Skip to content

Fundamental Analysis: Study Economics, Trade the Markets

Let us begin our brief study of fundamental analysis by remarking that a century ago there was only one school of analysis at the time when there were also a large number of self-employed millionaires. The only school in the analysis was, of course, the basic analysis. Technical analysis did not exist among us as a disciplined system before the end of the nineteenth century, but fundamental analysis has existed since the beginning of economics at the time of the Persians and Greeks, at the very least. ProfitBall APP new Forex traders on the Internet can take advantage of this small detail while making their decisions about the advantages of both schools in the analysis.

Basic analysis aims to predict future market movements based on economic data and news. While technical analysis mainly focuses on price, the fundamental analysis is concerned with studying the economic, political and social dynamics of an economy in order to draw conclusions about an asset, which of course is a currency pair when we talk about Forex. As primary analysts we aim mainly at identifying the most influential forces on the price movement followed by the formulation of our strategies on this basis. Time changes differ in the factors that have the most powerful influence in the fundamental analysis. For example, in the first half of 2008 it was expected that the Russian ruble, according to the fundamental analysis, would increase its value with the rise in oil prices and therefore the price of this commodity was the most important factor in the prediction of the ruble price. But in August 2008, after the war between Georgia and Russia, traders ignored these economic factors and intensified their sale to the Russian ruble because the political factors (that is, the war in this case) became the dominant driver of the currency.

It is important to distinguish between economic news trade and fundamental analysis. The immediate reaction of the market to news events is often difficult to predict, as there is no time to evaluate and formulate an appropriate strategy immediately after the news. Profit Ball Trading news is closer to technical models than basic analysis. The basic analysis includes refinement of the news data, isolating the important parts from those that are irrelevant and then creating the larger images that can be used as a long-term roadmap for trade. Economic news affects each other and isolated individual parts do not mean much to Forex strategies.

Basic analysis may be known as a difficult field but there is no evidence of the validity of this assumption. It does require a lot of thought from the trader, but given the lucrative and satisfactory results, this is just a small price to pay if you choose to apply this method to your business. Surely the returns will be more than satisfactory compared to even the best expectations.


Currency Wars Explained

The concept of currency wars may seem somewhat strange to the public and even to some forex traders, but many countries in fact deliberately reduce their currencies by intervening in markets in a way that devalues ​​their currency. Currency devaluation often becomes a tool to provide an advantage Competitive country – and help stimulate economic growth in particular. During periods of economic recession. However, when a country begins to devalue its currency, some other countries may try to jump and quickly cancel that advantage. When that happens, it is said that there is a war of action, as countries strive to keep the value of their own currencies low compared to those of other countries

What is the secret behind the desire for a weak currency?

. In fact, many countries prefer strong currencies during periods of economic expansion, where strong currencies allow increased purchasing power of citizens. A strong currency can lead to a higher quality of life. It also helps to control economic inflation

Although the currency is weak but has its own benefits – at least from the point of view of countries that favor that theory. When a country’s currency is weaker than its currency counterparts, its exports are cheaper and more attractive. Perhaps Japan is one of the countries that are known for its desire to keep its currency relatively weak. For its desire to keep the price of its exports lower and then accept people in other countries to buy their products. The same example applies to China, a country that favors a weak value for the yuan relative to the US dollar, which simply means more Americans want to buy cheap Chinese products.

With lower export prices, a country can sell more goods to other countries. This, in turn, can promote and create jobs where weak-currency countries are forced to produce more goods to meet the growing demand for their cheap products. This situation can also promote economic growth. The devaluation of the currency could push economic growth forward and that is why many countries are concerned about the weaker currency during periods of economic recession

How can a country weaken its currency?

. The currency-linking strategy is one of the strategies most recently used by countries to keep their currencies weak. Recently, the Swiss bank set the ceiling for the euro, which closely resembles the idea of ​​linkage. Concerned by the rapid appreciation of the franc for the euro, the Swiss bank decided to stabilize the franc and the euro, to ensure that the franc gains a lot against the euro.

