Forex Fundamental Analysis Made Easy…

Forex Fundamental Analysis is usually an intimidating subject for Forex traders and let’s face it, it’s much easier to look at technical indicators, moving average crosses, or Fibonacci retracements rather than “read between the lines” on Bernanke’s 22-minutes speech and make split-second trading decisions. But the same could be said about Technical Analysis methods such as the Elliot Wave theory or the infamous Neural Network based trading, and the conclusion is that in order to master either Fundamental or Technical Analysis, it would require investments of both time and efforts…

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That’s why we created the Fundamental Forex Outlook, our goal is to make the daunting task of forex fundamental analysis bearable for the average trader, by providing you with the right tools such as: breaking news, commentaries, historical charts, and fundamental scores at your fingertips, helping you make the right trading decisions.

Before we dive into the deep end, let’s just take a second to define the differences between News Trading and Fundamental Analysis, because for a lot of people, they are one and the same, but that couldn’t be further from the truth. Here are some important differences:

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1. News trading in a nutshell is trading based on surprises, it may or may not have anything to do with fundamental analysis, as it is primarily based on the market perception and psychology by comparing the forecast/actual releases at the time. But Forex Fundamental Analysis accounts for the overall outlook of particular currency based on its economic indicators (such as GDP, CPI, PMI, Trade Balance, etc…), monetary policy, and other breaking news that affects the longer-term value of the currency, i.e. Outlook.

 

2. Another interesting difference between News Trading and Forex Fundamental Analysis is that News traders seldom consider prior releases unless there are significant revisions, but for fundamental analysts, prior releases are starting points of comparison, and a better than prior release figure is usually considered positive, regardless of the forecast… Of course this may present some conflict with news trading, but just remember that fundamental outlook is for the long-term; think of it as gravity, it’s always there… Market may be driven by other forces temporarily, but it will eventually fall back in the direction of fundamentals.

 

3. Fundamental Analysis does not change often, and unlike news trading where the market could become volatile immediately after release, fundamental outlook remains unchanged (mostly) unless there are significant evidence in both market sentiment and concrete economic data… The rule of thumb is that unless there are reasons to change our view, we don’t.

 

So without further ado, let’s take a look at some of the tools:

 

Fundamental Outlook Score:

Outlook Score is basically a score assigned to the currency based on economic indicators and high-impact news releases such as: central bank speeches, breaking news, political developments, etc… A score between -3 to +3 is assigned to each scheduled events based on its importance, market focus, and surprise factor. For instance, the Non-farm Payroll should have more impact than the New Home Sales figure in the U.S., but if the New Home Sales comes out 100K more than forecast, it should have equal effect on the USD (as compared to NFP) in the long-term.

The Outlook Score is the summary of all of the individual scores assigned to each news releases that matters, and the score is carried over from month to month… this is based on the idea that fundamental sentiments are also carried over from month to month…

The score is modeled after the PMI (Purchasing Manager’s Index) releases, so we start at 50, and any number above 50 is considered positive, or below 50 as negative:

score fundamental outlook trend
 55 and above  Positive Fundamental Outlook   Up trend
 50 to 54  Neutral Fundamental Outlook   Neutral Trend
 49 and below  Negative Fundamental Outlook   Down trend

 

Forex News Score Detail:

In the details section, details of the scores assigned to each individual releases are listed. You can click on the ▼(down-arrow) for descriptions on the particular news event, or click on the link to load the 1M chart the default USD cross (EURUSD in this example) at the time of the news release… You can see the first-hand market reaction to the news… Feel free to change the timeframe (from 1M to 60M), and Currency Pair (16 most popular pairs).

 

Historical Forex News Chart

In the Historical Forex News Chart section, you can see how the market reacted to high impact releases in the past, with a bright green vertical line marking the release time. We are working backward in time to add more historical releases and our goal is to provide historical chart all the way back to 2001, giving you a complete set of data to research and test out your strategy.

The ability to switch to higher time-frames and see longer-term effects of the news is an added bonus, as sometimes fundamental outlook will go against immediate market reaction… but you’ll soon find out that market always falls back in the direction of fundamental outlook.

