Fundamental analysis is typical of market analysis.
By using economic and socio-political factors that have an impact on or issue the country whose currency is being assessed, traders or market analysts attempt to assess currency pairs in order to determine the true or intrinsic value of one currency relative to another.
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 does not coincide with the market value of a currency pair.
The task of fundamental analysts is to analyze a currency with some evaluation factors and compare it with another currency to determine whether the present value is the true value of the currency pair or whether a currency is undervalued or overvalued relative to another currency.
If a currency is undervalued, then the trader’s response based on fundamental analysis is to take 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 will take a short position to profit from the currency’s future decline to its true valuation.
A key component of the tools used by analysts is the financial calendar, also known as the forex news calendar.
This calendar is a schedule of the dates of important announcements, which are determinants of certain economic, social, political situations issued by certain countries at a particular time or their impact on each country.
These news releases are either monthly (such as jobs data) or quarterly (such as reports).
Each press release includes a consensus forecast, previous figures, revisions to previous figures, if any, and the actual numbers at the time the news was released to the market.
The relationship between the actual figure and the expected or prior figure (including the revised figure) reflects the confirmation that one currency is undervalued or overvalued relative to another.
When these numbers are published, traders around the world can confirm their fundamental analysis and thus tend to buy or sell the currency being assessed, or even take no action.
A trader’s reaction to financial news causes the intrinsic value of an asset to synchronize with its market value.
The strong dollar continued, with U.S. oil plunging nearly 8 percent and the energy crisis threatening to drag the euro below parity.
Please pay attention to the specific operation, the market is changing rapidly, investment needs to be cautious, the operation strategy is for reference only.