Fundamental Analysis In Forex – An Introduction By XFR Financial Ltd

14 Jul

You can be very successful with forex trading and make profit provided you use the right techniques that help maximizing your profits and minimizing the risks of losing money. All that forex trading demands is forecasting the correct performance of currency prices which is possible through accurate and good analysis.

Understanding Fundamental analysis

Analyzing the movement of currency prices with changing political plus economical circumstances that could affect currency prices is known as fundamental analysis. For doing their fundamental analysis, professionals traders at XFR Financial Ltd depends on information gained through news and reports on rate of unemployment, inflation and growth rate and economic policies. Fundamental analysis is carried to obtain a broad picture of economic conditions that could affect the currency of a particular country. It is a normal practice with traders to employ fundamental analysis along with technical analysis to make more accurate forecasts of future movements in prices of currencies. Like any other market, forex market too is governed by the law of demand and supply, which in turn depends on economic conditions. How strong the economy is and the rates of inflation are the two most significant economic factors that affect the law of demand and supply. Balance of trade, foreign investments and GDP determine how strong the economy can be.

XFR Financial Ltd takes consideration of the Indicators Of Fundamental Analysis

Various indicators provided by the government as well academicians are reliable sources of economic state of affairs and all segments of investment markets take those into consideration. Such indicators are provided by the said sources on a monthly basis but XFR Financial Ltd actually provides some on weekly basis. The two most significant indicators of fundamental analysis are international trade and the rates of interest. Additional fundamental indicators include Consumer Price Index (CPI), Producer Price Index (PPI), Durable Goods Orders, retail sales and Purchasing Managers Index (PMI),

International trade– If imports of a country exceed it exports, it causes trade deficit. It shows that more money is going out from the country in buying foreign made goods and this causes devaluation of country’s currency. Nevertheless, market expectations define if a deficit trade balance is adverse or not. When a country is used to having a deficit balance of trade, it may fail to affect trade deficit affecting, and affect only the price of the currency in case it exceeds expectations.

Interest rates-Interest rates can have strengthening or weakening effect on a specified currency. Higher rate of interest draw foreign investments while the local currency goes up. However, many investors hold diverse opinion and thus an agreement on how this indicator affects forex market needs to be reached.

Additional indicators that XFR Financial Ltd uses include CPI, a measure of the cost of living, and PPI, meaning cost of manufacturing goods. In the US, 28 major indicators are employed. GDP or gross domestic product means the worth of all goods plus services produced by the country. Fundamental indicators strongly affect the financial markets. Therefore, trader must keep these in mind while formulating their trading strategies.




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