Fundamental Analysis – Free Training Course in Forex – Lesson 19

Definition of Fundamental analysis:

This type of analysis looks to analyze the Forex market through economic news, political and social, which affect the size of supply and demand, in other words we compare the country's economy, which works well and the weak economy of the country. 

Compare the economy of any country which works well and the weak economy of the country, and the idea behind this type of analysis is that the country's economy (which wants to buy its currency) works well.

Fundamental analysis is also known as the analysis of the news!!

It includes the study of economic and political factors that may affect the foreign exchange market, which is issued in the form of news reports of these reports and grouped in "Economic Calendar" For this we, say that fundamental analysis is the study of any information or data that is expected to affect the market price.

And now in order to shorten the above ideas in a quick about factors influential in the country's economy and then the change in the exchange rate of any currency in any country:

In order to be successful trader in Forex you need to know that we buy and sell foreign currency in accordance with the following:

(1) - An analysis of the results of the economic indicators in the data table News

Economic Indicators, it called also data, or statistics, or reports, or results, or news of economic indicators.

It is a set of news, which is published in certain times of the often (monthly, or quarterly, or annually), and these data reflect a picture of the financial situation, social or general shape of the country's economy her currency.

It is important which determines the strength or weakness of a country's currency in the timing of a specified time, whether short-or medium-or long-term, and this is the economic data, which represents the economic situation of each country.

(2) Changes in the level of inflation and its impact on the country's economy (Inflation rate)

Inflation means: low purchasing power of the currency against the prices of goods and services over a long period and a recession and the deterioration of the economy, and this means that if there is a leap in rise of the prices, we do not called this inflation, and not necessarily a rise in all prices because, even in times of severe inflation, some prices may be relatively constant or others prices may fall.

* It is important reasons that lead to inflation, the size of the money supplying in the Internal Market (Growth of money stock at the internal market).

In Forex continuously rising inflation, means a negative effect on the development of the country's economy and thus decreasing the monetary value of the currency followed it, and therefore investors resorted to the sale of this currency, hit by inflation and the trend to buy the currency of another country’s economy better.

With the continuous rise of the prices people realize that buying long for the day when the price levels prevailing in the purchase is better than tomorrow because the prices will go up more and more hastily to resort to foreign currency is more stable in value, which is reflected in the deterioration of the exchange rate of the currency, hit by inflation.

(3)- Level of interest rate

All investors interested in buying the currency with the largest interest rates, and the announcement of the interest rate is linked to the central bank of the currency country, which is a very important indicator reflects us look for other economic indicators and the amount of control the inflation and money supply policy or financial.

(4) The decisions of central banks and their role in improving the state of the economy

It Defines the relationship between inflation and interest rates in the role of central banks that they intervene to reduce the interest rate cut and therefore people are going to buy the currency and trending to the loans, and all that in order to reduce the size of inflation if there is inflation, and because of this we find that the record index for the consumer costs of the most important economic indicators.

The name of the international banks is:

•             European Central Bank

•             Federal Reserve Bank of New York

•             Bank of Japan

•             Bank of England

•             The Central Bank of Swaziland

•             Reserve Bank of Australia

•             Bank of Canada - Banque du Canada

(5) Changes in the size of the stock indices for global stock exchanges and the securities markets

You must know the changes in stock indices for global stock markets for securities (Stock indexes) you must know the result of the average index of the stock exchange of the currency country you want to trade in its currency.

The stock market is the market in which securities instruments are dealt, stocks and bonds issued by companies, banks or governments or other institutions, public bodies and be negotiable, and here you have to know the result of the average closing stock index stock Securities (Stock indexes) of the currency country want to trade in, in order to be able to determine the extent of the growth or deterioration in the economy of this state and you want to buy or sell their currency.

For example, when an increase in the Dow Jones stock exchange USA's 0.3% per day, this means that 30 shares of the leading companies in the United States, which represents the index of the Dow Jones, the increase in prices in for 0.3% that day any earnings growth in the U.S. stock market.

The main indicators that affect the stock market news on Forex market:

INDICATOR NAME	ITS OWN STOCKE MARKET
NIKKEI 22	Contains 225 Securities representing about 70% of the capitalization of the Tokyo Stock Exchange.
HANGSENG	Hong Kong Stock Exchange Index
DAX	Contains 30 Securities representing 70% of the capitalization of the Frankfurt Stock Exchange
FTSE100	And contains 100 Securities representing 70% of the London Stock Exchange (the euro zone EURO area)
CAC40	Consists of 40 Securities of financial companies the most important in the Paris Stock Exchange.
NASDAQ	New York Stock Exchange Index
DOWJONES	This index contains thirty Securities representing 30% of the New York Stock Exchange.
S&P500	Contains five hundred Securities representing 80% of the market value of the shares traded on the New York Stock Exchange.

(6) The size of the changes in the energy markets, oil, and metals markets, especially gold

You must know the price of one oil barrel

If you intend to trade in the currency pair USD / CAD you should know the price of oil per barrel.

The higher the price of a barrel of oil, the less the price of the U.S. dollar, and that was good for the Canadian dollar.

The lower the price of a barrel of oil whenever the price of the U.S. dollar, and that was bad for the Canadian dollar.

It is Because of Canada's largest oil-producing country, but America's largest oil-importing countries.

And you must know the size of the gold and currency reserves of the country.

You must know the size of the gold reserves and the currency reserve stored in the central bank and financial institutions at the state and assets with international creditors, especially if you intend to trade in the currency pair AUD / USD.

Please remember that this is an important point...

If gold prices rose

That was good for the Australian dollar, and the worst on the U.S. dollar

If the prices of gold go down

That was the worst on the Australian dollar, and good for the U.S. dollar

In addition to all this to identify the extent of political stability and peace in the country, and the volume of natural disasters and other makes investors more secure or fear of investing in the currency of any country.

What do we conclude from this!!

(1) Once the development and growth of the economy, the exchange rate of the currency of the country will also grow.

(2) Once the numbers are issued the economic countries passively or start to go down the exchange rate of the national currency also will be affected negatively, and vice versa.