ADDITIONAL READING ABOUT FUNDAMENTAL ANALYSIS

Fundamental analysis is something that will require ongoing study since economic data and developments are always changing. There will be certain fundamental influencers that have an ongoing requirement to keep in tune with what is happening. The reason for this is because a currency may be trending one way, due to a certain economic development, however details of that which hit the news wires later down the line, may shift the trend of the direction for the relating currency.

Looking at an example, the Brexit saga, this has been somewhat of a roller coaster, GBP may be trending higher across the board, as it looks likely that the EU and the British government are close to an agreeing some key details. However,one week later, an EU official comes out and says the EU and Britain are no where near agreeing any details, this would then send GBP lower and into a fresh bearish trend.

In a different scenario, lets use the U.S. central bank, the Federal Reserve. At a rate decision, they make no change to policy, however there were some indications that would suggest an increase in interest rates may be occurring at the next rate announcement. The markets would start to price in the chances of a rate hike, which would start to see some strength in the U.S. Dollar, resulting in it trending higher. However, after a couple of weeks have passed, the Federal Reserve release the minutes of their last meeting for interest rates, and in fact the suggestions that markets had initially interpreted at the rate decision, were somewhat misconstrued, as it becomes clearer there will be no upcoming change in interest rates. This would see a shift in trend for the USD, which should see a bearish reversal of that initial move higher.

There are several sources to gather fundamental news, however it is best that you stick to the mainstream news wires. The reason for this is with reliable sources, you know there is much more credence in stories that you are reading. It is important there is accuracy, as this would be helping you make a trading decision. Given that fundamental analysis can be consuming, to simply stay up to date with current currency influencers, the major financial newswires such as; Bloomberg and Reuters, write very good preview and summary pieces, at the start and end of each trading day. This is usually packaged with the key market moving themes.

As we have noted in this course with regards to economic data, do not forget to keep a regular eye on the data/events calendar. It is important to check this, as sometimes new events or announcements will be added to the schedule within the trading week. Another vital part of fundamentals, as traders need to know what is going to be released. This would need to be done, in order for traders to prevent themselves from being unexpectedly caught off guard, with excessive volatility in whatever currencies are being traded.

In summary, you do not need to be a high-status economist like Nouriel Roubini in order to understand and implement fundamentals into your trading. It is necessary to do that ongoing reading and self-educating with market themes, that are dictating the currencies you are trading. After all, why shouldn’t you know the underlying contributing reasons a currency is trend higher or lower.