Fundamental Analysis should not be Forgotten in Forex

Before starting on the foreign exchange market, we must understand some basic precepts of forex. Among the concepts essential to know, next to the carry trade or the technical analysis is the fundamental analysis.

Again, it should be noted that fundamental analysis is inseparable from the technical analysis, and vice versa, because they allow when combined to make investment choices, if not wiser, at least more thoughtful . Fundamental analysis is based on the evaluation of an economic indicator. These include employment figures or the publication of the index of activity in Chicago.

The main economic indicators

Of all the economic indicators, some have a bigger impact on other currencies. Thus, the index of activity in Chicago, when published, had less influence on the exchange rate of the dollar as the publication of unemployment figures. In fact, to know what the economic indicators are the most important, you only need a little experience. However, beginners in the foreign exchange market can go, at least, the principle that there are four economic indicators do not miss when it appears on the economic calendar this week. It is the interest rate, the unemployment rate, the rate of inflation and the consumer confidence index. These four economic indicators generally affect investment decisions of many traders.

The importance of the irrational

However, we must always keep in mind that financial markets are, by nature, thank you for the irrational behavior. Thus, even if the decision of a central bank to lower its rates or not, for example, often plays on the currency rates, one should keep in mind that nothing is gained. We must take account of market expectations, which can be met or satisfied, and the aversion to risk may go completely unnoticed to the publication of economic indicators.

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