What is Fundamental Analysis?
Fundamental analysis is the analysis of the current core elements that affect an economic entity such as stocks or foreign exchange. Through the analysis of economic indicators, official policy, social or other factors to predict the price trend of a commercial area.
If the market as a huge clock, the fundamentals are to provide power gear and winding. Everyone can say what time it is, but only know the fundamentals to know the cause behind the clock (or price) the reasons behind the operation.
Fundamentals? Or technical?
There seems to be a tendency to simply classify traders into two categories: fundamental and technical. In fact, most of the wise traders tend to combine the two, rather than simply use one side.
Fundamental analysts need to keep a close eye on the technical signals sent out on the chart, and technical analysts should not overlook the key economic data, important political decisions or major social events that affect the exchange rate.
Use the model to forecast the economic situation
Fundamental analysis is very effective in forecasting the economic situation, but it can not help you to accurately forecast the exchange rate. An analysis of GDP or employment data can give you an idea of the economic situation of a country and the reasons behind it, but you still need some way to translate it into specific entry and exit prices.
The bridge between fundamentals and trading strategies comes from the trading model. These models use current or historical empirical data to predict future exchange rate developments and translate them into specific trading strategies.
Prevention of "suffering from aphasia"
Predictive model is a combination of sensibility and reason, because of its many ways, so traders learn to use them may be at a loss. It's hard to say when you can confidently confirm your timing.
As a result, many traders turn to technical analysis at this time to validate their forecasts and observe the admission signals from price patterns.
Look at the fundamentals of factors
The fundamentals cover all the elements that drive a country's economic and currency movements. From interest rates, central bank policies to natural disasters, fundamentals are a dynamic mix of unique plans, unusual behavior and unknown events.
Therefore, not every change can cause a country's currency fluctuations. We recommend that you grasp the main contradiction from the start, the first grasp of qualitative factors, not to grasp. Rather than focusing on all the fundamental data, we suggest that you first grasp the most influential factors in the fundamentals mix.
Factors affecting the foreign exchange market
Foreign exchange market by the interest, crude oil or gold and other commodity prices, and several other basic factors.
Rate hike to promote a country 's currency appreciation
We usually understand interest rates as follows: it means how much the loan will cost, whether it is a mortgage or the proceeds from bonds and financial markets. Interest rate policy is the key factor affecting the exchange rate, and is suitable for foreign exchange trading novice typical strategy.
Fundamentally, if a country raises interest rates, the exchange rate will rise, as interest rates will attract more foreign investors.
For example, the high interest rate in the euro zone will prompt US investors to sell dollars, in turn buy euro bonds. Similarly, if Switzerland to increase interest rates, investors will sell euro bonds, convertible Swiss franc bonds, which prompted the euro fell, the Swiss franc appreciation.
Gold rose, the dollar fell (and vice versa)
Gold has long been regarded as a "hedging tool", investment hedging instruments and the world's other reserve currency US dollar alternatives. This means that the price of gold and the dollar price into a reverse movement, many foreign investors in the transaction through a variety of ways to use this.
For example, if gold prices break through important levels, and is expected to continue to rise. At this point, you may be short dollar, buy the euro, hedge gold prices.
Gold rose, the gold country's currency also rose
As we all know, Australia is the world's third largest exporter of gold, Canada is the world's third-largest gold producer. So once the price of gold, the two countries are expected to appreciate the currency. Therefore, when gold appreciates, you can consider buying more Australian dollars and Canadian dollars, or selling sterling or yen to invest in Australian dollars and Canadian dollars.
Oil rose, oil-dependent countries fell
Just as the aviation industry or other oil-dependent industries will be hit by rising oil prices, the oil-dependent countries such as the United States and Japan, the two oil-importing countries will also be suppressed.
If you are convinced that oil prices will continue to rise, you can consider doing more commodity economies such as Australia or Canada's currency, short oil-dependent countries of the currency.