Forex Fundamental Analysis

  

  Fundamental analysis in Forex is a type of market analysis which involves studying a variety of economic and political indicators (such as :the economical ,political, environmental situation or other relevant factors and statistics) to trade currencies more effectively.It gives information on how the big political and economical events influence currency market.Thus, traders are most likely to gather information from news sources to determine unemployment forecasts, political ideologies, economic policies, inflation, and growth rates.

Also traders must keep an eye on the figures and statements given in speeches by important politicians and economists, as well as announcements related to United States economy and politics.Speeches of those prominent people(such as Chairman of the Federal Reserve Bank of USA, Secretary of the Treasury, President of the Federal Reserve Bank of San Francisco and so on)are also watched closely by traders.

What figures move the Forex market?

Some of the most important figures that move the FX market are displayed below:

Interest rate - it is known that if a country raises its interest rates, its currency will strengthen because investors will shift their assets to that country to gain higher

Gross Domestic Product (GDP) - GDP is reported quarterly and it's a primary indicator of the strength of economic activity.If GDP is high the traders will expect the interest rate also to grow wich is mostly positive for the currency.

Employment situation - If the employment rate decreases(signs of weak economic activity) the interest rate could also drop wich will have a negative impact on the currency.

Trade balance, budget and treasury budget - If a country has a significant Trade Balance deficit then currency will grow weaker as there will be continuous commercial sellings of that currency.

Retail sales - It represints the strength of consumer expenditure.

Durable goods - Rising Durable Goods Orders are associated with stronger economic activity and can lead to higher interest rates(on short term), which is usually a positive thing for a currency.

How do we use all this information?

Use this tips:

- You must watch every day the Economic Calendar and be aware of all the important events that will hapen and will influence the foreign currency market.

- When the difference between the expectations and real results occur, watch for corrections in the market price moves.

- Pay attention to news because the situation on the market can change quickly.

- Pay attention to all the important indicators and their fluctuation.

Conclusion

In summary, Forex fundamental analysis focuses on what ought to happen in a market. Factors involved in price analysis include supply and demand, seasonal cycles, weather, and government policy.Fundamental analysis is an effective way of studying the performance of a certain investment in the future. In practice, traders use fundamental analysis in conjunction with technical analysis to determine a Forex trading strategy, fundamental analysis is considered to be the opposite of technical analysis.After all that is said and done, you just might realize that fundamental analysis is a useful practice.

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