Forex trading: which comes first? Fundamental analysis or technical analysis?
Insisting whether fundamental analysis or technical analysis is superior may be dogma
Yen crosses continue their explosive rally even at this moment after BOJ announced they will expand Japan’s money supply. The USDJPY for instance is off its low of today by nearly 300 pips. One member of our community then asked me:
Is this a result of fundamental news analysis or technical analysis?
Japanese central bank doubles money supply in fresh bid to spur inflation gu.com/p/3eqt4/tf
— Guardian Business (@BusinessDesk) April 4, 2013
Fundamental analysis and technical analysis works hand in hand
Traders have often debated which is more important, which one is proven, which one works and so on. From my own point of view, there is no need for such a debate. In fact we can say that one man’s meat is another’s poison. But more seriously, I think that it does not really matter because the most important news developments tend to coincide with technical levels. And the one concept to bind them? Confluence.
So the more important thing to do is to keep an open mind, master the setups and learn to recognise the opportunity to make more money.
Completing the picture
Before we go away, let me try to re-tell the whole story:
Today, the Japanese central bank announced that they will double money supply.
Of course this is a policy that will depreciate the Japanese Yen.
Coincidentally the Yen has been dropping (Yen crosses rallying) in anticipation and has reached support.
Because there was no other market moving news on the horizon, everybody decided to focus on this part.
And when the news finally came out, there was no surprise really.
Since the news did not make Yen crosses crash the support, everyone just thought it was buy now or never.
Those who were waiting for technical reasons to buy agrees to do it at the same time.
You jump I jump.
So here we are.