People involved in foreign investment all know, grasp for the market is the key to profitability. And there are many factors that affect the foreign exchange market trend, these factors play a role sometimes alone, sometimes reinforce each other, play indeed affect the whole body effect, the combined effect of exchange rate changes. These factors are commonly known as the fundamentals of foreign exchange. This article focuses ATFX small series to talk about the importance of forex investors learn fundamental analysis.
First, forex fundamental analysis of several common factors
We know that forex quotes is the exchange rate, usually with the exchange ratio between the two currencies to represent. The common factors that can influence the exchange rate change include social events, political factors, economic factors, the environment and climate and other aspects.
In foreign exchange trading, whether it is technical analysis or fundamental analysis of their role is to help investors better understand and master the law of the foreign exchange market trends and volatility, which can develop appropriate forex trading strategy. Thus technical analysis and fundamental analysis are essentially the same, but the method is used to distinguish the.
Second, the main aspects of Forex fundamental analysis:
Economic data
Published on the exchange rate of the trend of economic data caused some short-term impact, economic data also timely to reflect a country's economic development is good or bad.
1. Effect of economic data on the foreign exchange market performance in the economic data on the exchange rate, economic data reflect the current state of development of their economies. And a key factor in determining the exchange rate is the balance of payments, balance of payments surplus or deficit will be reflected in the foreign exchange market in a country. If the international balance of payments surplus means that the supply of foreign exchange temporarily greater than the demand of foreign exchange, namely foreign exchange supply exceeds demand, then the foreign exchange rate should fall (depreciate), while its relative currencies should rise (appreciation); and when happen when the balance of payments deficit, it will have a downward pressure on the currency exchange rate, there is a need to increase the foreign currency exchange rates.
2. The impact of inflation on the foreign exchange market is reflected in changes in prices, which have competitive goods and services and certain countries or economies in the world market impact. In addition, the rate of inflation also affect real interest rates affect the foreign exchange market supply and demand and exchange rates. When the high inflation rate of a country is the real interest rate in the country decreased, the actual return on investment of investors will decline, the outflow of funds influence the exchange rate.
3. In the foreign exchange market fundamentals, most of what we call the non-farm payrolls data is concerned. Consumption concern is PPI and CPI data. If the data is larger than expected and the former value can easily lead to skyrocketing prices, if greater than expected less than the previous value, but also to rally the main, if not only less than the previous value of the data and then generally less than expected decline in the main market.
Geopolitics
Geopolitics refers to geographic features form the basis of geographical and political structure, analyze and predict the behavior of the political situation in the scope of strategic regions in the world and the countries concerned. Whether it is connected between two or more countries in the region or trade, economic interaction, potentially will affect each other. The Internal countries at war, terrorist attacks and other political factors also affect a country's exchange rate and monetary policy.
Environment and climate
Environment and climate factors are natural disasters, such as earthquakes, droughts, flooding, and other natural disasters affecting the country's economy, thus affecting the foreign exchange market, the huge foreign exchange impact of natural disasters on efforts to influence Bureau at any time change. Sudden and unpredictable nature, which is a factor in the decision "Black Swan" frequented.
Government economic policy or statement expected
Two important factors which influence is far-reaching: the higher the central bank monetary policy, interest rates, interest rates, will attract more money, the more likely the country's currency to strengthen. The lower the interest rate, the more money might flee the country more likely to weaken the currency.
The central bank's rate decision and monetary policy for the currency of the country tend to be long-term.
In fact, with regard to fundamental analysis and technical analysis of the boundaries between the two has become blurred. In foreign exchange trading, when the use of fundamental analysis often also need to pay attention to price fluctuations given technical chart signals, while technical analysis can not ignore the impending major political events, economic data and a series of factors that affect exchange rate changes. Fundamental analysis can be very effective in forecasting economic trends in the market, but not necessarily for the exact market price. So the two complement each other in forex trading, you can not rely solely on fundamentals or technicals to determine the market trend.
