On the way travels, you must come across Gulliver, Frodo, and the
topic of fundamental analysis.
Wait a minute…
You have already been provided a teaser about fundamental analysis during Kindergarten! Now let’s get to the nitty-gritty!
Do you the exactly usage of it? Well, fundamental analysis is the study of fundamentals! That was easy, wasn’t it? Ha! Gotcha!
There is really more to it than that. Really much more than you imagine!
If you hear people mention fundamentals, they’re really talking about the economic fundamentals of a currency’s host country or economy.
The economic fundamentals cover a vast collection of information – whether in the form of economic, political or environmental reports, data, announcements or events.
Even a credit rating downgrade qualifies as fundamental data which do you need to look how Pip crawler turned this news into a winning short EUR/USD trade.
The fundamental analysis means the use and study of these factors to forecast future price movements of currencies.
Actually, it is the study an ongoing study in the knowledge world and around us, economically and financially speaking, and it tends to focus on how macroeconomic elements (such as the growth of the economy, inflation, unemployment) affect whatever we’re trading.
Fundamental Data and Its Many Forms
Specifically, the fundamental analysis provides insight into how
price action “should” or may react to a certain economic event.
The fundamental data takes shape in many different forms.
It can be found in a report released by the Fed on U.S. existing home sales. It can also exist in the possibility that the European Central Bank will change its monetary policy.
The data report released to the public often changes the economic landscape (or better yet, the economic mindset), creating a reaction from investors and speculators.
There are many examples if no specific report has been released, the anticipation of such a report happening is another example of fundamentals.
Speculations of interest rate hikes can be “priced in” hours or even days before the actual interest rate statement.
Actually, currency pairs have been known to sometimes move 100 pips just moments before major economic news, making for a profitable time to trade for the brave.
Thus, many FOREX traders are often on their toes prior to certain economic releases and you also need so.
In fact, the economic indicators can fill up a large percentage of data used in fundamental analysis. Like a fire alarm sounding when it detects smoke or feels heat, economic indicators provide some insight into how well a country’s economy is doing.
As it’s important to know the numerical value of an indicator, equally as important is the market’s anticipation and prediction of that value.
By assessing the resulting impact of the actual figure in relation to the forecasted figure is the most important part. All of the factors need consideration if those are to be decided to trade.
Phew!
You need not to be worried about. Actually, this is simpler than it sounds and you won’t need to know rocket science to figure it all out.
We recommend you to visit Pip Diddy’s daily economic roundup every day so that you can stay in the loop with the upcoming economic releases.
The fundamental analysis is a valuable tool in estimating the future conditions of an economy, but not so much for predicting currency price direction.
This sort of analysis has a lot of gray areas because fundamental information in the form of reports releases or monetary policy change announcements is vaguer than actual technical indicators.
The analysis of economic releases and reports of fundamental data usually go something like this:
“An interest rate increase of that percentage MAY cause the euro to go up.”
“The U.S. dollar SHOULD go down with an indicator value in that range.”
“Consumer confidence dipped 2% since the last report.”
Here’s an Economic Report, Now What?
This is a great thing that, most the time the market response
based on how people feel. These feelings can be based on their reaction to
economic reports, based on their assessment of current market conditions.
And you might guess it – there are tons of people, all with different feelings and ideas.
Probably, you are thinking “Geez, there’s a lot of uncertainty in fundamental analysis!”
You are right.
It is impossible to know 100% where a currency pair will go because of some new fundamental data.
That’s not saying that fundamental analysis should be dismissed.
It is not at all.
The reason is the sheer volume of fundamental data available; most of the people simply have a hard time putting it all together.
They can understand a specific report, but can’t factor it into the broader economic picture. This simply takes time and a deeper understanding of the data.
In addition, since most fundamental data are reported only for a single currency, fundamental data for the other currency in the pair would also be needed and would then have to be compared to get an accurate picture.
When, you are too busy to go through a bazillion news reports and economic data, you must not fret. Our resident economic guru, FOREX Gump, got yo back covered! Make sure you read up on his regular economic analysis on his Piponomics blog.
As we mentioned from the get-go, it’s all about pairing a strong currency with a weak one.
At this point, you’re probably still waiting for the answer to “Will I ever need to use fundamental analysis to become a successful FOREX Trader?”
We totally understand that there are purists on both sides.
Technical analysis seems to be the preferred methodology of short-term FOREX Traders, with price action as their main focus.
Intermediate or medium traders and some long-term traders like to focus on fundamental analysis too because it helps with currency valuation.
A mix of technical and fundamental analysis covers all angles. You’re aware of the scheduled economic releases and events, but you can also identify and use the various technical tools and patterns that market players focus on.
I have a couple of trade examples for you showing how the perfect blend of fundamental and technical analysis results in huge profits. Check out Cyclo-pip’s huge win on EUR/JPY and Happy Pip’s 115-pip profit on NZD/USD.
There’s your answer!
Happy?!
In this lesson, we’ll discuss the major fundamental factors that affect currencies. These are interest rates, monetary policies, and market-moving economic reports.
As I mentioned earlier, Pip Diddy’s daily economic roundup is a great source of economic updates. Combine that with FOREX Gump’s in depth Piponomics articles and fundamental analysis will be a breeze!
Wait a minute…
You have already been provided a teaser about fundamental analysis during Kindergarten! Now let’s get to the nitty-gritty!
