Fundamental analysis is a method to interpret the news and events, both economic and political, which is expected to have an impact on currency movements associated countries. For example, the U.S. unemployment report the adverse effect on the strength of the currency to USD, or a political feud between America and China, could affect the currency of countries that are commodity based, such as the AUD and CAD, because dikhawartirkan this feud will affect China's imports from Australia, Canada , and so forth.
The analyst would predict links from news stories with each other, eg declining industrial production data, but consumer demand is still high, it can predict there will be price increases. Or another example, meingkatnya unemployment will trigger a decline in private consumption, this will affect the rotation slowing economy, the central bank will lower interest rates for the population more quickly turn their money and open up new ventures.
The advantages of fundamental analysis is that we know the long term trends, such as the end of 2010 UK GDP was released bad, still shows a slow economy, in the next few weeks look GBP continues to weaken because investors feel pessimistic about the UK economy, need something new to convince them that Britain's fine. So with fundamental analysis, we can assess how the economy of a country, when compared with other economies, which is more powerful? Let's say middle America better than England, then the GBP / USD trend was likely to fall.
Of course, all methods must have a flaw. Fundamental analysis is prediction, and therefore no subjective element. How do analysts predict the numbers that appear to be influenced by the person of the analyst himself, eg in the U.S. unemployment data are released is an analyst with American, they will tend to put great expectations for his country. This is called 'bias'. In addition, the reaction of each person against the emergence of the actual numbers will be different, take the example trader A will assume rising house prices as a harbinger of faster rate of economic turnover, on the other side trader B, may think this is a symptom of inflation.
source : asiasurabaya
The analyst would predict links from news stories with each other, eg declining industrial production data, but consumer demand is still high, it can predict there will be price increases. Or another example, meingkatnya unemployment will trigger a decline in private consumption, this will affect the rotation slowing economy, the central bank will lower interest rates for the population more quickly turn their money and open up new ventures.
The advantages of fundamental analysis is that we know the long term trends, such as the end of 2010 UK GDP was released bad, still shows a slow economy, in the next few weeks look GBP continues to weaken because investors feel pessimistic about the UK economy, need something new to convince them that Britain's fine. So with fundamental analysis, we can assess how the economy of a country, when compared with other economies, which is more powerful? Let's say middle America better than England, then the GBP / USD trend was likely to fall.
Of course, all methods must have a flaw. Fundamental analysis is prediction, and therefore no subjective element. How do analysts predict the numbers that appear to be influenced by the person of the analyst himself, eg in the U.S. unemployment data are released is an analyst with American, they will tend to put great expectations for his country. This is called 'bias'. In addition, the reaction of each person against the emergence of the actual numbers will be different, take the example trader A will assume rising house prices as a harbinger of faster rate of economic turnover, on the other side trader B, may think this is a symptom of inflation.
source : asiasurabaya
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