Tuesday, Cristobal Montoro, the Spain treasury minister announced in an interview in a radio that the Spanish bond’s high risk premium is keeping them away from bond markets that stops Spain to refinance its debt. Last Friday, June 1st, the 10-year bond spread between Spain and Germany hits an all time European Union record of 548 basis points. Read the rest of this entry »
Archive for the ‘Fundamental Indicators’ Category
In this article we will look at the major economic indicators that influence the price movements of the Euro. When studying the Euro for trading purposes there are several important indicators to analyze. Most important to keep in mind is that, unlike USA and Japan, the Euro zone consists of 12 different countries and any individual change in one of their economies may have an effect on the Euro. Political differences and developments in each of the countries may have strong effects on the currency as well. The largest states within the EMU are Germany, Italy and France, so their economic and political movements become the most important to keep up with.
Fundamental Analysis in the forex market is the art of predicting future price movements based on macroeconomic events and political developments. The forex market is the only market that can be traded successfully on both economic news and political news, as the commodity traded, currency, is backed by a nation and not just a company. So any change in the status quo of a nation can and will effect a nations currency. The forex market like all other markets are governed by the laws of supply and demand, thus the question all traders must ask themselves on release of news is: Will this affect demand for that currency positively or negatively?
Forex fundamental analysis is the strategy of predicting movements of individual currency pairs in the forex market by analyzing the underlying economic factors. Think of forex fundamental analysis the same way you would if you were to do fundamental analysis on a company’s public stock. You gather up the information and try to piece together the puzzle on how profitable the company is going to be. In the stock market the process is fairly simple. The main thing to analyze is the companies annual and quarterly reports. From this you can deduct some key indicators of profitability. When it comes to forex trading things get more complex because of the scale of the economy.
As a nations currency is a reflection of that nations economic status there is a lot of information to digest and process in order to get the full picture. There are interest rates, GDP, Consumer Price Index, Retail Sales and many more. All of which are an area of study onto themselves and continue to prove difficult to predict even for economists in that particular field. Many traders therefore respond more to news and announcements from the major players in the economy. This is why you often see the market moving at its most violent, and profitable, around news sessions. In this article we will look at three major announcements that become forex fundamental indicators.
The forex market is an investors heaven and hell at the same time. The same thing that make forex trading so exiting and profitable are the same that can break a trader faster than anywhere else. The one thing that sets the forex market apart from other financial markets is the significant volatility of the market. Currency is used everyday and everywhere, where people do businesses and there are so many players with conflicting interest that no one holds any true edge over others.
Central Banks around the world are of course the major institutions in the market trough their huge influence by setting interest rates. Central Banks don’t act on feelings or sentiments though, their objective is to stabilize the growth of their nations through monetary policy. So if you can actually predict a countries economic growth there is a good chance you can predict the interest rate changes from the central banks. Let us take a look at why economic growth is important to predicting interest rates.