Forex Fundamental Analysis Guide - Key Economic Indicators for Trading

Forex Fundamental Analysis Guide - Fundamental Analysis Basics PDF

Fundamental Analysis is one of two methods commonly used to analyze & interpret the market - the other method used is known as Technical Analysis. Traders who use Fundamental Analysis analyze price movement using Economic News Reports that are provided on Economic Calendars. These Economic Calendars are provided by various websites online and one can search for these Economic Calendars on the internet.

The Importance for Traders to Understand Fundamental Economic News Releases - Forex Economic Calendar Data

The main ways to study markets are fundamental analysis and technical analysis. Fundamental looks at money and economy ideas, plus politics, to gauge supply and demand.

Looking at the basics studies what makes the market move, while technical analysis studies what happens after the market moves.

What is Fundamental Analysis? Fundamental analysis looks at the real reasons why a currency pair's price might change. Forex Fundamental analysts study the country that a currency represents. If that country's economy seems strong, its currency will likely become more valuable. Fundamental analysts buy currencies from countries with strong economies by looking at their Economic Indicators.

**What is Technical Analysis?** It involves analyzing price movements to identify specific patterns. Technical analysts leverage these patterns to forecast currency movements and decide which pairs to buy or sell.

Fundamental analysis represents a core methodology extensively employed by online forex traders. This fundamental analysis approach relies on estimations derived from analyzing Economic Indicators to forecast future economic conditions.

Interest rates and how strong the economy is are the two main things looked at in fundamental analysis. How strong the economy is can be seen by checking things like GDP, retail sales, consumer spending, inflation, trade balance, and political stability - these are Forex Economic Indicators used in analysis. These economic factors are called economic indicators.

The interest rate is the most important thing to look at when doing fundamental analysis. The interest rate of a currency has a direct effect on how much inflation there is in a country. If interest rates go up, the amount of inflation in the country goes down. If interest rates go down, inflation goes up.

The USA Federal Open Market Committee (FOMC) rate decisions significantly influence financial markets.

Fundamental analysis by Comparing Countries

Every trade position involves buying one currency and selling another. Fundamental analysis in forex trading is a type of market analysis which involves studying of the economic situation of countries to trade currencies more effectively. It gives information on how the big political and economical events influence the market

Carry Trade Basics: Compare Currency Interest Rates for Analysis

The carry trade is a plan where a trader sells a currency that has lower interest rates and buys another currency that has higher interest rates. Simply put, you borrow money at a lower rate, and then you lend it out at a higher rate. The trader who uses the carry strategy makes money from the difference between the two interest rates. When using borrowed money in the carry trade, even a small difference between the two interest rates can make the carry trade very profitable. Besides making money from the interest rate difference, investors often see the value of the higher interest currency go up as money goes into the higher-yielding currency, which raises its value.

Key Economic Reports for Traders: Market Movers Guide

Certain economic news can shift markets by 100 to 200 pips in just minutes after release. Keep a schedule handy for when these reports come out.

USA economic reports

USA Non Farm Payroll - Employment report of jobs created in the United States
Interest rates (FOMC) - Federal Open Market Committee FOMC rate decisions
US Gross domestic product - GDP - a measurement of growth in economy
USA Trade Balance - proportion between exports and imports in US economy
Treasury Inflow Capital (TIC) Data - a measure of how much foreign buying of a country securities takes place
US Retail Sales - measure of consumer expenditure
Consumer Price Index, (CPI) - measure of inflation

NB: because the US dollar is involved in over 80% of all trades, USA economic info tends to be the most important in the market.

Japan economic reports

Bank of Japan Monetary Policy Meeting - measures strength of the JPY
Trade Balance - Japanese imports versus exports
Gross Domestic Product - GDP - growth in an economy
Consumer Price Index, (CPI) - measure of inflation
Industrial production index - a measure of activity in the Japanese manufacturing sector
Retail sales - a measure of strength of consumer expenditure
Tankan report - assessment of Japanese business conditions
Unemployment rate

Great Britain economic indicators

GBP Trade Balance - a proportion between exports & imports
Gross Domestic Product - GDP - growth in an economy
Consumer Price Index, (CPI) - measure of inflation
UK Housing Prices - UK Housing Prices gauge the level of inflation in the UK .
Bank of England Meeting -outline of monetary policy and changes to GBP rates.
UK Unemployment rate
UK Retail Sales

Euro Zone economic indicators

Euro Zone Countries Trade Balance - a proportion between exports & imports
EuroZone Gross domestic product - GDP - growth in an economy
Euro Zone Consumer Price Index, (CPI) - measure of inflation
ECB meeting -outline of monetary policy and changes to GBP rates.
Euro Zone Unemployment rate
Euro Zone Retail Sales

All such relevant economic reports are readily accessible through the economic calendar provided by numerous online sources.

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