Forex Fundamental Analysis: Why It Is So Important

Forex fundamental analysis is the analysis of economic, social and political data. It is based by the economic situation for the purpose of determining price movements. It is forecasting the price of one currency and its trend in the market. Economic indicator is showed the current rate of economic growth, trends and the state of the local economy. It is existed the strongest economic indicators. They have long term influence on the market. In the US  economic data is generally released at 8:30 and 10 am EST.

EURO INDICATORS

The strongest indicators for the euro are: Minimum Bid Rate 0.05%, GDP, German ZEW Economic Sentiment, German Ifo Business Climate, German Prelim CPI, Industrial Production, Consumer Price Index.

US DOLLAR INDICATORS

The strongest indicators for the US dollar are: Federal Fund Rate 0.25%, GDP, Jobless Claims, Non Farm Payrolls, Unemployment Rate, Manufacturing PMI, Consumer Price Index, Consumer Confidence, Building Permits, Core Durable Orders, Retail Sales.

GBP INDICATORS

The strongest indicators for pound are: Official Bank Rate 0.50%, GDP, Manufacturing PMI, Construction PMI, Services PMI, and Retail Sales.

Positive data for pound – LONG STRATEGY – SECONDARY CURRENCY – SHORT STRATEGY

Negative economic data for primary currency – SHORT STRATEGY SECONDARY CURRENCY – LONG STRATEGY

Hawkish speech for primary currency – LONG STRATEGY – SECONDARY CURRENCY SHORT  STRATEGY

Dovish speech for primary currency – SHORT STRATEGY – SECONDARY CURRENCY LONG STRATEGY

What is the primary currency? What is the secondary currency?

GBP/USD

GBP is the primary currency.

USD is the secondary currency.

During forex fundamental analysis the British pound fell to a five-year bottom against the US dollar after data showed that the unemployment rate unexpectedly remained unchanged in January and that the average earnings rose less than expected. Markets are waiting to see whether the central bank would continue to be “patient” in raising interest rates or is willing to increase by mid-year.

Today is published the minutes of the last meeting of the Bank of England which showed that the Monetary Policy Committee of nine members was unanimous in its decision to keep interest rates at a record low of 0.50% and a program of buying bonds in the amount of 375 billion pounds.

GBP/USD recorded the bottom at 1.46320, and subsequently consolidated at 1.46660. The pair was likely to find support at 1.43430 and resistance at 1.48450.

Trading the news takes a stab at trading macro-data and provides a good base for those interested in this type of strategy. I wanted to explain this strategy in order to see the behavior of price movement and focusing on macro economic data published. Strategy is focusing on a very short time frame.:

 

It can see the following:

The pound dropped almost 100 pips in very short time period. Moving average showed oversold zone. RSI is oversold zone too. Price has been broken lower Bollinger Bands and continued to drop. It can be expected a declining trend line. Profit will be more than 100 pips. If trader knows for this information he will be earned the money. If trader deposited account $100 and it used leverage 100:1 and lot 0.01 on short position GBP/USD he made it $10 or 10% profit per trade. Trader should be careful and cautious because the price can be moved in the opposite direction. So it is possible to make 30-50 pips profit per this trade.

GBP/USD Trading

Short positions with entry to 1.47600 with the first target at 1.46300 and 1.4500 in the second.

Support and resistance levels.

1.55000  resistance

1.53500  resistance

1.52700  resistance

1.50700  last

1.48500  support

1.47100  support

1.46300  support

Regarding forex fundamental analysis sterling fell against the euro. EUR/GBP climbed to 0.7238. In relation to the franc and yen, pound sank. GBP/CHF dropped to 1.4692 and GBP/JPY fell to 177.62.

The Office for National Statistics UK announced that the unemployment rate remained unchanged at 5.7% in January, while the expected decline to 5.6%

The analysis also shows that the number of applicants for a job fell by 31000 people in February, and predicted the decline of 30600, after a drop of 39400 people in the previous month.

The data showed that the index of average earnings in the UK, including bonuses, rose in January by 1.8%, while the predicted growth of 2.2%, following an increase of 2.1%.

Excluding bonuses, wages increased by 1.7% the last month, Analyst has been predicted growth of 1.8%, following an increase of 1.7%  in December. It was published bad data for the pound so pound dropped against euro, yen and franc.

I wrote this I wanted to give answers to the following questions about forex fundamental analysis. Question every trade I know how much I can make profit. But there is the one. It includes financial news in the Forex market. They are represented economic indicators like Inflation Rate, Unemployment Rate, GDP, Interest Rates decision, Trade Balance. The parts of fundamentals are speeches of two most powerful men in the world. They are Mario Draghi the President of the Central European Bank and Janet Yellen the Chairman of Federal Reserves. The speech of the President of the United States Barack Obama is the most important too. The combination of technical and fundamental analysis allows profits. Technical analysis and fundamental analysis are used separately but complement each other.

Forex Fundamental Analysis Conclusion

It is needed to watch careful published forex fundamental analysis economic data. If it is positive economic data long strategy on pound or if it is negative short strategy on pound. Trade only yen, Canadian dollar and New Zealand dollar. It is the same direction price movements euro against pairs. It is needed to hold open position between half an hour and two hours. It depends from worse than expected published economic data or better than expected published economic data. It is 10 trades per week. I only can say that it is possible to take a signal 50 times per week. You can do this if you want trade with currencies, commodities, indices and stocks. It can be used Asian, European and the US trading session. One more thing. Asian markets are slowly while European and the US markets are choppy and more volatility.