9 FUNDAMENTAL ANALYSIS
fundamental analyse2
Fundamental analysis is the study of the forces that influence the economy. For a good forex fundamental analysis strategy is indispensable. Look at the average forex economic calendar and you're faced with an extensive buffet of numbers that are important for the Forex. A small selection:
Unemployment Rate
Building Permits
Oil Inventories
CPI y / y
Underlying CPI m / m
Housing Starts
Fed Chairman Speaks
The actual list is of course much longer, and those of us who are not mathematical economist but are likely once the towel in the hamper and throw in the direction of the nearest technical indicator run.
This can and should of course, but without this kind of figures in each case with a crooked eye in the eye you will still keep a boxer who fights with 1 arm. (In this case, therefore, the technical arm). Moreover, it is all not nearly as difficult once you have a reference framework. You do these figures is not to invent or calculate, you really do only have to interpret.
Most of us also act mainly on the short term when it comes to Forex intra-day, day-and an important rule of thumb is: the shorter the term in which you act, the more important news of the moment.
If everyone expects the U.S. GDP (Gross Domestic Product) rose by 5% and 8% appears to be, it will almost certainly in the short term effect, but whether the effects 4 weeks later to note are still very doubtful.
90% of Forex traders, however, focuses on a period shorter than 2 days, their EUR / USD or GBP / USD position has such a message is very likely an effect.
The infamous / famous (denomination depending on whether you are socialist or capitalist? Smile) investor Warren Buffet has many years a Long EUR / USD position held, where he was during a 2005-strong EUR / USD decline significantly over-criticized. However, if you to price movements over the previous years looks (from 0.8 USD in 2002 to $ 1.35 in 2005 to $ 1.57 in 2008) is a) clearly indicate that WB is not for nothing is so filthy rich and b) are not clear that WB skips lunch because Consumer Confidence in the eurozone declined by 0.5%, and c) that he has more confidence in the EU economy than that of the U.S. (but that aside).
For us hyperactive day traders run the world but a lot faster ..... Smile
The 4 Fundamental Themes
The 4 themes that drive the currency markets:
1) Economic growth
2) Interest positions
3) Trade
4) Political Stability
Economic Growth
This is a logical course. The strength of a national currency is determined primarily by the strength of the economy in which it operates. And like quarter / year figures for a company to say much about the economic health of that company, say quarterly / annual results of a land lot about the economic health of that country. The forex market will therefore focus primarily on economic performance of national economies.
50 euro free markets
So if the GDP of Germany (the largest economy in the Eurozone) increased by 1% MORE than analysts had expected, at constant inflation then the value of the EURO probably up. On the one hand because more companies will want to invest in the German economy (increasing the demand for the currency actually increases) and on the other hand, since fx traders will speculate on a rise in the price (speculative value).
Key Indicators of economic growth they include: GDP q / q and GDP y / y (quarterly and annual Gross Domestic Product, or GDP), Unemployment rate, non-farm payrolls, Industrial Production and consumer confidence.
Interest rate positions (Interest Rates)
Anyone who has had economics in high school knows that economies evolve in a cyclical motion, or in an up-and downward trend. The peaks and valleys of those trends alternate more often short than long-term (eg over a period of 50 years).
National governments in the field of macroeconomics simply put two tasks:
1) Growth of GDP stimulate
2) Cyclical movements in the hand.
Point 1 is obvious. The bigger the GNP growth, the richer the country, the wealthier citizens (generally anyway).
Point 2 is logical, but is slightly less obvious. That we do not like cyclical lows (low-cyclical, recession) is obvious, but what's wrong with a high-cycle? That amounts to saying: What comes up must come down. A high-cycle that is not in the hand-held can lead to an arched economy. Tight labor market, increasing wages, rising costs (the infamous' wage-price spiral "), becoming broader money (everyone wants to invest in this thriving economy) and then finally ...... The Great Turning.
The sentiment returns, there is huge overproduction, people should be fired, claims for benefits (and costs for governments) take explosively, investments decrease, the cyclical movement races down.
Here's help anyone, and so the government aims to counter the cyclical movement of its economy in the hand: less high peaks, deep valleys less.
An important tool for this is the state interest. It is about the interest that the Central Banks * (such as 'De Nederlandsche Bank, Deutsche Bank, Bank of England') in charge to commercial banks when they want to borrow money from the Central Bank. This is important because if it becomes more expensive for commercial banks to make extra money to come, it is also more expensive for investors to get money, thus causing the growth will slow. Conversely, investment will increase as it becomes cheaper for banks to borrow money from the Central Bank.
When a Central Bank interest rates on its currency (currency) increases so does this a) something about how the Central Bank thinks about the state of econmie and especially b) whether the growth is stimulated or weakened. By increasing the interest rate mode, the tighter money market (it is indeed more expensive to borrow money) and the value of the currency in the main, by lowering the broader money market and the value of the currency in general.
Exception
An important exception is when a central bank increases interest rates to curb inflation rather than to the highly cyclical curb. This fact suggests that the money is too broad (hence the prices are up) and the benefits of the higher rate on the strength of the currency are now being offset by fears of further inflation.
A good example is the interest rate hike by the ECB in June 2008 (from 4% to 4.25%) which was not ontvanen with a climb of the Euro against other currency's but with a fall, because it was obvious that the interest was increased to the high inflation (4%) to curb.
But in general it is therefore:
up = up interest in the Forex currency
rate down = down on the forex currency
Trade (Trade Balance)
Suppose the U.S. for 100 billion more buying goods from the Eurozone than they sell. In order to buy those goods, the Americans need Euros. They actually buy them for $ 100 billion euros. Their trade deficit ([Trade Deficit) ensures that the Euro will increase in value against the dollar.
The reality is often more complex than this example (which example to think of American companies in the Eurozone which export goods to the U.S.) but it is important to understand that the value of a currency may drop if the trade deficits of country increase. If there is a figure for the convenience of the U.S. economy Trade Balance, in which the expectation is that this 2% compared to the previous period, while the actual value is found to be 3%, is that a (strong), indicator that the USD will decline in value.
Political Stability
Much more than the stock markets the FX market is influenced by politics. This is understandable, since the forex market is "acted" in rural economies, not individual companies.
Political instability could harm economic growth and thus the conscious currency. Especially a corruption scandal, the value of a currency significantly harm.
A good example is the decline of the CAD against the USD in the summer of 2005-despite rising oil prices, something the Canadian currency usually benefits from it-precisely because the ruling Liberal Party was embroiled in a political scandal. After a motion of censure was rejected (difference of 1 vote!) Climbed back up the CAD .....
Conclusion
Also is your natural familiarity may be more at the Technical Indicators (which we shall deal with it) then it is wise to these 4 basic keys to monitor. An example is the situation in 2004 when the U.S. dollar made new lows against the Euro despite several positive and unexpected economic developments in the U.S. economy. When all the technical indicators began to see weakness in the EUR / USD pair were technical traders that the fundamentals in the holes had held with great confidence and benefit from boarding the dollar rally that followed.
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Forex is simple follow the trend and you will rich.
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