 

Breaking News

The last section is the breaking news section where we look at current news headlines that are defining the market for the day, and we dig deeper with our own commentaries. This is equivalent to “What’s Happening Now” in the market, although these headlines may not have a long-term effect on the market, you should always consider the context of the market in your trading decisions.


In conclusion, Fundamental Forex Outlook helps you staying on the right side of the market by giving you the tools you need. You can trade currencies with strong Outlook Score against currencies with weak scores, especially from a longer-term point of view. The advantage of the Outlook Score is that when a currency is going against it, it usually will come back, giving you a golden opportunity to place your longer-term trade based on fundamental trend…

Thanks,

 

About Henry Liu

My name is Henry Liu and I am a Forex Trader and Mentor. I help traders achieve consistent income trading Forex while spending less time trading. My focus in trading is a combination of Fundamental Analysis, Technical Analysis, and Market Sentiment. Far too many retail Forex traders concentrate on just one aspect of trading, technical analysis, and ignore everything else; it is my goal (and vision) to educate every trader on how to take advantage of news trading and become more balanced traders.

You can find more information about me on my Google Profile.

Comments

  1. if the currency strength of say eur/usd is looked at as a long or short trade for the pair,is it accurate to say that because the usd is stronger it would take fewer us dollars to purchase a euro. that the pair should have a bullish bias

  2. Juan Ginard says:

    Good morning Henry, his Forex Fundamental Outlook I feel great, in fact I had something similar in Excel spreadsheet, but I did not trust much of the impact that I assigned to the news, so I trust their opinions more. But I wanted to ask you would not keep a log of their scores by currency?, With a history you can see the evolution of each currency in a chart. A currency can be in 55 points, but can come from 60, so it is in a downtrend … this would seem very interesting. I can do daily writing down scores, but I wanted to ask if you have already done something similar. Thanks, John Ginard.

    • I had exactly the same idea for the Currency Strength Meter. Would it be possible to make it cumulative – not the desktop version, which is good as it is now, but an online version – a table of maybe 20 lines showing the most recent 20 updates in the CSM, or more useful, a new line every 30 minutes or so to reflect a history, and the 30-minute updates can simply scroll down and off the table. Would something like this be possible?

  3. hi kelvin ,
    on outlook score AUD score was atpresent 47 market goes down on AUDUSD currency pair,
    on below there will be a support at 0.97109 so when it touched the price. can go market reverse upside or otherwise market goes through outlook score direction .
    thanks

  4. Anyremote says:

    Hi Henry & team,

    Thanks for the time to create this awesome website.

    I got a question that I can’t figure out on this Fundamental Outlook Score.

    Would you mind telling us how you determine score for each news?

    For example, US Core Durable Goods on 2013-04-24. How did you determine the score is -1? Why not -2 or 0?

    Another example, US ADP NFP Employment on 2013-05-01. Since actual 119K is worst than forecast 153K, why is it not -1 or -2 instead of 0?

    Is the score determination is purely subjectively based on your experience? Or is there any objectively measurement deviation that determine if certain result different than the forecast certain amount, the score would then be determine based on that? If there is such table that have been created, where can I find them?

    Thanks.

    Anyremote

    • Anyremote, A score of ‘0’ usually is assigned to a news that came out as expected or did not have any impact on the market. Whereas +/-1 and +/-2 will be assigned to a news event that did have an impact, but reserving the +/-2 only for very high impact news that not only moves the market but have potential to change the trend. For example, the US NFP is considered a very high impact news so when it comes out below or above forecast (beyond the deviation), it is more likely to be assigned a +/-2. In regards to your two examples in question, the US Core Durable Goods on 2013-04-24 came out worst than forecast, but is not a high impact enough news to get a -2, so we assigned a -1. As for the US ADP NFP Employment on 2013-05-01, although it came out worst than forecast but it did not reach our deviation of 70k difference, and it did not move the market, so it was assigned a ‘0’. Trying to gauge the outlook of the currencies cannot be done objectively, so you could say that the Currency outlook is subjective, but we try to be as accurate as possible.

