Fundamental Analysis

Forex Calendar

Most trading decisions are based on two schools of thought: Fundamental Analysis and Technical Analysis. In fundamental analysis, the trader studies or observes the macroeconomic factors such as the ones mentioned below, that effect the price of a currency:

1. Unemployment Rates
A key indicator of economic strength. A high unemployment rate leads to a fall in currency value.

2. Interest Rates
A low interest rate usually cause a currency's value to depreciate. However, the stock market now has an influence on the forex market, in that investors will move their money away, in turn causing the currency value to depreciate.

3. Industrial production
Strong numbers indicate similarly strong value in its currency pair.

4. Geopolitical events
Uncertainly in a country's political situation can render the currency to weaken. Eg. military coup

Some Important News effecting major currencies:

In all currency pairs, the first currency is called the "base currency", and the second is called the "quote currency". When we buy a currency pair, we're actually buying the "base currency" and selling the "quote currency". When we sell a currency pair, we're actually selling the "base currency", and buying the "quote currency".

For example, when we buy EUR/USD, we're actually buying Euro, and selling USD.

If the economic indicator of a country, say U.S., is largely positive, we assume its currency will appreciate, so we buy USD. We "short" (or sell) EUR/USD - sell Euro, and buy USD. In forex terms, "short" is used for sell, and "long" for buy.

When you trade with the news, you need an economic calendar as a point of reference. These online economic calendars are extremely useful for your trading needs using fundamental analysis. You can bookmark this page:

Forex Calendar