Fundamental or news analysis is one of the necessary means for investors that enable them to analyze the movement of financial markets and know its direction. Fundamental analysis includes all economic, political and social news affecting a country, and thus we can assess the economy of that country whether it is strong or weak through this analysis .
As for the forex market, Fundamental Analysis It is used to assess the value of the currencies of countries through their economy, which is affected by the economic, political and social factors that change the forces of supply and demand for the currencies of those countries, and these data are issued in the form of reports collected in the “economic calendar”.
In order to be a successful trader in the forex market, you must understand many of the basic concepts and rules of this analysis that will help you easily trade and reach satisfactory and profitable results, which are as follows:
1. Knowledge of economic indicators and their analysis.
Economic indicators or economic data are one of the important reports that reflect the economic and financial situation of the country, which will help you know the strength of the currency of that country, and you must monitor and follow up on those indicators. These data include news of many sectors of the economy that are issued at different times, some of which are issued monthly or Seasonal or annual.
2. Inflation rates.
We must first know what is meant by inflation, which means a decrease in the rates of currency purchase in front of the prices of goods and services in the long term, and then an economic recession occurs.
The economy of countries is affected by the change in inflation rates so that if inflation rates continue to rise, this means that the economic situation of that country is not good and therefore the value of its currency is weak, and therefore sales of that currency increase in order to buy currencies with a stronger value.
3. Interest rates.
Interest rates are important in fundamental analysis, and they are a strong indicator that mainly affects the currencies of countries and also reflects inflation rates and the monetary and financial policies of the country. The central bank of the country is the main controller in changing interest rates, and investors always tend to buy currencies with high interest rates. .
4. Results of the Central Banks Meeting.
Usually the central banks of countries meet periodically to take appropriate decisions for their economic situation, and therefore central banks control the decision to reduce or raise interest rates, which are greatly affected by the rates of change in inflation, and this affects the appetite of investors to buy currencies and borrow.
5. Stock indices for global stock exchanges.
The trader should be keen to know the rates of change in the stock indices of global stock exchanges, especially the average stock index of the country whose currency you want to trade.
6. Changes in the oil and metal markets, especially gold.
As a successful trader, you must know the size of the changes in the oil and metal markets. For example, if you want to trade the US dollar pair against the Canadian dollar, you must be familiar with oil prices, as there is a close correlation between the Canadian dollar and oil prices because Canada is one of the largest oil-producing countries. While the United States is one of the largest importers of it, the higher the price of a barrel of oil, the lower the US dollar against the Canadian dollar and vice versa.
If you want to trade on the Australian dollar pair against the US dollar, you must be keen to know the prices of gold, as when gold prices rise, the US dollar declines and the Australian dollar rises and vice versa.