  5. sir request
    if there is any option available iam asking below
    outlook is for long term ,scores but we fear when to enter and exit so will u please mention each currency pair minimum target level reaching as when to buy and when to exit including dates as a signal based in your open website these signals to view we all use it with your help……

    • hi ghouse, the currency outlook is an additional tool to guide you on the direction of your trades. To look for entries and exits, look for support/resistance levels, and top/lows of the ranges. If you are interested in becoming part of the trade room, where Henry analyzes the market and issue trade recommendations, click here: http://www.forexnewstradingacademy.com

  6. sir ,
    this week 30th three US releases i have seen on that
    US ADP NFP Employment
    US Quarterly GDP came -0.1 here out look score -3 detected on usd61score now score was 58
    US FOMC Interest Rate
    if we are waiting to trade next non farm payroll now the outkookscore was usd is 58 which was positive
    sir can i trade non farm payroll release would be buy usdjpy or gbpjpy based on the score usd as strong as jpy as weaker
    pls explain is this correct way iam learning can i follow this or….
    awaits your reply
    thank you

  7. Hello master,
    good morning kindly make a video presentation about outlook score how to use on live trade with examples please make as soon as as we are waiting long days we clarify fullfill
    yours student ghouse india
    thank u

  8. sir,
    good morning

    http://www.currencynewstrading.com/56129/forex-market-review-and-news-calendar-for-January-7-11-2013/
    as iam learned this article above web link here i noted and highlight that these sentence below

    USDJPY is definitely positioned to top above the 90.0

    based on this report i take a long trade on 8th january the target will be touched now on17th today this was a excellent point of view and we gain above 100 pips with your help

    kindly provide each and every week give us minimum (one) currency pair target level as above mentioned was easy to all of us to take a long trade with your guideliness in outlook we are easily place trades and gain some pips

    1) Today uk retail sales news i can prepare this to trade based on outlook score GBP score now :49 this is a score i can make a sell trade on gbp/usd it is safer to trade this 49

    reply awaits yours student ghouse
    thank you

    • ghouse thank you for your comments and I’m glad that you were able to make some pips. In every fundamental analysis article that I put out, I try to give at least one tradable insight on the market. So I’d recommend that you read those articles for trade directions. As far as your question on Fundamental Outlook Score (FFS), I don’t think it is time to sell GBP, yet. As the US will continue to keep USD weak, and that would inevitably keep supporting the GBPUSD pair. However, I believe JPY are still weakening, so selling JPY is always a good idea.

  9. sir
    outlook score is easy to use kindly continue your services sir please tell us its
    outlook score is hundred percent accurate method for news trading it is the final solution in forex news trading kindly explain and reply
    awaits yours student ghouse
    thank u

    • Although, we try to make the Fundamental Forex Outlook as accurate as possible, no tool or indicator is 100% accurate. You should use this as an additional confirmation tool to help you in you predict the direction of your trades.

  10. sir,
    On 4th jan 2013 non form payroll release i traded based on your instructions news details i follow and i trade both
    Gbpjpy and usdjpy
    Here gbpjpy i close the trade on 50 pips here usdjpy still trade open i can continue this pair open
    Awaits your’s student
    Thank you

  11. sir good morning from ghouse please explain this sentence i have taken theis sentence on breaking news column above
    You can trade currencies with strong Outlook Score against currencies with weak scores, especially from a longer-term point of view.
    if example we can trade non form payroll usd score is high i can choose usd currency here against currencies with weak score means which currency to choose below 50 score i can choose or please explain in detail
    awaits truly yours student thank you

    • Basically what you need to do is to look trades in the direction of the outlook. For instance, EUR USD should be a SELL because USD is stronger than EUR. So when you are trading, you get a signal to BUY EURUSD, you could stay out of the market and wait until you get a signal to SELL EURUSD, then you take the SELL trade. Of course, this is overly simplifying the Outlook, as sometimes the market will be driven by short-term trends. But I hope you get the basic idea.

