Fundamental analysis is the research of how the worldwide events and news influence the currency markets.
In this edition of my Forex strategy trading Hints I will be teaching you how I you can utilize fundamental indicators to help you take better trading decisions.
The usage of fundamental analysis in the currency market is done by using economic indicators. These fundamental indicators provide you with economical conditions of a country that can assist you to evaluate the robustness of a country’s currency.
Economic indicators are available throughout quite a few bodies of a country’s government and private companies. This information is researched by foreign exchange traders to calculate the direction of the currency exchange market. Currency economic indicators are released at defined times and dates, and are followed by most serious foreign currency traders.
Given that so many investors are looking at them, foreign exchange economic indicators have an enormous impact on the exchange rates of the currencies that are traded in the foreign exchange market.
A large amount of Forex traders do not use fundamental analysis because economic indicators seem difficult to them.
Nevertheless, using fundamental analysis and following economic indicators can be a whole lot easier when you follow easy guides that will keep you up to date with the Forex economic indicators with no trouble.
How to Start Using Forex Economic Indicators
It is important to keep a log of all the important Forex economic indicators’ release dates. Keep a log or subscribe to one of the economic journal services that are available on the internet.
Aside from that, you should employ and follow economic indicators that are relevant to the currencies you trade. Each currency belongs to a different country and for that reason the economic indicators will be different for each currency.
You will in addition need to learn what each indicator means and how it will impact a currency’s strength.
The primary theory behind Forex fundamental analysis is that if a country’s economy is doing good its currency will go up in value and if the economy is doing bad then their currency will devalue and its price will go down.
The Most Significant Fundamental Forex Indicators
As I said before each currency will have unique economic indicators and the date and time when they are released are different. It is now time to talk about the most prominent fundamental indicators that every single foreign currency exchange trader should pay attention to.
The Treasury International Capital: The treasury international capital or TIC measures the flow of treasury and agency securities. The simple principle behind this indicator is that a increased reading is positive (or bullish) for the USD, while a low reading is negative (or bearish).
Durable goods: This is released monthly by the Bureau of Census and reflects new orders placed with domestic manufacturers for delivery in a near future. The basic principle behind this indicator is that a high reading is positive (or bullish) for the USD, while a low reading is negative or bearish.
Consumer Price Index (CPI) Ex Food & Energy: This indicator measures and analysis the weighted average of prices of consumer goods and services such as transportation, food, and medical care. This indicator is used to measure the level of inflation of a country. The basic principle behind this indicator is that a higher than average reading is seen as positive (or bullish) for the USD, while a a lower reading is seen as negative (or Bearish).
There are several other Economic indicators that can be used to assess the FX Market and you should spend some time examining the ones that affect the currency pairs you trade. I hope I was able to offer you with helpful information in this component of my Forex strategy trading helpful hints.