Fundamental analysis is a typical type of market analysis in which traders or market analysts attempt to evaluate currency pairs in order to determine the true or intrinsic value of one currency relative to another, using economic and socio-political factors that affect or affect the country issuing the currency under evaluation.
Fundamentals of Fundamental analysis Fundamental analysis is based on the assumption that assets have intrinsic (true) value and market value.
In a market cycle, sometimes the true value of a currency pair is inconsistent with the market value of a currency pair.
The task of fundamental analysts is to analyze a currency using certain valuation factors and compare its valuation with another currency to determine whether the present value is the true value of a currency pair or whether a currency is undervalued or overvalued relative to another currency.
If a currency is undervalued, then traders respond based on fundamental analysis by taking a long position in the undervalued currency to profit from the change in the expected valuation to the true valuation.
Similarly, if a fundamental analyst believes a currency is overvalued, he or she will take a short position to profit from a change in the currency’s future decline toward its true valuation.
A key component of the tool used by fundamental analysts is also known as the currency news calendar.
The calendar is a schedule of dates for important announcements, which are determinants of certain economic, social and political conditions issued by countries or affecting countries in a given period of time.
Some of these press releases are monthly (such as employment data), while others are quarterly (such as reports).
Each news release in the financial calendar includes consensus estimates, previous figures, revisions to previous figures, if any, and the actual numbers at the time the news is released to the market.
The relationship between the actual number and the expected number or previous numbers (including revisions) reflects the recognition that one currency is undervalued or overvalued relative to another.
When these numbers are published, traders around the world are able to confirm their fundamental analysis and thus tend to buy or sell the currency being assessed, or even take no action.
Traders’ reactions to financial news will create a synchronization between the intrinsic value of assets and the market value of assets.
The next logical question for fundamental analysis of foreign exchange is: What are the fundamental factors that affect one currency or another?
We think there are: a)b) employment data c) manufacturing data d) inflation data e) trade data (including retail sales) there are a lot of reports on fundamentals.
Traders can read these reports in the financial calendar for free, and they are available on the websites of foreign exchange brokers.
Practical Use of Fundamental Analysis On 6 September 2011, the Swiss National Bank adopted a floor peg against its own currency (CHF).
The move was designed to reduce buying pressure on the Swiss franc as traders sought to exit the weakening euro in order to buy the Swiss franc, which is considered a stronger currency.
As an export-driven economy, the Swiss National Bank’s actions are aimed at keeping the franc relatively weak to make its exports cheaper.
One such export is tourism.
Naturally, for example, if an Irish family wants to spend a holiday in a Swiss ski resort, it would be better off to be able to get more Swiss francs for a given amount of euros.
That is the intention of the Swiss National Bank: to make Swiss exports cheaper and more desirable.
Four years later, with the euro further weakened and considering a plan, the Swiss National Bank is well aware that the costs of sticking to the peg, including pouring Swiss francs into the market to buy euros, thereby boosting the value of the euro and weakening the value of the Swiss franc, are unsustainable in the long run.
Some senior fundamental analysts saw this as far back as October 2014.
Most market participants didn’t notice.
On January 15, 2015, the inevitable happened.
Faced with the increasing costs of maintaining the peg, the Swiss National Bank removed the euro/Swiss franc peg, with the result that, in a matter of seconds, the euro fell by about 3,000 points to reflect its true value.
Introduction to Foreign Exchange Fundamental analysis
Fundamental analysis in foreign exchange is a typical type of market analysis in which traders or market analysts attempt to evaluate currency pairs in order to determine the true or intrinsic value of one currency relative to another, using economic and socio-political factors that affect the currency or the country issuing the currency being evaluated.
Fundamentals of Fundamental analysis Fundamental analysis is based on the assumption that assets have intrinsic (true) value and market value.
In a market cycle, sometimes the true value of a currency pair is inconsistent with the market value of a currency pair.
The task of fundamental analysts is to analyze a currency using certain valuation factors and compare its valuation with another currency to determine whether the present value is the true value of a currency pair or whether a currency is undervalued or overvalued relative to another currency.
If a currency is undervalued, then traders respond based on fundamental analysis by taking a long position in the undervalued currency to profit from the change in the expected valuation to the true valuation.
Similarly, if a fundamental analyst believes a currency is overvalued, he or she will take a short position to profit from a change in the currency’s future decline toward its true valuation.
A key component of the tools used by fundamental analysts is the financial calendar, also known as the currency news calendar.
The calendar is a schedule of dates for important announcements, which are determinants of certain economic, social and political conditions issued by countries or affecting countries in a given period of time.
Some of these news releases are monthly (such as the jobs data), while others are quarterly (such as the GDP report).
Each news release in the financial calendar includes consensus estimates, previous figures, revisions to previous figures, if any, and the actual numbers at the time the news is released to the market.
The relationship between the actual number and the expected number or previous numbers (including revisions) reflects the recognition that one currency is undervalued or overvalued relative to another.
When these numbers are published, traders around the world are able to confirm their fundamental analysis and thus tend to buy or sell the currency being assessed, or even take no action.
Traders’ reactions to financial news will create a synchronization between the intrinsic value of assets and the market value of assets.
The next logical question for fundamental analysis of foreign exchange is: What are the fundamental factors that affect one currency or another in the foreign exchange market?
We think there are a bunch of reports on fundamentals such as a) interest rates b) employment data c) manufacturing data d) inflation data e) trade data (including retail sales).
Traders can read these reports in the financial calendar for free, and they are available on the websites of foreign exchange brokers.
Practical Use of Fundamental Analysis On 6 September 2011, the Swiss National Bank adopted a floor peg for the euro against its own currency, the Swiss franc (CHF).
The move was designed to reduce buying pressure on the Swiss franc as traders sought to exit the weakening euro in order to buy the Swiss franc, which is considered a stronger currency.
As an export-driven economy, the Swiss National Bank’s actions are aimed at making the Swiss franc relatively weak in order to make exports cheaper for the Swiss economy.
One such export is tourism.
Naturally, for example, if an Irish family wants to spend a holiday in a Swiss ski resort, it would be better off to be able to get more Swiss francs for a given amount of euros.
That is the intention of the Swiss National Bank: to make Swiss exports cheaper and more desirable.
Based further weakening after four years, with the euro, and European in considering a plan to quantitative easing, the Swiss national bank of awareness to adhere to the Swiss franc against the euro exchange rate pegged to the price, including investment in the market a large number of Swiss francs to buy euro, boosting the euro value, reduce the value of the Swiss franc, which is not sustainable in the long term.
Some senior fundamental analysts saw this as far back as October 2014.
Most market participants didn’t notice.
On January 15, 2015, the inevitable happened.
Faced with the increasing costs of maintaining the peg, the Swiss National Bank removed the euro/Swiss franc peg, with the result that, in a matter of seconds, the euro fell by about 3,000 points to reflect its true value.
It is a classic example of how fundamental analysis could have saved many traders from the huge losses they suffered on the day of the Swiss National Bank financial crisis.
An analysis of the peg would have shown that the Swiss franc was significantly undervalued against the euro, supported only at a higher cost by the Swiss National Bank.
When the Swiss National Bank decided to remove its support, the intrinsic value of the Swiss franc corrected itself, moving back towards the market value of the Swiss franc against the euro.
In short, traders who use fundamental analysis correctly can see some of the market changes ahead of the rest of the retail market, which has great potential in the future.
Officials urged the Prime minister to resign.
