Lesson 2 - Introduction to fundamental analysis



We have found that forex traders tend to focus on one type of analysis or the other (fundamental or technical) in their trading and will often completely dismiss other types. We encourage traders to spend the time it takes to understand the underlying forces moving the market (fundamental analysis) as well as what is happening in price, volume and volatility (technical analysis). We separate fundamental forces into two categories: Trade Fundamentals Of course trade number themselves are obviously the key announcement that we pay attention to when analyzing this fundamental. Trade data is released in most economies once a month and the trend of that information is important. If exports are increasing over time, we would expect the currency to appreciate versus other currencies whose, exports or net exports are shrinking. Other announcements will affect trade numbers indirectly. For example, if producer prices are increasing, it can make an country's exports more expensive and therefore could hurt trade export numbers. Similarly, falling commodity prices could damage exporter profitability and in turn hurt a currency's value. Whether you are looking at the actual trade numbers from an economy or supplemental trade information like producer prices and commodity values, trade fundamentals will have a bigger impact on the commodity currencies. Make sure you place the right fundamental emphasis on the right currencies. Capital Flow Fundamentals Capital flows are a measure of the pace of investment in an economy. The US traditionally attracts the most investment in government debt amongst the major economies and is therefore sensitive to relative interest rate yields from one economy to another. If rates and other yields are high in one economy compared to others then that currency is likely to appreciate in value. Besides the benchmark interest rates, stock market performance and market volatility will also affect capital flows. These factors will impact currencies most sensitive to capital flows. Provided by Learning Markets

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  12. 3:30 wait shouldnt demand for currency decease because interest rates got increased to 8% and not the other way around? im confused
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Duration: 7m 46s

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