Forex Fundatmental Trading Analysis
Fundamental analysis for the Forex market is looking at the market through economic and political forces that affect a country’s economic status within itself and to the entire world. In the Forex, it is a comparison of whose economy is doing well and whose economy is not doing well. The end result of this type of analysis is that if a country’s economy is doing well you expect their currency to become stronger.
For example, when an economy like the US is doing really well, the Central Bank will move to raise interest rates higher to slow things down to a reasonable growth pace. Large investment bodies will move to buy the US currency to get the higher interest rate. There is only supposed to be a set amount of a country’s currency, so the greater the demand due to the higher interest being paid the more valuable the currency becomes.
It is important to remember, that even though it is interest rates that really move a currency the data the different Central Banks of the world focus on to make interest rate decisions changes based on their respective economic climate.
For example, at times unemployment is the main focus and at other times maybe it might be housing prices. They know the deep details that are affecting the economy that we never know. Have you ever seen news that suggested a currency should get stronger and then see it weaken? The market did not think that was what the data the Central Bank was using to make its interest rate decisions.
Summary, it is hard to know what those running the Central Banks are focusing on at each exact moment, sometimes we will never really know but we can know what the price charts are telling us consistently.
