Learn Forex Trading: Fundamental Analysis in the Forex Market
Fundamental Analysis in the Forex Market – It’s not just the stock market that requires technical analysis and fundamentals in determining which stocks are profitable but also the forex market. The forex market is as intense as the stock market where the value of a currency can be strengthened or weakened in minutes or even seconds. If technical analysis is an analysis based on price movements that can be detected through charts or graphs, fundamental analysis tends to be used to determine long-term profits. Fundamental analysis is an analysis to determine the causes of strengthening or weakening foreign currencies.
Fundamental analysis tends to make observations on issues, interest rates, inflation to the level of unemployment of a country. Seeing a country’s economy, you are able to detect which foreign currency will strengthen and give you profits in the future. Everything that becomes the focus of the market will certainly affect the demand and supply of currencies in a country.
Factors that influence fundamental analysis
The social and political turmoil of a country is also an indicator in fundamental analysis. One example is the decline in the value of the pound when the announcement related to the UK’s exit from the European Union or commonly referred to as Brexit. Not only that, the United States dollar also weakened when the economy was paralyzed due to bad credit. Indonesia itself also experienced a weakening of the currency during the reform order in 1998.
Economic factors also contribute to influencing currency values in a country. To determine a sell and buy position a trader must check the economic data from the origin of the currency to be invested. Various policies in the country contribute to advancing the economy. Generally the more advanced the country is, the currency will also be of high value.
In addition to the economic and social political factors of a country, there are also external factors that influence the weak or strengthening of a country’s foreign currency. One example is related to environmental problems such as the MERS virus that was experienced by South Korea in 2015. The impact of this virus attack even decreased the number of tourists visiting the country of ginseng.
To see the health level of a country’s economy can also be overcome through the level of unemployment in the country. This jobless rate is also useful for determining the monetary policy issued by the government. Weak foreign currency is also caused by the slow pace of the economy in a country due to high unemployment.
Interest rate decision
Inflation in a country will also weaken or strengthen foreign currencies. Inflation itself is usually affected by bank interest rates. This interest rate is able to reduce the rate of consumption and cause a smaller amount of money in circulation because it prioritizes the deposit of money in the bank. The central bank’s own goal of raising interest rates is to attract funds from the public who will increase the value of the currency.
The interest rate itself is not arbitrarily determined because it must go through the governor council meeting. Several major central banks in several countries took part in determining bank interest rates. Several major central banks, including the Bank of England, the Swiss National Bank, the Bank of Canada, the Reserve Bank of New Zealand, the Reserve Bank of Australia, the Bank of Japan, the Federal Reserve and the European Central Bank.
The factor that influences the fundamental analysis then is regulation. As is known that in monitoring trade to spur the nation’s economy, there is certainly government interference through the regulations that it applies. This regulation also sometimes inhibits the pace of the economy because it feels less precise.Some regulations are able to reduce consumption of imported goods and strengthen local commodity trade. No wonder monetary policy related to imports and exports is also very important to be monitored by traders before investing.
Not only from the government side that is needed to increase the rate of a nation’s economy. Of course public trust is also needed so that it can produce superior human resources and can compete with other individuals from various countries. If the level of public confidence increases then the foreign currency can also strengthen.
A trader does need experience and expertise in seeing opportunities. This is because the volatility of a currency price can change unexpectedly. For those of you who want to use this analysis in forex trading it is a good idea to trade 1 – 15 minutes after the news or the current issue is being announced.
Do not be careless in determining actions and confident in your own abilities. Never stop learning to trade because to become an advanced trader needs a long experience and hard struggle. How to start interested in using fundamental analysis to trade on the forex market?