Have you ever heard of fundamental analysis in the Forex market? If you have, then you must know that fundamental analysis is one of the most important things that traders should know about. We agree that technical analysis is very important when you’re trying to read the market and understand is the best time to execute your trades. However, it is also a fact that the market does not always go the way you expected. The reason behind this involves several external factors that play an important role in shifting the market value of a commodity. In the financial market, we know them as fundamental factors. They play a huge role in changing the decisions of the investors and can make changes in a stable market within a short while.
So, it is often seen that even if you think that your research is right and you have no chances of getting it wrong, the market moved in the complete opposite direction than your assumption. You may wander a bit to find the reasons behind this. You might say that numbers don’t lie. Then why isn’t the market moving according to calculations and formulas?
Supply and demand factor
Well, you have to understand that this industry is completely dependent on supply and demand. As long as the balance between supply and demand is maintained, the market will remain stable. But when the balance is interrupted, there occurs a pull in the price in the market. For example, the occurrence of a natural disaster like floods can hamper agricultural production and this may lead to an increase in the price of many agricultural goods.
Again, when many producers are inclined to producing one good but the demand is not up to their supply, then the price may go down. Now, analysis regarding these events can help you to understand what the highest profit level is for you. If you don’t know much about them, then you will fail to use them in your support. All these events combine to help you you’re your fundamental analysis.
Factors like a natural disaster or a pandemic can be a potential market shifter but it is not possible to anticipate these events beforehand. However, there are some events that you can include in your trading calendar to get notified about possible changes and news releases before they happen. To keep yourself tuned in with it, read more about the fundamental factors at Saxo. They have strong resources for retail traders and anyone can easily enhance their skills. Now let’s learn about some of the major events in the Forex market.
Gross Domestic Product is an important indicator used to assess the progress of an economy in a specific time period, usually a fiscal year. This includes all the money-making factors of a country, like, agriculture, business, industry, services, and many others. The GDP shows the contribution of each of these sectors to the earned income of a country. So, the bigger the number, the higher the chances of a country’s progress. So, a country with a higher GDP means that the economy of that country is progressive and this indicates a rising demand for its currency. The demand for that currency increases as many investors want to trade in this economy.
The employment rates
This is another important factor that helps to determine how much a country has progressed over time. A higher percentage of employment means a greater part of the population is worthy of earning their bread and is not a burden to the state. On the other hand, a low employment rate means, the population is not ready to invest in development programs. This pulls the economy down.
Interest rate decision
Central bank releases are important to find out the price shifting of a currency. The central bank comes up with some decisions to change the value of its currency to control monetary inflation and other issues. These play an important role in providing insight to investors into probable price changes. For instance, if they hike the interest rate, the currency gain significant value against most of its major rivals. On the other hand, if they cut their interest rates, the currency’s value decreases against most of major assets.
Therefore, keeping a keen eye on these aspects is a great help when you are struggling with price movement. So, you should always remain aware of such events and this will eventually make you a more skilled trader.