Fundamental Analysis

Fundamental Analysis

Fundamental Analysis:

Fundamental analysis in the currency market is a study of the economic situation in a country and its impact on local currency, as they are closely linked. When the economy is strong and stable, the currency is stronger and vice versa.

Fundamental analysis is based on current or upcoming economic events to see their impact on the currency market, the deeper the analysis is, the less element of surprise there is in the market.

It is difficult to predict the changes that impact the economy of some countries. Financial authorities, regulations, and natural disasters all have an impact on currency movements. Nonetheless, it is possible to predict some of the events and their timestamps. Investing1 offers an economic calendar that contains all the upcoming events and their timestamps to facilitate the process for traders.

Prominent Economic Indicators:

v Local Production:

The total goods production and services of a country over a specific timeframe are an important indicator of economic conditions, which in turn directly impacts the local currency.

v Interest Rates:

Is used to determine the interest rate of loans from the central bank, which is considered a means of combating inflation.

v Unemployment Rates:

Is an important indicator for having a significant impact on the currency exchange rate. Unemployment rates are also difficult to predict. A low rate contributes to the rise of the local currency and vice versa.

v Trade Balance:

Is the difference between exports and imports. If the difference is positive, it indicates economic growth, which contributes to the rise of the local currency. If a negative difference, however, this indicates an economic deficit, which contributes to the decline of the currency.

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