Forex Fundamental Analysis. Basics
What is fundamental analysis?
Fundamental analysis in Forex is a
type of market analysis which involves studying of the economic situation
of countries to trade currencies more effectively.
It gives information on how the big political and economical events
influence currency market. Figures and statements given in speeches by
important politicians and economists are known among the traders as
economical announcements that have great impact on currency market moves.
In particular, announcements related to United States economy and politics
are the primary to keep an eye on.
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What is economic calendar?
Economic calendar is created by
economists where they predict different economics figures and values
according to previous months. It contains next data:
Date — Time —
Currency — Data Released — Actual — Forecast — Previous
For example: If the forecast is better than the previous figure,
then US dollar usually is going to strengthen against other currencies.
But when news are due, traders have to check the actual data.
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If to look at oil prices, a rising price will result in weakening of
currencies for countries which depend on huge oil import, e.g. America,
Japan.
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Whose speeches to keep an eye on?
Chairman of the Federal Reserve
Bank of USA, Secretary of the Treasury, President of the Federal Reserve
Bank of San Francisco and so on. Speeches of those prominent people are
watched closely by traders.
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What are the most powerful figures that move Forex
market?
Interest rate
Traditionally, if a country raises its
interest rates, its currency will strengthen because investors will shift
their assets to that country to gain higher returns.
Employment situation
Decreases in the payroll employment are
considered as signs of a weak economic activity that could eventually lead
to lower interest rates, which has negative impact on the currency.
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Trade balance, budget and treasury budget
A country that has
a significant Trade Balance deficit will generally have a weak currency as
there will be continuous commercial sellings of its currency.
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Gross Domestic Product (GDP)
GDP is reported quarterly and is
followed very closely as it is a primary indicator of the strength of
economic activity.
A high GDP figure is usually followed by
expectations of higher interest rates, which is mostly positive for the
currency.
