Forex analysis

There are two types of analysis in the currency market to assess a currency pair and try to predict where the future could target price.


Fundamental analysis:

Fundamental analysis is generally used for long-term investors. This analysis considers the macroeconomic fundamentals of the various areas such as bank rate, gross domestic product, inflation, the index of industrial production and unemployment and tries to make predictions based on the relative evolution of these indicators.

What is Fundamental Analysis in Forex?

The fundamental or macroeconomic analysis is the study of macroeconomic causes which affect the supply and demand of currencies in the forex market. Fundamental analysis focuses on both the macroeconomic situation in a particular country, and the economic situation globally or group of individual states and their relationships.

We must remember that the market works as a whole, and usually changes in the economy sooner or later end up having an impact on supply and demand for both currencies, commodities and other financial assets.

The market is not only capable of perceiving changes by economic factors but also political, social and even climatic events are able to affect currency trading, commodities and other financial assets with different weight.

Within the fundamental analysis economic indicators play a major role.

Investors that focus on macroeconomic aspects to invest in forex usually denominárselos as fundamentalists.

Technical analysis:

Technical analysis is the method mostly used by speculators to short and medium term, using it to try to predict the frequent movements and daily fluctuations that present currency pairs in the market. This analysis is to translate in a graph the price of a currency pair a set of trend lines, training, and technical indicators that help predict the immediate price movements.

However, it should be noted that this type of analysis has been criticized as subjective and unscientific.

What is Technical Analysis in Forex?

Technical analysis is looking at the price and trading volume data to determine whether to continue in the future or not. Provided that the analysis is based solely on price movements we are doing a technical analysis.

The principle of technical analysis is that markets act on trends and everything that influences the behavior of prices is expressed in the graph.

The analysis of the trend is absolutely essential to understand and operate successfully in the Forex Market. One of the great advantages of this market is that you can win both the upside and the floor, as the purchase of a currency equivalent to be selling its counterpart.

Technical analysis can detect many signs that the trend may change or continue, and locate critical areas in prices that can serve as a reference for operation.