Forecasting exchange rates
Making a forecast of the exchange rate only at first glance seems like an impossible task, but if you know the main technical points, you can actually carry out this procedure yourself, without resorting to the help of a specialist.
To do this, you need to know two main points - which external factors influence exchange rates and what patterns can be detected by analyzing the chart of a currency pair.
Currency forecasting can be used not only for speculative transactions on Forex, but also for assessing the risks of operations in the economic activities of some enterprises closely related to currency exchange.
In addition, when forecasting exchange rates, you should remember that you need to take into account in relation to which currency you want to make a forecast.
For example, the exchange rate of the American dollar cannot grow simultaneously in relation to all world currencies; there is such a thing as correlation, based on which, some monetary units will grow simultaneously with the American dollar.
Therefore, if you trade Forex, carefully study the analyzed currency pair and only after that proceed directly to currency forecasting.
When trading, it is worth highlighting two main groups of factors that are the basis for a future forecast - these are internal and external factors.
Factors to consider when forecasting exchange rates
1. Internal factors can be detected by analyzing the chart of a currency pair - these are the so-called patterns that are based on the repetition of history. For example, a seasonal increase in the price of a certain currency pair or a sharp drop depending on the trading session.
We will also use the chart to determine the general mood of the market and the existing trend.
It is technical analysis that serves as the basic basis for obtaining data for forecasting the exchange rate, and after it has been carried out, one should proceed to the study of fundamental factors.
2. External factors - these include the state of the economy of the country of issue of the currency being analyzed; it is advisable to take data for the last six months and track the dynamics of changes.
If you carry out short-term forecasting of exchange rates, a tool such as the Forex event calendar , from which you can obtain information not only about the time of publication of current economic and financial indicators, but also expert forecasts.
Often it is forecasts that form a market trend, and the event that occurs only confirms it or, on the contrary, radically changes the direction of the trend.
Using the data obtained with the results of technical analysis, we predict the likelihood of a change in the exchange rate.
For example, if there is currently an upward trend in the market, and the situation in the country issuing the currency also has a positive trend, it is highly likely that the upward trend will continue.
Forecasting exchange rates is a rather complex process, but if you identify the main aspects that you should pay attention to, you can greatly facilitate and simplify this work.
Read also:
- Factors influencing the price of currencies - http://time-forex.com/fundamental/faktory-vliyayushchie-na-kursy-valyut
- Important indicators for forecasting exchange rates - http://time-forex.com/fundamental/ekonomicheskie-pokazateli-kurs