Forecasting exchange rates
At first glance, creating an exchange rate forecast may seem like an impossible task, but if you understand the basic technical aspects, you can actually carry out this procedure yourself, without the help of a specialist.
To do this, you need to know two key points: which external factors influence the exchange rate and what patterns can be discovered by analyzing the chart of a currency pair.
Currency forecasting can be used not only for speculative operations on Forex, but also for assessing the risks of operations in the economic activities of certain enterprises closely related to currency exchange.
In addition, when forecasting exchange rates, it is important to remember that you need to take into account which currency you want to forecast.
For example, the US dollar cannot rise simultaneously against all world currencies; there is a concept called correlation, which means that some currencies will rise simultaneously with the US dollar.
Therefore, if you trade Forex, carefully study the currency pair you are analyzing and only then proceed directly to currency forecasting.
When trading, it is worth highlighting two main groups of factors that form the basis for future forecasts: internal and external factors.
Factors to consider when forecasting exchange rates
1. Internal factors can be identified by analyzing a currency pair's chart—these are so-called patterns based on historical repetition. For example, a seasonal increase in the price of a certain currency pair or a sharp decline depending on the trading session.
We will also use the chart to determine the general mood of the market and the existing trend.
Technical analysis serves as the basic basis for obtaining data for forecasting the exchange rate, and after it has been carried out, one should move on to studying fundamental factors.
2. External factors – these include the state of the economy of the country issuing the currency being analyzed; it is advisable to take data for the last six months and track the dynamics of changes.
If you're making short-term exchange rate forecasts, a tool like the Forex events calendar . It can provide information not only on the release dates of current economic and financial indicators, but also on expert forecasts.
Often, it is forecasts that shape a market trend, and an event that occurs only confirms it or, on the contrary, radically changes the direction of the trend.
Using the obtained data and the results of technical analysis, we predict the likelihood of a change in the exchange rate.
For example, if the market is currently experiencing an upward trend, and the situation in the country issuing the currency is also showing a positive trend, there is a high probability that the upward trend will continue.
Forecasting exchange rates is a rather complex process, but if you identify the key aspects to pay attention to, you can make this work much easier and simpler.
Read also:
- Factors Affecting Currency Prices - http://time-forex.com/fundamental/faktory-vliyayushchie-na-kursy-valyut
- Important indicators for forecasting exchange rates - http://time-forex.com/fundamental/ekonomicheskie-pokazateli-kurs
