10 figures for foreign exchange investments

Posted by GRY on November 1, 2018

Fundamental analysis refers to the study of the core elements affecting a country’s economy and currency exchange rate changes. It aims to predict the exchange rate changes and market trends in an economic cycle by analyzing a series of economic indicators, government policies and events. Fundamental data not only tell us the current market situation, more importantly, it can help us predict the future market development.

Fundamental analysis can be very effective in predicting economic trends, but it is not necessarily specific to the market price. If we want to acquire specific trading strategies such as entry point and exit point, we need to resort to more precise technical analysis methods. Therefore, the proper fundamental analysis method is to grasp some of the most influential data, rather than want to eliminate all.

Because of the dollar’s role in foreign exchange markets, and because the vast majority of foreign exchange transactions are dollar-centric, U.S. economic data is most notable in currency markets. The following are some important economic indicators, government policies and analysis of events:

Non-agricultural data

The non-agricultural data mainly consists of non-agricultural employment, unemployment rate and wage and treatment, which reflects the national income and expenditure, employment and unemployment, and is a barometer of a country’s economic development. Employment is down, and rising unemployment is a sign of economic stagnation. Unemployment is normally around 4 percent, but above 9 percent would indicate a recession. This data is published by the us department of Labour on the first Friday of each month.

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Interest rate

Interest rate is the return on lending money or the cost of using it. The level of a country’s interest rate will affect whether the country’s capital market is favored, and thus the direction of the currency exchange rate. High interest rate currency because of the high rate of return, the country’s currency demand rose, the exchange rate appreciation; On the contrary, it depreciates. The federal funds rate in the United States is determined by the federal reserve’s meeting, which is usually held for two days in the last half month.

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GDP

The gross domestic product mainly consists of four parts: consumption, private investment, government expenditure and net export. It refers to the total value of goods and services produced by the country in a certain period, reflecting the overall economic situation of a country. The stable growth of data indicates that the economy is booming and national income increases, which is beneficial to the multi-dollar exchange rate. The opposite is bad. Generally, if GDP declines for two consecutive quarters, it is considered a recession.

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Trade deficit

International trade is an important component of economic activities. When the country exports more than it imports, it is called a trade surplus; Conversely, call the deficit. U.S. trade data has been in deficit, with a focus on widening or shrinking the deficit. A bigger deficit is bad for the dollar and good for the other. The data, released by the U.S. department of commerce, come out at 21:30 in the middle and late hours of the month.

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CPI

International trade is an important component of economic activities. When the country exports more than it imports, it is called a trade surplus; Conversely, call the deficit. U.S. trade data has been in deficit, with a focus on widening or shrinking the deficit. A bigger deficit is bad for the dollar and good for the other. The data, released by the U.S. department of commerce, come out at 21:30 in the middle and late hours of the month.

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Political situation

The change of international and domestic political situation has a great impact on the exchange rate. If the situation is stable, the exchange rate is stable. When things go wrong, the exchange rate falls. Areas of concern include international relations, partisan fighting, the situation of key government officials, unrest, riots, etc.

Military activity

Wars, local conflicts and riots will lead to insecurity in the region and have a negative impact on the exchange rate of the region and weak currencies, while the exchange rate of countries far away from the incident and traditional safe-haven currencies will be favorable.

Market psychology

The psychological expectation of the participants in the foreign exchange market seriously affects the trend of the exchange rate. As for the appreciation or depreciation of a currency, the market will often form its own opinions. When a certain consensus is reached, the exchange rate will change in a certain period of time, when the exchange rate may rise or fall completely out of touch with the fundamentals or the central bank’s intervention is ineffective.

Speculation

As financial globalization accelerates, international hot money flooded the foreign exchange market, sometimes controlled by speculative institutions, can have a profound impact on currency movements because of their huge trading volumes and their tendency to hedge. For example, quantum fund blocks the pound and makes its exchange rate depreciate sharply in a short time.

Emergency

Some major emergencies will have an impact on market psychology, thus causing changes in the exchange rate, and the extent of the results will also have an impact on long-term changes in the exchange rate. For example, the September 11 incident caused the sharp depreciation of the dollar in the short term.