Fundamental Analysis in Forex – Influence of Economic News

There is a continuous debate among Forex traders about the use fundamental and technical analysis. Some prefer to use exclusively technical analysis and ignore the economic indicators. Other traders say that you can trade profitably only on fundamentals. In my opinion both types of analysis are equally important.

Simply speaking the difference between fundamental and technical analysis is that fundamental analysis studies the impact of economy and politic on currency value while technical analysis studies the chart patterns in effort to predict the price movement.

I believe everyone would agree that that state of national and worldwide economy would influence the currency exchange rate. Country with a healthy economy would have a strong currency, the same way as a company that is doing well would have rising stocks.

Any time that a major financial or economic report is due from one of the main players in the world economy, you can expect to see an effect on the foreign exchange markets. This includes reports of the country’s Gross Domestic Product, statements of the national debt, inflation, employment levels and trade deficits. Many of these reports are given out regularly at predetermined times and dates, and you will see a lot of volatility in the Forex markets around those times. More details please visit:-

Any serious trader needs to keep track of those news releases not only in home country but also in those countries whose currencies are extensively involved in currency exchange market. Therefore you can not rely only on the local publications. You will need special economic publication or you can use the Internet as an alternative.

On the other hand, it is not only the economy that influences the value of currency. Social and political forces also have a strong influence on a nation’s currency values. Such events as election, civil disturbances, or a natural catastrophe can cause high volatility in currency values.

Usually it is very difficult if not impossible to predict the impact of these events, but you can still base your trading around what is likely to happen after the event. You can back test your system based on such fundamental news releases to see if that approach can be profitable.

If you decide to use a system that utilizes these fundamental indicators you need to be familiar with their impact on the currency prices. What’s more you have to be a person who enjoys to follow the news in economy an politics.

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