I was inspired to write this post by a recent article published by Counting Pips, entitled “The Problem with Forex Fundamental Analysis.” While the author, Warren Seah, delivers a stinging critique of fundamental analysis, I think most of his points are pretty hollow. For the sake of debate, I’d like to present my rebuttal. Seah’s thesis can essentially be boiled down as follows: First, by the time traders have a chance to act on fundamental developments, it is inherently too late as such developments have already been priced into the exchange rates. Second, he argues that fundamental metrics are not automatically trustworthy, since the countries presenting them often have their own agendas. Finally, he asserts that the markets’ response to fundamental news releases is often illogical, and may only serve to confuse traders that would otherwise depend on technical signals to make trading decisions. I think Seah’s first argument is inherently self-defeating. If one were to concede that all fundamental data has already been priced into currencies, that one would have to make the same concession with regard to price data, which is the backbone of technical analysis.
