1:18 AM
AGHA
FUNDAMENTAL ANALYSIS
Now, I'd like to tell you how to trade forex by fundamental-analyzing. Fundamental analysis is a method to analyze an economic's condition of a company based on its economic fundamental. Fundamental analysis of a business involves analyzing its financial statement and health, its management and competitive
advantages, and its competitors and markets.
When it's applied to forex trading, the analysis focuses on the overall states of the economy, interest rates, production, earnings, and management. Fundamental analysis is performed on historical and present data, but with the goal of making financial forecast. The point is, fundamental analysis emphasizes how to read an economic condition. Fundamental analysis for forex trading means we forecast the price movement of a pair by analyzing a country's economic condition (mostly based on the latest condition). We have to be a;ways up to date to the world's economic news.
For example, before we open a position of EUR/USD pair, we know that Eurozone's economic condition is in trouble such as the declining of the Purchasing Manager Index (PMI), so it would be better if we open EUR/USD in sell position. PMI is one of the most notable economic data because of its sentivity to inflation rate change. PMI is a report of a purchasing manager survey of a big company in big countries. Let me tell you how to use PMI. For example, if Eurozone PMI's rate is above 50, then it will indicate that the price of EUR will move up. The conclusion is we can open EUR/USD in LONG/ buy position. The rate of PMI will affect the fiscal and monetary policy and it makes PMI become one of the most popular indicator for fundamental analysis.
There is another important economic data as well as PMI. That is Nonfarm Payroll employment (NFP). It is an economic indocator released monthly by the United States Department of Labor as part of a comprehensive report on the state of the labor market. It is a compiled name for goods-producing, construction and manufacturing companies. The Bureau of Labor Statistic releases the data on the first Friday every month. The NFP number is meant to represent the number of jobs added or lost in the economy over the last month, not including jobs relating to the farming industry. NFP is much influential, it affects the US Dollar, the forex market, and the stock market.
Anybody knows how to interpret this data to forecast the price movement of a pair?
If NFP number of this month is higher than the previous month (the present data is higher than the previous one), the US Dollar will always be stronger against other currencies. So, if the number of NFP moves up, you can open EUR/USD, GBP/USD, or NZD/USD in SHORT/ Sell position while USD/JPY or USD/CAD in buy position. As we know, US is now currently facing a problem such as "fiscal cliff" or the declining the number of the latest NFP. As the result, EUR reaches the strongest point in last 6 months against EUR/USD.
There is another screenshot below, when the data of NFP was released, EUR/USD goes up!
There are more indicators actually such as Consumer Price Index (CPI), Producer Price Index (PPI), etc.
But unfortunately. I don't know much about them, and I usually use NFP data release. Just pay attention when will the data be released in a certain country or what economic policy will be made by a government.
You can see the schedule in forexfactory.com or http://www.fxstreet.com/fundamental/economic-calendar/.
Just remember, the better data, the more profit you can take from BUY position. On the contrary, the worse data, the more profit you can take from SELL position.
Good luck and have a nice trading!Source: wikipedia.org
Futures Monthly MIF
