TECHNO-FUNDAMENTAL - When people ask me whether I am technical or fundamental, I tell them I am techno-fundamental. I look at both. I think it is important to have a good grasp on both if you want to trade successfully in this business. Generally, I will look for trades on a technical basis, but once I see something I think works technically, I will throw in an added fundamental filter. Whenever something sets up technically, I will ask myself if I can get behind the trade on a fundamental basis. For the most part, the answer is yes, as there is always a compelling argument to be made for both sides of a trade. But sometimes, the answer will be a 'No.' There are times when a trade looks beautiful technically, but fundamentally, it just doesn't feel right. And so, I will stay away from these trades. Sometimes, I will miss a trade because of it, but most of the time, I will have avoided a bad trade.
DISCRETION - As an example, a trade might set up perfectly technically, but it may also set up ahead of a major economic data release. The added variable of event risk volatility will be enough to keep me from taking the position. There will be many times I will go ahead and trade ahead of event risk, welcoming the volatility from the release, but I will need to feel good about it fundamentally to go ahead. But I suppose if you were to ask me to pick one, I would lean heavily on the technicals over the fundamentals.
THE WINNER - There are two reasons for this. 1) We are mostly trading markets short-term and when you are trading short-term, the fundamentals become less relevant. 2) If we are to accept that everything is truly discounted into the price, then it would stand to reason that technical analysis is the purest form of fundamental analysis. Anyone who is trading the markets and expressing their view, has done so by either buying or selling. So when we look at a chart, we are getting a glimpse at the blueprint of the entire makeup of the market. We get a direct insight into which side of the market may be prevailing or which side has a better shot at moving in a certain direction.
APPLICATION - Now onto markets. Over the past few days, I have highlighted the risk for pullbacks in both USDJPY and USDCAD. Now that we have seen these markets correct into the targeted zones, I would be on the lookout for more medium-term trend resumption in favor of the US Dollar. Look out for a rebound in both USDJPY and USDCAD in the sessions ahead, that take both these markets back towards and above their respective 2015 and multi-year highs.