Summary

We can see that fundamental factors do affect the prices of currencies, but we also can see key problems with using these factors in automated trading, such as the (a) releases of macroeconomic news mostly cause the unpredicted direction of price movements, and these movements frequently do not last long enough to trade, (b) political events cause longer price movements and are potentially tradable, but they are rare, and it’s easier to trade them manually than programmatically, (c) using industry-specific fundamental factors is potentially the most promising, but requires a thorough analysis of the respective industry and works only for specific currencies.

In any case, systematic traders (those who prefer entering and exiting positions basing their decisions on a set of rules rather than intuition or sentiment) have long searched for an alternative, quantitative way of analyzing market data as opposed to qualitative fundamental analysis. This quantitative analysis...