The traders who manage capital in the Forex market analyze the technical and fundamental analysis techniques thoroughly to keep their performance at the maximum level. Especially those who make trade transactions during the day (called the day trade) analyze the important news flows that might direct the pricing behavior while trying to interpret the short term outlook with the right technical analysis techniques. That is why for the traders who think about making BUY-SELL transactions for the short term, the Fundamental Analysis is more important.
So, what is this notion of the Fundamental Analysis, and what should the traders understand from it?
The Fundamental Analysis is an analysis method that includes all the developments which might have an impact on any financial assets. For instance, the upward rally in the Oz Gold price from June, 2019 is a reflection of the increase in the demand for safe harbors in consequence of the messages given by the US Federal Reserve regarding the interest rate cut and the trade wars between the US and China still being in the agenda. If a trader ignored these developments, they wouldn’t be able to benefit from the positive pricing behavior in Oz Gold in a correct and meaningful manner.
When people hear of “Fundamental Analysis”, almost everyone thinks about “The Economic Calendar.” Though this approach is not completely correct, the economic calendar is needed for people to follow the agenda items throughout the day. When we mention the economic calendar, the news that is especially paid attention to is Inflation, Unemployment, Growth, Non-Farm Employment, and Central Banks’ meetings.
We can evaluate the Fundamental Analysis in three main titles. The first and the most striking one is with no doubt is the Economic calendar. The main titles we need to pay attention to regarding the countries’ economy (Inflation, Unemployment, Growth, Monetary Policy Decisions, etc.) can be analyzed under the title of Economic Calendar. The second and the third titles can be taken into consideration related to more stock market and stock performances which are saved as Sector and Company Analysis. For instance, you have a certain capital and you plan to invest with this capital. First, you need to do a sector analysis to learn in which sector you can invest. When you find the sector you want to invest in, you can use the company analysis to see which companies are foremost in that sector. The second and third titles are the titles with details and depts inside the fundamental analysis technique. For this reason, rather than the products, the Forex market is more important for the stock market-based investors for them to be able to evaluate the stock performances. If the traders are involved in the Forex market, especially the intraday trade, the “Economic Calendar” title is critical for them.
Another thing to know about the Fundamental Analysis is that there is uncertainty on its effect regarding the pricing behavior. For example, the three main titles shared above are in front of us as generally known news flows. This means a trader knows when to reach the monetary policy decisions or inflation data of any country and can plan a strategy accordingly. However, it shouldn’t be forgotten that titles such as political-geopolitical risk factors and topics such as natural disasters, can cause instant pricing behavior with this news coming to the agenda.
The most vivid example of this subject is without a doubt the US President Trump and his tweets. The messages Trump shared on Twitter regarding the extent of the Trade Wars between the US and China are important for instant pricing behavior, and no one is aware of this situation until the relevant tweets are posted.
To summarize, for the traders who trade during the day in the Forex market, the important news flows that need to be paid attention to might have a determining effect on asset prices. For this reason, the Fundamental Analysis technique must be examined closely for short term strategies.