      As far as the differences between the scores, it is different and I don’t think you can gauge the strengths like you would with the CSM. An above 50 reading is not the same for all currencies, the score is meant to show that the economy is improving, it is showing the “rate” of improvements or on an uptrend; whereas a below 50 is showing that the economy is shrinking, or on a downward trend.

  12. sir,
    thank you for your reply
    kindly explain how to use outlook score ,please explain via video presentation it was better for us.
    for example currency strength meter video presentation was excellent understanding for me and for all viewers
    thank you
    yours student truly ghouse

  13. sir,
    By using Outlook score on trading what was the minimum take profit and stop loss for all the news releases
    In this outlookscore can face any losses sometimes
    What was the pips movement for each and every score for example,
    Score :55 how many pips to go up
    56,,,
    57,,,
    58,,,
    59,,,
    60,,,

    Score:49 how many pips go down
    48,,
    47,,
    46,,
    45,,
    This was my long days dout’s please clarify awaits
    your’s student ghouse

    • Outlook is a long-term fundamental sentiment, so there are no definitive ranges. A trend could last hundreds of pips, or even longer. The conventional SL / TP per pips method doesn’t really apply here.

  14. abiodun says:

    pls mr. henry, have been following your write up on forex. i want to learn to trade the news or fumdamental analysis trading how do i start

  15. chigozie says:

    please i forget to ask a question. is the fundamental scores renewed daily or as soon as there is changes from the fundamental analysis? i ask because dealings with forex is highly volatile, what do you think?

  16. chigozie says:

    hello henry, from the post of others and of how you responded it gave me an unmeasurable joy keep it up thanks

  17. Grace Muthua says:

    hi Henly. I have been following you for like 3 years now and you are one of my favorites. I have learned alot from your breaking News Analysis. A great subject of the difference between News and fundamental. I had not seen it that way but by understanding the difference, am better placed when trading. I have always thought that new is exactly the same as fundamental but i have seen the difference which is a thing to be looked at and considered when trading so that one does not fight the dominant trend of a market due to news release. Thank you and please keep it up. I wish all traders would see what i have seen. This is of great benefit to me as a trader. A good day Liu.

  18. Henry: According to”Currency Outlook”, we should be shorting GbpCad, but it just keeps going up since the NFP release. What gives?

    • Remember market is still running very low liquidity on CAD at this time, so we may not see the currency trade in the right direction, but I got a good feeling about seeing USDCAD drop.

  19. sobakin tunde says:

    Hey,I need lectures concerning forex trading, I reside in Nigeria and would love to love to know more about it, blockflat 4 festac extension amuwo odofin lagos Nigera , wouldbe expecting magazines and flyers Thanks.
    Sobakin Babatunde O.

  20. Mary Myanmar

    Hello Mr Henry.
    I normally follow your news release update,but I bumped into this new site navigating with a friend.
    I observe you dont give news release details on CHF. But its listed on the Outlook score. Why dont you give release details on it? Or is the news around CHF not strong enough to attract traders?

  21. Hi henry.
    Great piece of information is offered on your site here. I love this. I havent seen something like this before. I decided to check after a friend introduced me to this site and its wow…..
    I have gone through everything and I have a question if you dont mind please.
    is the Historical Forex News Chart section active now? How can it be accessed?
    Thanks.

    • It is not working with IE8 with compatibility mode, try a different browser or disable compatibility mode… It works well with Firefox, Chrome, Safari, IE7, IE9.

  22. Michael says:

    Hello Henry.
    I have the same question as “eche david”.
    According to the Currency Outlook the CAD has a better score than the USD and a more favorable trend strength outlook also. But recently it seems to be the opposite.
    Is this more to do with Euro woes or actual commodity weakness, since the Canadian economy is one of the most stable economies in the world right now?
    And due to the recent USD bullishness against the CAD do you think the Currency Outlook for CAD is still valid?

    Thanks so very much for your invaluable help; very much appreciated.

    Michael.

    • Michael:

      I think it is an excellent question and sometimes it is important to note that a strong fundamental may not mean a strong currency immediately, especially when the market is driven by risk sentiments. I believe USDCAD will eventually drop below the parity level, but that would only take place after safe-haven flows have stopped, i.e. no more uncertainty in the EU.

