Sentiment can be a valuable overlay to an existing Forex multi-factor model by providing a dynamic weighing mechanism over traditionally slower moving signals. Sentiment consistently adds values over time and works well with both long and short currency baskets.
Research shows that news sentiment is a relevant predictor of intraday FX moves in emerging markets. News analytics can help investors and market makers narrow the gap between the traditional systematic models and the catalyst-driven strategies of discretionary macro investors.
Sentiment can be leveraged across multiple asset classes and frequencies — from a few minutes in market making, to hours/days in buy-side quant and discretionary applications.
With news sources spanning 13 languages translated and analyzed in real time, FX traders can monitor the volume and sentiment of macro narratives and monetary policy communication as they propagate through news media - this makes it possible to compare incoming economic data with macro narratives as they develop.
RavenPack Research describes models and strategies that benefit from sentiment analysis for foreign exchange trading.
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