As the major financial market, the forex is affected by an extremely varied number of factors. These market fundamentals are the main elements to decide whether and when a currency will grow in value. The Forex market is very affected by the news of the country and economic news of that currency. And to understand the fundamental news is very important for a Forex trader.

What is the Fundamentals Trading?

Fundamentals trading also is known as news trading, this study of news events and economic data to assess trade opportunities. These news traders pay careful attention to changes in economic factors like employment rates, interest rates, and inflation. By analyzing the relative trend of these data, a trader analyzes the current strength of the economy of that country, or when to trade their currency’s future movement.

There are periods in the global economy when a currency pair‘s true value varies with the currency pair’s market value. The fundamental analyst’s task is to look at a currency using other calculation criteria, compare its price with the other currencies, and decide if the present value is the pairing’s true value, or if the value of one currency against another is underpriced or overpriced. If a currency is underpriced then the Forex trader’s approach to the fundamental analysis is to take a long stand on the underpriced. Similarly, if the fundamental analyst sees a currency as being overpriced, it will assume a sell position in order to profit from a potential downward trend towards accurate value.

In any country, the following economic news releases are typically the most relevant. These releases vary depending on the current state of the economy:

  • Inflation (consumer or product price)
  • Consumer Confidence Surveys
  • Industrial Production
  • Gross Domestic Product (GDP)
  • Business Sentiment Surveys
  • Inflation (consumer or product price)
  • Retail Prices, Interest Rate Decisions
  • Trade Balance
  • Manufacturing Sector Surveys
  • Employment / Unemployment (Non-Farm Payrolls)

Interest rate policy is the main key of currency prices movement and generally a technique for currency traders to analyze forex fundamentals. If the economy is strong or weak, it will be reflected in the interest rate policy of that country, and consequently the currency’s strength or weakness. Essentially, if any country or currency increases its interest rates and has a stable economic policy, the country’s currency should increase. Even if a country or currency lowers interest rates, the single currency may be weak.

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