What if you were able to match fundermental analysis with technical analysis in your forex trading curreer? Won’t it yield you more profits
As a swing trader, I have been working on adding fundermental analysis to my technical analysis strategies and as usual, I share my research findings with you.
In this blog post, you are going to learn the fundermental factors that affect currency prices. Using the information in this site, you can be able to develop your fundamental analysis trading strategies.
Information on upcoming economic indicators are normally published on the leading newspapers, monitor sources and leading business magazines.
Blomberg, reuters, wall street journal, financial times and the business week are some of the valuable sources of economic data that traders and investors should subscribe to.
As a trader, you should make sure that you have subscribe to atleast two of this information sources to be in tourch with the news as they develop.
The gross national product
This economic indictor measures the economic performance of the whole economy of the country concerned.
For example, the gross national product of kenya is the sum of all goods and services produced by the citizens of kenya either in kenya or in diaspora.
Gross domestic product
This is the sum of goods and services produced by the companies in a country by the companies owned by the foreigners and the citizens.
The figures of the GDP together with those of the GNP can give huge information about the strenght of the countries economy and hence its currency.
This indicator try to gauge the strength of the currency by infering to the confidence that the consumers have on it.
When the earning consumers decide to spend rather than save, it sends a signal about the level of confidence that they have on a currency.
This measures the fixed investments and inventories.
How the government decides to spends its income can effects the strength of its currency. Tracking the government expenditure can give you an idea of where the economy is heading to and hence the strength of the currency.
The industrial production figures shows the total industrial output of a nations plants, utilities and mines.
Traders use this figures to gauge the strength of the economy and hence the strength of the currencies under consideration.
Industrial utilization consists of total industrial output in a country divided by the total production capability.
This figures points out to the maximum levels of output a plant can generate under normal business conditions.
Thought capacity utilization is not a major economic indicator for the foreign exchangemarket, it adds to the general overview of the security.
This indicator is limited as it measures the total of durable and non durable good orders.
Durable goods orders
Durable goods orders consists of products with a lifespan of more than three years.
They are divided into four major categories that is, primary metals, machinery electrical machinery and transportation.
This indicator is also limited and its not that important to the traders as it measures the goods produced and held for future sales.
This indicator measures the rate of constructions in a country taking into account the the housing starts and permits, new and existing one family homes sales and contruction spendings.
The rate of inflation is the widespread rise in prices and hence measuring inflation is a vital macroeconomic skill that can give near precision picture of the currencies strength.
When measuring inflation, several indicators are available in the disposal of an analyst:
1: GDP deflector
2: GNP deflector
3: Consumer price index
4: Producer price index
5: Employment cost index
6: Commodity research Bureau’s index (CRB index)
7: Journal of commerce industrial price index (JoC)
Compining the above indicators can give you as a trader the overal picture of the inflation rate of a given country and hence the strength of its currency.
Merchandise trade balance
This one of the most important economic indicators because its value may lead to long term changes in monetary and foreign policies.
The difference between the exports and imports is the trade balance of that economy.
The data included in the trade balance is divided into six categories as outline below:
1: Capital goods
4: Consumer goods
5: Industries supplies
6: Raw materials to industries
7: Other mechandise
This is a significant indicator. Why? Because a declining unemployment rate signify a maturing business cycle and hence a stable economy.
Employment cost index (ECI)
This is a quarterly report that gives a clear compensation picture of workers by outlining the wages, salaries and fringe benefits of workers by looking into inflation.
The most important indicators followed by traders are:
1: Unemployment rate
2: Manufacturing payrolls
3: Nonfarm payrolls
4: Average earnings
5: Average workweek
You can research each indicator and make notes on each. In addition to that, you should be able to find strategies that uses the indicators that you have selected.
If you need assistance in any of the above indicators, feel free to conduct me and I will be more than willing to assist you.