Do you the exactly usage of it? Well, fundamental analysis is the study of fundamentals! That was easy, wasn’t it? Ha! Gotcha!
There is really more to it than that. Really much more than you imagine!
If you hear people mention fundamentals, they’re really talking about the economic fundamentals of a currency’s host country or economy.
The economic fundamentals cover a vast collection of information – whether in the form of economic, political or environmental reports, data, announcements or events.
Even a credit rating downgrade qualifies as fundamental data which do you need to look how Pip crawler turned this news into a winning short EUR/USD trade.
The fundamental analysis means the use and study of these factors to forecast future price movements of currencies.
Actually, it is the study an ongoing study in the knowledge world and around us, economically and financially speaking, and it tends to focus on how macroeconomic elements (such as the growth of the economy, inflation, unemployment) affect whatever we’re trading.
Fundamental Data and Its Many Forms
Specifically, the fundamental analysis provides insight into how
price action “should” or may react to a certain economic event.The fundamental data takes shape in many different forms.
It can be found in a report released by the Fed on U.S. existing home sales. It can also exist in the possibility that the European Central Bank will change its monetary policy.
The data report released to the public often changes the economic landscape (or better yet, the economic mindset), creating a reaction from investors and speculators.
There are many examples if no specific report has been released, the anticipation of such a report happening is another example of fundamentals.
Speculations of interest rate hikes can be “priced in” hours or even days before the actual interest rate statement.
Actually, currency pairs have been known to sometimes move 100 pips just moments before major economic news, making for a profitable time to trade for the brave.
Thus, many FOREX traders are often on their toes prior to certain economic releases and you also need so.
In fact, the economic indicators can fill up a large percentage of data used in fundamental analysis. Like a fire alarm sounding when it detects smoke or feels heat, economic indicators provide some insight into how well a country’s economy is doing.
As it’s important to know the numerical value of an indicator, equally as important is the market’s anticipation and prediction of that value.
By assessing the resulting impact of the actual figure in relation to the forecasted figure is the most important part. All of the factors need consideration if those are to be decided to trade.
Phew!
You need not to be worried about. Actually, this is simpler than it sounds and you won’t need to know rocket science to figure it all out.
We recommend you to visit Pip Diddy’s daily economic roundup every day so that you can stay in the loop with the upcoming economic releases.
The fundamental analysis is a valuable tool in estimating the future conditions of an economy, but not so much for predicting currency price direction.
This sort of analysis has a lot of gray areas because fundamental information in the form of reports releases or monetary policy change announcements is vaguer than actual technical indicators.
The analysis of economic releases and reports of fundamental data usually go something like this:
“An interest rate increase of that percentage MAY cause the euro to go up.”
“The U.S. dollar SHOULD go down with an indicator value in that range.”
“Consumer confidence dipped 2% since the last report.”
Here’s an Economic Report, Now What?
This is a great thing that, most the time the market response
based on how people feel. These feelings can be based on their reaction to
economic reports, based on their assessment of current market conditions.And you might guess it – there are tons of people, all with different feelings and ideas.
Probably, you are thinking “Geez, there’s a lot of uncertainty in fundamental analysis!”
You are right.
It is impossible to know 100% where a currency pair will go because of some new fundamental data.
That’s not saying that fundamental analysis should be dismissed.
It is not at all.
The reason is the sheer volume of fundamental data available; most of the people simply have a hard time putting it all together.
They can understand a specific report, but can’t factor it into the broader economic picture. This simply takes time and a deeper understanding of the data.
In addition, since most fundamental data are reported only for a single currency, fundamental data for the other currency in the pair would also be needed and would then have to be compared to get an accurate picture.
When, you are too busy to go through a bazillion news reports and economic data, you must not fret. Our resident economic guru, FOREX Gump, got yo back covered! Make sure you read up on his regular economic analysis on his Piponomics blog.
As we mentioned from the get-go, it’s all about pairing a strong currency with a weak one.
At this point, you’re probably still waiting for the answer to “Will I ever need to use fundamental analysis to become a successful FOREX Trader?”
We totally understand that there are purists on both sides.
Technical analysis seems to be the preferred methodology of short-term FOREX Traders, with price action as their main focus.
Intermediate or medium traders and some long-term traders like to focus on fundamental analysis too because it helps with currency valuation.
We like to be a little crazy by saying you should use BOTH!
Technically-focused strategies are blown to bits when a key
fundamental event occurs. In the same respect, pure fundamental traders miss
out on the short term opportunities that pattern formations and technical
levels bring.A mix of technical and fundamental analysis covers all angles. You’re aware of the scheduled economic releases and events, but you can also identify and use the various technical tools and patterns that market players focus on.
I have a couple of trade examples for you showing how the perfect blend of fundamental and technical analysis results in huge profits. Check out Cyclo-pip’s huge win on EUR/JPY and Happy Pip’s 115-pip profit on NZD/USD.
There’s your answer!
Happy?!
In this lesson, we’ll discuss the major fundamental factors that affect currencies. These are interest rates, monetary policies, and market-moving economic reports.
As I mentioned earlier, Pip Diddy’s daily economic roundup is a great source of economic updates. Combine that with FOREX Gump’s in depth Piponomics articles and fundamental analysis will be a breeze!
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