: There are other methods used by the state to weaken its currency

• Low interest rates One of the desirable ways among central banks as an option to weaken currencies is to cut interest rates. When a country has a low interest rate, its currency is less attractive. Savings in the economy are also less attractive, with yields very low. As a result, investors are looking for higher-yielding assets and the currency could lose value for other currencies.
•: Money supply increase In some cases, a country may create money from nothing. Increased money supply means that there is a lot of currency and therefore devalues ​​their value. This means that the supply exceeds the demand, meaning that the value of the currency has no place to have only a downside. The increase in money supply can find an outlet through the purchase of state assets. In the United States, the Federal Reserve can increase money supply by buying US Treasuries or even buying bonds. The Federal Reserve is creating new funds for this purpose, increasing the amount of money supply. This is called the quantitative easing tactic, while the one-time effort is called to increase the money supply by intervening in the currency
• Buying assets from other countries. A country may buy the assets of another country. This is one of the ways China has been able to encourage devaluation of its currency against the US dollar by purchasing US assets. This means that there is an increase in the demand for the dollar, and therefore the value of the dollar moves upward, helping the yuan to maintain its weak value – as planned by the Chinese government
Of course, these tactics can help cut one currency, but other countries soon join in trying to devalue their own currencies so they can get benefits from exports at competitive prices and economic growth.

In some cases, countries that are trying to devalue their currencies by other countries are punished by increasing taxes and trade restrictions that make it difficult to buy cheap goods in large quantities

Problems caused by currency wars

While some believe that currency weakness can be useful in times of economic recession, others suggest that problems with currency wars can in turn lead to more problems.

Many countries may resort to devaluation at the same time, and this is one of the biggest issues that can actually lead to some kind of instability. When everyone tries to get the upper hand through currency manipulation, this will make the global market economy increasingly unstable. In the end, it can discourage investment and commercial reality, which actually limits growth rather than encouraging it

Many people saw that the biggest threat posed by currency wars was the large scale of economic inflation on a large scale. When money supply increases, when currencies are devalued, prices rise. The purchasing power of the currency is reduced and what you can buy in one unit of currency is much less than it was. The purchasing power of the citizen is lower. Inflation is desirable, to some extent, by the secondary product of economic growth. But big inflation would stifle economic growth and wipe out middle-class savings. When this happens, it makes the entire system unstable, and can lead to economic collapse. Some fear that currency war, especially in the global economy, which has become a very integrated system, can lead to widespread inflation and thus a serious problem for the entire system. A comprehensive currency war could lead to a number of problems related to the global economy and lead to insufficient economic stimulus for any country

Allegations of currency tampering

. Of course, there are always allegations of tampering and coin manipulation. For years, the United States has accused the Chinese government of artificially cutting its currency. As a result, the United States threatens to raise tariffs on Chinese imports to America and is trying to pressure China to allow ProfitBall APP currency to rise (and the US is about to devalue its currency against the Chinese yuan).

. Recently, although Japan was one of the most obvious countries to devalue its currency. Japanese officials have intervened several times in 2011 to maintain the devaluation of the yen, in order to maintain the value of exports and fear of becoming too expensive. In fact, there is some talk that Japan could employ some measures to maintain more currency cuts just as it does now in reconstructing areas devastated by the tsunami last March

. In spite of the US warning fingers towards China and Japan, they also overlap in measures aimed at maintaining the devaluation of the dollar. However, US tactics are not as stark as those used by China or Japan. In fact, efforts to quantitative easing have been criticized at the end of 2010 by euro zone leaders, who were upset by the currency’s depreciation. While the ECB. With its loan facilities and the ability to engage in devaluation, it has so far used capacity rather than moderation. While the US and Japan continue to keep interest rates too low, the ECB raised interest rates in July 2011. With rumors once again about QE3 in the US, there is a chance that we can see a comprehensive currency war soon

what is happening now?

So far, although there have been some attempts to weaken the different currencies, but the comprehensive currency war has not yet erupted on a large scale. For the most part, they have been isolated attempts to devalue the currency to boost economic stimulus in different countries (and currency areas). However, these attempts were relatively small, and did not yield a significant degree of inflation – yet

Review Date
Reviewed Item
Fundamental Analysis: Study Economics, Trade the Markets
Author Rating
Published inFinance