Factors influencing exchange rates
If you learn to determine what affects exchange rates, you can consider yourself almost successful in Forex trading.
After all, this aspect is the basis of trading on the currency exchange; it is enough to simply know after what event the price will go up, and what news will cause an increase in the exchange rate.
The main thing is to correctly determine the weight of the event that occurred and its degree of influence on the trend.
Factors influencing the exchange rate are nothing more than the appearance in the press of reports about changes in the economic or financial situation, which in one way or another relate to a specific currency.
In other words, these are fundamental factors that are closely related to a particular currency and put pressure on its price.
Most of the so-called news trading strategies .
Employment changes in Canada. Impact of the news on the USDCAD currency pair
Employment is an indicator of the well-being of a country's economy, its good
investment climate and the health of the economy as a whole.
Fundamental financial analysis should always take into account employment data, as it also affects the value of the Canadian dollar.
In fact, the logic for a trader and investor when releasing this indicator should be very simple.
The more people are employed, the less unemployment benefits need to be paid, and as a result, the burden on the country's main budget decreases.
Also, do not forget that the greater the number of people employed, the greater the percentage of taxes the state will collect, which directly leads to strengthening the economy, increasing social standards and the development of the state in various sectors.
Types of fundamental news.
Even if you do not trade on news, it will be useful for you to know what types of fundamental news are divided into and what impact they have on fundamental market analysis.
And what impact, depending on this division, do they have on the rates of the currencies being studied.
First of all, all news can be divided into two categories - random and expected, random ones happen spontaneously, no one plans their appearance in advance, expected ones come out on schedule.
You can familiarize yourself with an analogue of such a schedule by studying the Forex calendar .
Each news, in addition to the release time, has several additional parameters.
US Consumer Confidence Index. Impact of the news on the USDCHF currency pair
The trust of one’s own people in the stable growth of the state’s economy and satisfaction with the current
situation that has developed within the country is a good sign for the confident growth and stability of any economy in the world.
There are a lot of myths about the US Consumer Confidence Index, the main one being that the data on the release of this index do not have the slightest impact on the US dollar exchange rate.
The US Consumer Confidence Index is measured by a routine survey of 5,000 households giving their opinions on the current state of the economy and their thoughts on future developments.
Simply put, thanks to the trust index, you can see how much the average consumer trusts and believes in the stability of their country's economy. Therefore, when conducting fundamental analysis on Forex, you should not forget about it.
Index of pending sales in the real estate market. Impact of the news on the Euro/Dollar currency pair
The real estate market has always had a significant impact on the exchange rate of the national currency.
Many traders ignore such data when conducting fundamental analysis on Forex.
Considering that real estate and the dollar exchange rate are completely distant things, since such a small indicator for the United States cannot in any way affect the world currency.
In fact, this is a big misconception that can be argued with simple common sense reasoning.
Let’s say you are an ordinary citizen and you want to buy yourself an apartment, but due to lack of money, you simply cannot do this, like our entire country.
In many ways, it's not even your fault; you can work hard for years and still not raise the money for your dream.
First of all, this speaks of the country’s weakness, its low wages and the weak economy as a whole.
Consumer price index. Impact of news release on the Pound/Dollar currency pair
Every novice trader who decides to trade using fundamental analysis in Forex
faces the problem that he simply does not know how certain news can affect the market, how long the price moves on average after the news is published, and why the market sometimes does not react to it.
Many sites write on their pages about the importance of fundamental indicators and that they can be used to trade, but, unfortunately, it is almost impossible to find practical information on how to apply certain news.
I also had to face this problem, so I decided to conduct my own analysis and some kind of mathematical calculation.
Using fundamental analysis in practical Forex trading
Forex trading is based on two methods of studying the market - technical and fundamental analysis, and although the latter option seems easier to use, it raises a lot of questions.
At first glance, it seems that there is nothing simpler than, after the release of the next news, to take and open a trade in the direction of the trend, but in fact, the market does not always behave correctly, and the price moves contrary to any logic.
Therefore, if you want to trade Forex most effectively, you should follow a few simple rules for opening and closing transactions, taking into account fundamental factors.
Market entry and fundamental analysis
The main point when trading Forex has always been entering the market, but at the same time it is necessary not only to choose the right direction of the transaction, but also to take into account the risk of a trend reversal.
It makes no sense to take a position right before the release of important news, since if this news causes a trend reversal, the transaction will be closed with a loss.
How various economic indicators affect the exchange rate
Currencies react quite sensitively to changes in the economic indicators of the issuer’s country; sometimes, after the publication of news, a currency pair moves several dozen points in a matter of minutes.
Therefore, it is so important to know what may follow a change in the discount rate or increased unemployment; there are not so many main indicators that really affect the exchange rate.
When conducting fundamental market analysis, the main thing is to know the relationship between their change and the currency’s reaction to this change
In addition, take into account the quality in which the analyzed monetary unit is included in the currency pair.
The impact of GDP on the exchange rate.
GDP - or Gross Domestic Product is one of the most important economic indicators that characterize the performance
of a country's economy.
GDP is the total amount of goods and services produced within a country, expressed in monetary terms. The higher the value of this indicator, the more optimistic are the forecasts regarding economic growth in a given state.
A special role is played by the analysis of the dynamics of changes in GDP, which is compared with values for previous years.
The positive dynamics of changes in the Gross Domestic Product is the basis for strengthening the national currency and plays an important role in attracting foreign investment. It is for this reason that some countries use certain techniques to artificially increase GDP.
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