I must disclose that I am far from an economic guru and I am purely a technical trader. The most fundamental it gets for me is just interest rates.
My studies and personal statistical analysis has proved to me that the interest rate market is responsible for manipulating the currency market, we can get more fundamental and talk about why that is the case but that wouldnt be fun and I encourage you do your own research on this regard.
I also want to make it known that I believe that any serious trader should have either the bond prices/ bond yields for every currency they trade if available.
I am a swing/position trader and as such I will only talk about medium+ term trading nothing like 15m and etc.
The chart above is UK Government 10 Year Yields.
Look at that chart and compare it with any GBP currency such as GBPUSD . You will find some astonishing correlations particularly in major tops and bottoms. I have found the actual bond prices have a negative correlation (moves oppposite) with the currency and the yields have a positive correlation. The 10YR is my personal favourite but there are other time periods.
The Bonds are almost always a leading indicator for price, couple them with a solid strategy and you find yourself with a realiable tool for predicting the value of a currency.
Heres the boring economic reasoning behind that (read to the bottom):
"As a rule of thumb, short-term, when a raises rates (yields rise, and bond prices fall), the currency appreciates as it becomes more attractive to hold (and get a better return from CDs).
There is a relationship between the yield of the bonds, and the general trend of the currency: when people are willing to take risks, low-yielding currencies depreciate, as investors buy high yielding bonds and don't hedge the currency risk. When markets turn (and stocks fall), low-yielding currencies outperform, because of the unwind of aforementioned trades " Sarunas Barauskas - A former fixed income trader - managed over 1Billion Euro at Compagnie Monégasque de Banque (CMB) in monaco.
Long story short and a simple rule of thumb : PRICE ALWAYS CHASES YIELDS. Price often moves in the direction of the yields.
I challenge you all to read more about the bond markets in developing your own trading strategies if you seek long term success in trading, nothing market related should ever be learned in isolation and remember this is a business not a lifestyle.
I will try to post these educational series on a weekly basis but cannot guarantee that every week I am after all ;also a trader, I will NEVER spoon-feed anyone trading educational content (Im Not a social media "guru" - I also continue to learn at every opportunity) and such I will post a chart and point you in a direction and its up to you to do more research on the subjects.
NB : I talk of a correlation between GBPUSD and GBP 10 YR Yields, remember GU is the quote of 1 pound at $xxx. It would be advisable to learn how the US GVT Bond/ Bond Yield is doing.
I hope this was helpful please comment below if you have any feedback. Lets avoid politics and Theresa May/Brexit please :).