Fundamental or technical analysis
There are many ways for predicting forex trends, but Fundamental and technical analysis are the most used tools to analyze forex movements.
Events and factors influencing the exchange rates are studied in fundamental analysis. This analysis examines advanced economic conditions, the global market, and fiscal and monetary policies.
Fundamental analysis focuses on the intrinsic value of a currency, and the analyst takes everything from the country’s economy to the financial management of small companies. Fundamental analysis sig up the history of a country and its monetary condition to reach a reasonable conclusion.
On the other hand, technical analysis looks at statistical data to show opportunities. Technical analysis does not look at prices but patterns and trends demonstrating which direction currency will move.
When using fundamental analysis in forex predictions, we are looking for currencies traded more or less than their value. But in technical analysis, you are looking to price movement and patterns resulting from that to find a trend and the next pattern.
Fundamental analysis to predict Forex
You can find forex forecasts using fundamental analysis; to do that, you need to evaluate everything that might have a tiny impact on a currency’s price, from fiscal and monetary policies to GDP and unemployment rates. By doing so, we will understand the intrinsic value of a currency then we can see whether it is traded according to its true value, higher or lower than that. In doing so, you could predict the next price movement for that currency.
Key factors influencing the price of a currency
As the main driver in the whole foreign markets exchange is sentiment, many different factors are involved in this market. From a single tweet from a famous figure to recessions and natural disasters, everything impacts the forex market. But to name a few, stay tuned:
Economic growth
A powerful economy means that goods and services are expensive, and the GDP is high enough. Investors naturally prefer this type of currency as a haven because they are more powerful and have better assets to store value. To evaluate the country’s economic growth, you need to evaluate the rate of changes in real GDP over the years in that country. In doing so, you need to consider these factors:
- labor market
- domestic policy & foreign affairs
- capital agglomeration
- Export and import
- National Production
- Human resources
- Technologies
- long-term economic plans
- Environmental factors
Inflation rate
inflation rate is measured by monitoring price changes of services and commodities in a country. When the inflation rate in a country is high enough, the central Banks Use interest rates as a primary tool to control inflation.