FOREIGN EXCHANGE MARKET (FOREX - MOVEMENT OF CURRENCY)
The persons who trading in the foreign exchange market (FOREX) generally depend on the two basic forms of analysis that are using in stock market. One is the fundamental analysis and the other one is technical analysis. The use of technical analysis is in forex are as same the price is assumed to reflect all news, and the charts are the objects of analysis, but unlike companies, countries will not have balance sheets, then in what way the fundamental analysis be conducted on a currency? Hence the fundamental analysis is about looking at the essential value of investment, its application in forex involve looking at the economic conditions that affect the valuation of a country's currency. Now here we look at some of the important fundamental factors that play a major role in the movement of currency.
The second one is the economic indicators which are reports released by the either private or government organization that explain a country's economic performance. These economic reports are the money resources by which a country's economic position is directly measured, these will remember that a great deal of factors and policies will affect a country's economic performance. These reports are released in particular scheduled times, suggesting the market as an indication that the country's economy position has whether improved or decreased. The results of these reports are comparable to how earnings summarized and these reports may affect securities. In forex and in the stock market any deviation from the pattern can cause large price and volume movements. With these economic reports you may recognize, such as the unemployment numbers, which are well publicized. Others, like housing status,receive little coverage. These indicators are serves a particular purpose, and can be very useful. The four major reports which we outline here, will be some of which are comparable to particular purpose fundamental indicators used by equity investors.
G D P :(GROSS DOMESTIC PRODUCT) The GDP is considered the broad measure of nation's economy, and it specifies the total market value of all material and services produced in a country during a given year. Since the GDP figure itself is frequently considered a lagging indicator, hence many traders are focus on the above said two reports that are issued in the months before the final GDP figures the forthcoming report and preliminary report. Important revsions between these reports can cause considerable volatility. The GDP is somewhat proportionate to the gross profit margin of a publicly traded company in that they are both measures of internal growth.
The one other measuring report is retail sales which in total receipts of all retail stores in a given country. This measurement system is derived from a diverse sample of retail stores throughout country. It is the report is normally useful because it is time to time indicator of broad consumer spending patterns that is arrange for seasonal variables. It can be used to foretell the performance of more important lagging indicators, and to estimate the immediate direction of an economy. Most probably revisions to advanced reports of retail sales can cause important volatility. The retail sales report can be compared to the sales activity of a publicly traded company.
PRODUCTION (INDUSTRIES) : This industrial production report shows the changing in production of factories, mines and utilities within a country. It also reports their capacity utilations, the measurement to which the capacity of every factory is being used. It is ideal for a country to see an increase of production as its maximum capacity utilization. By using this indicator, traders are usually involved with utility production. This can be extremely volatile since the utilities industry and in turn the trading of and the requirement for energy, is heavily affected by changes in nature weather. Important revisions between reports can caused by weather changes, it will then cause volatility in the country's currency.
CONSUMER PRICE INDEX (CPI) :
This CPI is one of the measure of the changes in the prices of consumer goods more than 250 different categories. This repor, which is compared to country's exports, can be important to observe that if a country is increasing or losing money by its products or services. Regarding this taking too much care while monitoring the exports, it is a focus that is popular with many traders because the prices of exports often change proportionately to a currency's strength or weakness.
The other major indicators include the Purchasing Managers Index (PMI), Producer Price Index (PPI), durable good report, Employment Cost Index (ECI), and housing status. One thing that don't forget that many privately issued reports are there to consider, the one most famous is the Michigan Consumer Confidence Survey. All of these survey organizations are provide an important resource to traders.
The importance of economic indicators is that they provide a gauge of country's economic state, changes in the conditions reported will therefore directly affect the price and volume of a country's currency. It has to keep in mind, however, that the indicators discussed above are not only the way that affect a currency's price. There are plenty of third party reports, technical factors, and many other things that also can severely affect a currency's valuation.
