Fundamental analysis is the investigation of how the worldwide events and news have an impact on 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 conclusions.
The usage of fundamental analysis in the currency market is done by using economic indicators. These fundamental indicators provide you with economical elements of a country that can allow you to measure the strength of a country’s currency.
Economic indicators are available through quite a few divisions of a country’s government and large companies. This information is studied by FX traders to forecast the direction of the currency markets. Currency economic indicators are published at defined times and dates, and are followed by most passionate FX traders.
Given that so many investors are looking at them, fx economic indicators have a tremendous impact on the exchange rates of the currencies that are traded in the Forex market.
Almost all of foreign exchange market do not use fundamental analysis because economic indicators seem difficult to them.
Although, using fundamental analysis and following economic indicators can be a whole lot simpler when you follow easy guides that will keep you up to date with the Forex economic indicators easily.
How to Start Using Forex Economic Indicators
It is beneficial to keep a log of all the important Forex economic indicators’ publish dates. Keep a log or register to one of the economic journal services that are available via the internet.
Additionally, you should utilize 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 also need to learn what each indicator represents and how it will influence a currency’s strength.
The main principle behind Forex fundamental analysis is that if a country’s economy is doing well 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 Important Fundamental Forex Indicators
As I mentioned before each currency will have diverse economic indicators and the date and time when they are published are different. It is now time to talk about the most widely used fundamental indicators that each currency trader should pay attention to.
The Treasury International Capital: The treasury international capital or TIC records the flow of treasury and agency securities. The basic principle behind this indicator is that a increased reading is positive (or bullish) for the USD, while a decreased 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 increased reading is positive (or bullish) for the USD, while a a lower 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 decreased reading is seen as negative (or Bearish).
There are more than a few other Economic indicators that can be used to assess the Forex and you should spend some time analyzing the ones that affect the currency pairs you trade. I hope I was able to present you with beneficial information in this part of my Forex strategy trading hints.
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