Influential Factors On The Forex Market
The traditional school of fundamental analysis is likely to be combined with the development of the applied economic science. I mean economics of course. In order to execute only successful deals on the foreign exchange market you will require to know the foundation of the macro -economic life of the human society and of course all its impact on the dynamics of prices of specific goods.
For example, the knowledge of weather conditions in the South America for the current year may help you to calculate the volume of coffee production and consequently the dynamic of coffee prices for this period.
Now let’s understand something essential. If the primary task of the macroeconomic school of the technical analysis is to smooth speculative price fluctuations then on the contrary the main task of the fundamental analysis school is to shape and anticipate new trends in price movements.
So we’ve just deduced the purpose of the fundamental analysis. It has appeared to be the analysis and prediction of different fundamental factors and their influence on the trend behavior of prices. By the way strategic investors, while hoping for carrying out their long - term investment pay a considerable attention to the fundamental analysis of financial markets.
Conducting the fundamental analysis is supposed to be more complicated than any other, because the same factors may arise under different circumstances. And they can’t be of the equal importance to the market. Moreover they may be simply a noise or rumor and nothing else. In general, the fundamental analysis identifies four groups of factors directly influencing the market. They are different political events, rumors and expectations, force majeures and certainly economic events.
The vivid example of the influence of political events was the rejection of the Constitution in France in 2005. In fact this led to the fall of the euro against the dollar and resulted in subsequent elections in Germany.
Let’s consider another example of price changes under the influence of rumors and expectations. I hope you know about the fall of the British pound. At that time about 1 billion was earned by J. SOROSS. Within a few months he was of negative perception about the economy of Great Britain and after the next release of data having failed to confirm the welfare of the UK, the pound fell.
The striking example of a force majeure was certainly the September 11 attack, the fall of the twin towers. Against the backdrop of these buildings the dollar fell very much within hours. The Economic group of factors and its influence on the currency markets is based on the axiom that any currency is derived from the country’s economic development and its costs can be controlled with certain economic measures. I hope that we’ll continue with our trip over the fundamental analysis very soon.
As in every other sphere of our life foreign exchange market needs some knowledge.
Surely, one can start forex trading and be quite successful in it. However sooner or later the losses will come. This is when one might think “Why didn’t I start with a nice forex book?”
This does not imply that after reading even the top forex book you will start closing trading positions with huge income, but this knowledge will save you from lots of dangers.
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