The analysis of the markets and conditions of financial institutions constitute a primary basis for preparing any methodology or planning of the trading at the forex market.
The fundamental analysis and the technical analysis are made to study the nature of the market forces. The fundamental analysis of trading at the forex markets entails the analysis of the political and socio-economic conditions.
The political set-up, its stability and lineage play a role in moulding the forex market by triggering a change in the prices of currencies. Traders and brokers use the informations to devise ways to harness the forex markets.
Also, the outbreaks of wars or the onset of natural disasters in form of floods or earthquakes also have their effects on the forex market.
So, it is necessary to keep abreast of the latest news from different sources to plan the strategies to take advantage of the upheavals in the forex market.
The strength of the economy of any country is the prime factor that governs the trading of currencies. The more vibrant a currency is, the stronger it becomes at the forex market. The strength of the currency is again dependent upon the political and social stability.
Hence, this knowledge would help in shaping the strategies of the investors and brokers at the forex market. The economic indicator like the inflations, interest rates, the gross domestic products are the main indicators of the strength of the economy.
These reports are released both by the governmental and non-governmental organisations. They may be as follows
The GDP or the Gross Domestic Product – This is an important economic index and tells about the value of the products of a particular county in terms of currency in a given year.
This indicator is used in the planning of the trading in the forex market as it tells a lot about the overall of the economy.
Interest Rate – The interest rate is an important indicator in gauging the strength of the economy.
International Trade – The international trade is of paramount importance in the forex market. A higher export compared to the import is a good sign of an economy.
The trade deficit doesn’t augur well for the forex market. But it can also be a time to sell or purchase of a particular currency.
Consumer Price Index – The prices of consumer goods of a country is also an indicator of the economic health. This and the export tell the real value of the goods and services offered in the world market.
Apart from the above-mentioned indicators there are some other economic indicators that the traders and investors look into to have a proper idea about the market forces relating to forex.
They are the cost of living and production of goods, the total amount of currency supply etc. The industrial growth is also a prime factor that should be closely looked into to devise the strategies for investing in the forex market.
But above all, the overall socio-economic and political stability of a country is the prime indicator.