By www.TheForexNittyGritty.com
Fundamental Analysis of Forex Pairs
Forex traders have two means of predicting changes in Forex currency rates, fundamental analysis of Forex pairs and technical analysis of the same.
Fundamental analysis of Forex pairs revolves around the news of the day, politics, monetary policy, balances of trade, and both pronouncements and actions of central banks.
Technical analysis of Forex pairs has to do with assessing and predicting changes in market sentiment. While technical analysis can give traders an advantage in short term trading, the fundamentals are what drive currency prices over the long term.
How to trade Forex successfully is typically to use fundamental analysis of Forex pairs to gain a sense of the market possibility and technical analysis to spot short term opportunity.
Fundamentals Have to Do With Both Currencies of a Forex Pair
Forex markets were set up to allow for payment of world trade.
A German company makes a product and sells it to a company in India.
The Indian company needs to convert Rupees to Euros in order to pay.
The Indian company may well purchase options on the Euro with the Rupee in order to hedge currency risk.
What is of importance to the company in India regarding fundamental analysis of Forex pairs are only the Euro and the Rupee.
How to trade Forex successfully in this case is to be aware of the fundamentals that drive the Euro, monetary policy in India, and factors relating to the strength of the related economies.
Importance of Fundamentals for Hedging Currency Risk
When a company is interested in hedging currency risk it is less interested in Forex technical strategies and more interested in fundamental analysis of Forex pairs.
This is usually because a company is trying to anticipate the relative strengths of two currencies six months, a year, or longer in advance.
What are more important in the medium and longer terms are assessment of employment rates, monetary policy, balance of payments, and other factors useful for understanding the long term strengths of one currency versus another.
The Use of Fundamental Analysis of Forex Pairs in Currency Speculation
Currency speculators are often day traders or traders who use technical analysis of trends and reversals to make short term profits from market volatility.
Once a day trader is in the midst of a trade his focus is primarily on technically driven market fluctuation.
But, how does he pick which currency pair to trade?
What is his sense of the range of prices in which a currency pair may trade?
Where will the currency pair be a year from now?
Fundamental analysis of Forex pairs helps the currency speculator anticipate volatility.
Fundamental analysis is how a trader can gain insight into the long term trends of one currency versus another.
A successful Forex trading system should always include fundamental analysis of Forex pairs.
2. Forex traders have two
means of predicting
changes in Forex currency
rates, fundamental
analysis of Forex pairs and
technical analysis of the
same.
By www.TheForexNittyGritty.com
3. Fundamental analysis of
Forex pairs revolves around
the news of the day, politics,
monetary policy, balances of
trade, and both
pronouncements and actions
of central banks.
By www.TheForexNittyGritty.com
4. Technical analysis of Forex
pairs has to do with assessing
and predicting changes in
market sentiment.
By www.TheForexNittyGritty.com
5. While technical analysis can
give traders an advantage in
short term trading, the
fundamentals are what drive
currency prices over the long
term.
By www.TheForexNittyGritty.com
6. How to trade Forex
successfully is typically to use
fundamental analysis of Forex
pairs to gain a sense of the
market possibility and
technical analysis to spot
short term opportunity.
By www.TheForexNittyGritty.com
8. Forex markets were set up to
allow for payment of world
trade.
By www.TheForexNittyGritty.com
9. A German company makes a
product and sells it to a
company in India.
By www.TheForexNittyGritty.com
10. The Indian company needs to
convert Rupees to Euros in
order to pay.
By www.TheForexNittyGritty.com
11. What is of importance to the
company in India regarding
fundamental analysis of Forex
pairs are only the Euro and
the Rupee.
By www.TheForexNittyGritty.com
12. How to trade Forex
successfully in this case is to
be aware of the fundamentals
that drive the Euro, monetary
policy in India, and factors
relating to the strength of the
related economies.
By www.TheForexNittyGritty.com
14. When a company is interested
in hedging currency risk it is
less interested in Forex
technical strategies and more
interested in fundamental
analysis of Forex pairs.
By www.TheForexNittyGritty.com
15. This is usually because a
company is trying to
anticipate the relative
strengths of two currencies
six months, a year, or longer
in advance.
By www.TheForexNittyGritty.com
16. What are more important in
the medium and longer terms
are assessment of employment
rates, monetary policy, balance
of payments, and other factors
useful for understanding the
long term strengths of one
currency versus another.
By www.TheForexNittyGritty.com
18. Currency speculators are
often day traders or traders
who use technical analysis of
trends and reversals to make
short term profits from
market volatility.
By www.TheForexNittyGritty.com
19. Once a day trader is in the
midst of a trade his focus is
primarily on technically
driven market fluctuation.
By www.TheForexNittyGritty.com
20. But, how does he pick which
currency pair to trade?
By www.TheForexNittyGritty.com
21. What is his sense of the range
of prices in which a currency
pair may trade?
By www.TheForexNittyGritty.com
22. Where will the currency pair
be a year from now?
By www.TheForexNittyGritty.com
23. Fundamental analysis of
Forex pairs helps the currency
speculator anticipate
volatility.
By www.TheForexNittyGritty.com
24. Fundamental analysis is how
a trader can gain insight into
the long term trends of one
currency versus another.
By www.TheForexNittyGritty.com
25. A successful Forex trading
system should always include
fundamental analysis of Forex
pairs.
By www.TheForexNittyGritty.com
26. For the individual or
company hedging currency
risk it is essential.
By www.TheForexNittyGritty.com
27. For a currency speculator it is
a useful and profitable
practice that helps him spot
profitable trading pairs and
gives him a valuable sense of
market possibility and limits.
By www.TheForexNittyGritty.com
28. For more insights and useful
information regarding the
Forex markets and foreign
currency trading, visit:
www.TheForexNittyGritty.com.
