Fundamental Analysis

What is fundamental analysis?

Every trader wants to know where the price will go. However, in order to get the most realistic answer to this question, it is necessary not only to observe the chart on the trading platform but also to constantly monitor what is happening in the world. In this, fundamental analysis helps traders.
A key referendum, the president’s commentary or a negative statistics publication can have a dramatic effect on the national currency rate.
You may have heard phrases like: “The pound fell on the news ... The euro against the dollar jumped up due to the news ...”. Such statements are used by the experts in their daily fundamental market analysis and reviews..

If a well-known company has poorly reported for the quarter and has received less profit than expected, this will upset investors: its shares will no longer be so attractive, will begin to be sold, and the price for them will fall down.
A long rainy season in America can ruin the cotton crop: the volume of the available consignment will be less than planned and prices will soar.
All of these are important factors that are inextricably linked to trading and are called fundamental analysis.

What events should be taken into account?

  • - economic, geopolitical and social phenomena;
  • - economic prospects and the general mood of the market in relation to a particular country;
  • - natural disasters (extreme weather conditions, earthquakes and hurricanes that cause serious damage);
  • - wars and periods of conflict between key countries;
  • - political events (presidential elections, referendums, forums);
  • - publication of important statistics (economic indicators) by industry or country.
  • Natural disasters

    When we speak about natural disasters, we mean extreme weather occasions, such as floods, earthquakes, hurricanes and tsunamis. Mass casualties, damage to infrastructure and a general sense of fear can have a detrimental effect on a country's economy, especially since the government will have to allocate a considerable recovery budget.
    As a result, the national currency inevitably weakens. So, e.g., the Japanese yen slipped by 0.4% against the US dollar after the catastrophic earthquake and tsunami of 2011, which led to the death of 15000 people, thousands of wounded and missing.

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