How Does The Economy Affect Global Currency?

By: Amuro Wesley

When asking several Forex traders for their thoughts about using fundamental analysis as part of their trading decisions, I received 2 different answers. Yet they both have a significant impact on the economy which directly affects the global currency based on the decisions they made.

First Answer:

Traders - who gave the first answer - think that most fundamentals we read about are typically useless as the market has already given a price discount.

They prefer to look at long-term trends, current chart pattern and identifying a good entry point to buy or sell.

Second Answer:

Traders – who gave the second answer – always trade on current market trends or views.

They do not simply rely on technical info but rather on technical analysis. Unless they truly understand why the market should move, they will not initiate nor hold their position.

There has been a lot of hype on technical analysis by technicians claiming that it can predict the future.

The truth about this is that it only tracks the past but does not foresee the future. You need to take initiative and do your due diligence before concluding what the future might be be it good or bad.

In my opinion, technical analysis is very similar to thermometer. Those so-called experts who failed to pay any attention to the chart are like doctors failing to take their patients’ temperature and give them the necessary medication and injection.

If you want to succeed in trading whether in Forex or other investments, you need to know 2 basic things. They are when the market will go and down. Once you understood the formula, everything else becomes much easier.

Technicial analysis generally reflect the vote of the whole marketplace. Henceforth, they do spot unusual behaviour at certain times. Anything that results in new chart patterns is certainly unusual.

Studying the details of price action to observe is very important and critical as doing so alerts you to any existing disequilibrium and potential changes.

Basics and fundamentals are what makes an economy tick. The release of economic and inflation indiciators such as consumer spending, employment cost, government spending, product price index etc can set the whole market into frenzy.

While technicial analysis serves to predict the future price of a currency pair using historical price data, fundamental analysis serves to forecast economy. But even so, it does not give exact market places and you ought to trade in agreement with supporting technical indicators.

Most Forex traders now rely on technical analysis, trading platforms and charts together in predicting market trends. Their actions thereafter will either cause the economy to go up or down.

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