HOW TO FUNDAMENTAL ANALYSIS
Stock Analysis, JCI, Stock Investments, Stock Recommendations - Fundamental analysis is one of the most important factors in trading. Fundamental analysis not only focuses on the release of fundamental data or important economic events, but also on various aspects affecting a country's economy including political events, financial system regulation, social influence and various aspects of life in society.
In fact, fundamental analysis has more indicators than technical analysis, but in practice only a few important indicators have an impact on currency movements that the traders need to pay attention to. Here are ways to do fundamental analysis.
Know the macroeconomic conditions globally
Macroeconomics is fundamental to fundamental analysis. Knowing the current economic cycle, the policy of a country's government in controlling the inflation rate, spurring economic growth, managing the budget and state revenues that, among others, through tax revenue. The whole process is a series that can affect the movement of a country's money value against the currencies of other countries. The global political situation also affects the fluctuations of major world currencies. For example, the era of high inflation in the 1970s was the result of political events affecting the economic fundamentals of large countries, as well as hyper-inflation in Germany after the first world war.
However, when global political conditions are relatively unstable, the economy tends to grow along with new innovations in technology that spur high productivity (booming phase), tends to create bubbles (bubbles) uncontrollably and eventually leads to contraction. The economic cycle greatly influences the investment climate as well as the movement of currency values. When the booming phase is over, speculation and investment activity usually declines and demand for currency is also reduced.
Know the monetary policy of the major world currency countries
Central bank monetary policy has a direct effect on the exchange rate of a country's currency. The most concern of market participants is the interest rate. If the central bank raises interest rates then the demand for the country's currency will increase until the exchange rate against other countries currencies will strengthen, on the contrary if the central bank lowered the interest rate. The considerable interest rate differential between the two countries tends to cause carry trade. In determining the interest rate usually the central bank looks at the rate of inflation and growth, by regulating the amount of money in circulation.
As the economy contracts or heads for signs of recession, the central bank can implement quantitative easing policies to increase the money supply as it once did in Japan, the United States, Britain and Switzerland. In addition, the credit rating of a country that is a reference of investor confidence is also important to note. If a trustworthy credit rating agency or agency downgrades a country's credit or bond rating then market sentiment against the country's currency will tend to be negative.
Know the balance of payments picture of the major world currency countries
The balance of payments includes trade balance, investment of a country in another country and foreign investment in that country. The trade balance is the ratio between the total export and the country's total imports. The trade balance is said to be a surplus if exports are greater than imports, and are called deficits if the opposite happens. Although currently the trade balance has less direct impact on price movements in the forex market, but changes in export and import values remain important to know. Increased exports indicate an increased production level that will affect the rate of economic growth.
In fact, fundamental analysis has more indicators than technical analysis, but in practice only a few important indicators have an impact on currency movements that the traders need to pay attention to. Here are ways to do fundamental analysis.
Know the macroeconomic conditions globally
Macroeconomics is fundamental to fundamental analysis. Knowing the current economic cycle, the policy of a country's government in controlling the inflation rate, spurring economic growth, managing the budget and state revenues that, among others, through tax revenue. The whole process is a series that can affect the movement of a country's money value against the currencies of other countries. The global political situation also affects the fluctuations of major world currencies. For example, the era of high inflation in the 1970s was the result of political events affecting the economic fundamentals of large countries, as well as hyper-inflation in Germany after the first world war.
However, when global political conditions are relatively unstable, the economy tends to grow along with new innovations in technology that spur high productivity (booming phase), tends to create bubbles (bubbles) uncontrollably and eventually leads to contraction. The economic cycle greatly influences the investment climate as well as the movement of currency values. When the booming phase is over, speculation and investment activity usually declines and demand for currency is also reduced.
Know the monetary policy of the major world currency countries
Central bank monetary policy has a direct effect on the exchange rate of a country's currency. The most concern of market participants is the interest rate. If the central bank raises interest rates then the demand for the country's currency will increase until the exchange rate against other countries currencies will strengthen, on the contrary if the central bank lowered the interest rate. The considerable interest rate differential between the two countries tends to cause carry trade. In determining the interest rate usually the central bank looks at the rate of inflation and growth, by regulating the amount of money in circulation.
As the economy contracts or heads for signs of recession, the central bank can implement quantitative easing policies to increase the money supply as it once did in Japan, the United States, Britain and Switzerland. In addition, the credit rating of a country that is a reference of investor confidence is also important to note. If a trustworthy credit rating agency or agency downgrades a country's credit or bond rating then market sentiment against the country's currency will tend to be negative.
Know the balance of payments picture of the major world currency countries
The balance of payments includes trade balance, investment of a country in another country and foreign investment in that country. The trade balance is the ratio between the total export and the country's total imports. The trade balance is said to be a surplus if exports are greater than imports, and are called deficits if the opposite happens. Although currently the trade balance has less direct impact on price movements in the forex market, but changes in export and import values remain important to know. Increased exports indicate an increased production level that will affect the rate of economic growth.
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