Forex Fundamental Analysis In The Wake Of Economic Events

Forex fundamental analysis and forex technical analysis are the two basic types of foreign exchange trading. There is an ongoing debate about the pros and cons of these two techniques of analyzing the forex market, but both trading systems are important.

At the first level, we could say that forex fundamental analysis looks at the world economy while technical analysis is based on charts. Here we will examine the different fundamental or economic factors and the impact they can have on your forex trades.

How financial reports affect your trades

Anyone with the most elementary information about the currency markets knows that the state of the economy of a country affects in some way the value of its currency. A booming economy translates into a strong currency, exactly as it happens with the stocks of a company that is thriving.

Virtually every important economic and financial report made public by the major agents of the international economy has a marked effect on the forex markets.

Some examples of such influential reports are trade deficits, employment accounts, news about the country's Gross Domestic Product, national debt statements and inflation reports. You can expect such type of reports at regular and established dates and times. And every time one of them comes out, the volatileness of the foreign exchange markets increases.

It is essential that you know when these reports are due to appear, from your own country and from any other country whose currency you trade on a regular basis. You can depend neither on television news nor on newspapers for these details. Their accounts of the world's financial news are not elaborate enough. You need access to professional publications, and you can find them online too.

Forex fundamental analysis vs. technical analysis

Despite the paramount significance of the economy for the forex markets, it is not the only field that counts for forex fundamental analysis. Political and social trends have a noticeable effect on the currency values of different countries too. Natural disasters, elections, civil turmoil, all of them are examples of events that can unleash sharp fluctuations in the values of the markets.

Many of these developments are almost impossible to foretell, but you can still make forex trades based on what will probably happen after the events. You can perform a historical analysis to find out the trends in the forex markets in similar circumstances.

If you are going to trade based on the forex fundamental analysis technique, you will have to keep track of the financial, economic and political news and analyze them.

Another option you have is to refrain from trading every time there is going to be a very influential major event. This is what people who prefer to use charts for their forex trades usually do. Nevertheless, if you want to keep away from the markets at those times, you still have to know what is going to happen and when.

The bottom line is that even if one of your chosen forex strategies for trading is forex technical analysis, you cannot dispense with forex fundamental analysis completely. You still have to trace events.