Fundamental Analysis
Fundamental analysis is a form of analysis performed at the macroeconomic level. Fundamental analysis is based on the premise that the movement of one or another currency is not random, if we know the “impact” we can predict the “reaction”. Therefore, fundamental analysts will trade with their eyes constantly glued to the screen and pay less attention to the past movements of the currency they are interested in.
They will determine the factors that determine the intrinsic value of a currency and their values based on supply and demand. If there is a decrease in supply and demand increases or remains the same, the value of the currency will increase and vice versa. While investors who open positions only based on fundamental analysis are successful in the dominant direction of the market; It is insufficient to determine the duration, effectiveness and best price levels of pricing.
Since Forex markets are a very large volume market where large masses trade according to macroeconomic data and market perception, the psychological factor in prices is of great importance.
Although we accept that supply and demand are effective in the pricing of money and precious metals, the main basis that will have an impact on prices is how the market interprets the data, rather than the announced data.
In order to determine the direction of the market correctly and to place buy/sell orders at the most appropriate levels, it is necessary to examine the market by considering fundamental and technical analysis methods as a whole. The fact that both analysis methods point in the same direction increases the accuracy of the position we will open.
Prices in the Forex market are affected by macroeconomic factors such as inflation, unemployment rates, interest rates, geopolitical events and production values. Apart from these factors that need to be taken into consideration, you need to know which events, news and statements affect the parity and follow these statements regularly.
In fundamental analysis, another important issue is what effect the announced rates of all factors and events will have on the parities.
Some important indicators in fundamental analysis are as follows:
Growth
Consumer price index
Consumer Confidence Index
FED Interest Rates
Employment Reports
Production Index
Non-Farm Employment
Michigan Confidence Index
Retail Sales Data
Unemployment Figures
Advantages of Fundamental Analysis;
It provides a fundamental and comprehensive perspective, and it is relatively easier to establish relationships and connections.
Disadvantages of Fundamental Analysis;
There is a lot of information to analyze and it is difficult to accurately measure the relationship between variables.
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