      Ultimately I would use the fundamental score to look for selling opportunities on the USDCAD, perhaps wait for a news catalyst, a strong technical resistance area, etc… and ride into that correction… Remember if you trade CAD against another currency that is not safe-haven (USD, JPY, or CHF), the picture would have been clearer. i.e. EURCAD.

  23. eche david says:

    Hi henry. From the currency outlook score…CAD read 57 which is positive and USD reads 54 which is like neutral. However, over the past 5 weeks, the USD has gain strenght over CAD going over 500pips. With the Currency outlook score reading, are we saying CAD will gain strength over USD in the long run with the present reading? Thanks.

  24. Henry:
    Awesome idea. Definitely worthy of development, but I am somewhat surprised by results at this point. As bad as things are in Europe, the Euro score is equivalent with Nzd and better than Aud or Gbp. Intuitively I would have expected Eur to be the lowest…and no, I have not looked at all the reports.

    • p.s. I just had a thought. A great advantage of trading with fundamentally based strong-weak pairs? Soft stop-losses. Or at least broader hard ones without a lot of concern that they will actually be hit.

  25. Hello, mr Henry liu, i praise your talent its helps me inparticular and put some $ in my pocket the Fundamentalforexoutlook just simplified everything about trading thank you.

  26. eche david says:

    This is the best Forex website ever built for free. These informations are awesome, We are no longer in the dark. Thanks henry.
    I have a question and it goes in line with the divergence you talked about earlier. What other things causes divergence from the general fundamental trend apart from the news?
    Thanks a lot

  27. Hello Henry, while not make a system too like the currency strength meter, and name it, FUNDAMENTAL OUTLOOK METER. We will really appreciate it. and it will help well. Thanks

  28. Wow, i love that answer Henry, That means i will hookup completely to your fundamental score as i proceed in my forex trade life, thanks….

  29. Hello Henry, you talked about The basic idea is to help you choose the right direction and don’t go against the fundamental trend. Sometimes when news come out and we could see temporary divergence in the market, that’s an opportunity to position a trade in the long-term position…, Ok i i agree with it, then how long can we see changes on the currency outlook as to know when the uptrend or down trend, are they changing on daily basis or by monthly?

    • The trend usually will last for a while, it is like a train going down 65 miles an hour. To stop it, it would require tons of news events, so the score could really help in the long run. Usually it would take a couple of months, or a few high impact announcements such as Greece leaving the EU or the Federal Reserve announcing QE3.

      • In other words, what I am saying is that the fundamentals won’t change UNLESS there are sufficient reasons to make the change… and we keep track of that here…

  30. Mr H..
    Your new web-site is awesome.
    Mica

  31. ogbonna says:

    Hello Henry, please another innovative idea from you.Kindly explain how the currency outlook can be used as currency pairs for trading.

    • The basic idea is to help you choose the right direction and don’t go against the fundamental trend. Sometimes when news come out and we could see temporary divergence in the market, that’s an opportunity to position a trade in the long-term position…

  32. Donald Pule says:

    Hi Henry

    On the FFO, say you select the Fundamental Analysis for AU as we have news scheduled tonight, How do you select the actual news that are coming up and check the history data?

    when I select the AU FA it shows the last news for the Currency and not necessarily the scheduled news. I’m not sure if it is possible to choose the type of news you want.

    Can you expalin how does one select the type of news for the currency?

    • Donald:
      The way FFO is set up is to show the outlook of the currency, right now it does not have that ability to select previous news as I’m still working on getting the news calendar imported… Once that’s done, then you should be able to select schedule and chart information all the way back to 2001…

      Henry

      • Donald Pule says:

        Hi Henry

        Strange enough, on IE 8 I’able to see the Historical Forex Chart but cannot see Forex News Detail which I think is what I need on my question below. However on Mozilla Firefox and Apple Sfari, I’m able to see the Forex News Detail and not the chart “it gives blank” but shows the timeframe and currency choises.

        Not sure if its my browser that is messing things up.

        Thanks

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