Factors Affecting Forex Market Fundamentally

There are still many traders who do not know about fundamental factors and their effects on the actions of market participants. Although some traders already understand, it is not uncommon for them to focus solely on technicality and ignore economic news. In fact, considering the fundamental factors that have a huge effect, you naturally have to understand and understand what are the main factors driving the forex market trade.

Every price created in the forex market is basically based on certain news. There is news that is able to move prices up to hundreds of points, but there are also those that have no impact at all. The question is, among the many news every day, the factors that influence the forex market in terms of fundamentals arise from what kind of news?

Factors Affecting Forex Market Fundamentally

In general, news that affects the forex market can be divided into three, namely the release of economic data, interest rate announcements, and news about the political crisis or geopolitical tensions. There are various ways to monitor each news.

Country Economic Data Release

Factors that influence the forex market in terms of the biggest fundamentals come from the economic data of a country. In fact, certain data can trigger extreme price movements between 50 to 120 points in minutes after the news is released. If only there were no more important news after the data was released, then the effect could be lasting for several weeks to months.

The economic data is a regularly updated report, so you can anticipate it by monitoring the economic calendar that is already widely available on the internet. Examples of these important economic reports include reports on Gross Domestic Product (GDP), labor (Non-farm Payrolls, Unemployment Rate), retail sales, and others.

Interest Rate Announcement

News about interest rates can greatly affect the forex market, especially for the currencies of the country concerned. Drastic price changes can immediately appear after the announcement of changes in interest rates. So if you want to get a strong movement, just anticipate the announcement of interest rates from major currency countries, especially the United States.

If the interest rate will be raised, the exchange rate of a currency will increase. Conversely, a signal of a decline in interest rates can be responded to by selling over related currencies, because the assumption that investment returns in his country will decline.

In addition, long-term trends can be formed even before changes in interest rates are actually announced, for months afterwards. An example can be seen in the US Dollar Index (DXY) with the following Monthly (1M) timeframe.

Interest Rate

News About Political Crisis or Geopolitical Tension

When there is political turmoil like before the general election, the change of leader of a country, armed conflict, or prolonged mass demonstration, the forex market will fluctuate. This turmoil is not limited to the currency of the country concerned, but also to the currencies of other countries which are vulnerable to being affected by changes in market sentiment.

Usually political factors like this will not be written on the economic calendar, but you have to look for the latest news, for example seeing news from television, newspapers, magazines, and headlines on well-known websites. Because it is not scheduled, upheaval can appear suddenly and is difficult to anticipate, and last for a long time. For example, the anticipation of the market ahead of a referendum on Britain's membership of the European Union (Brexit) in 2016 was a significant pressure on the pound sterling.

Political News


In addition to geopolitical factors, incidents such as war or natural disasters also affect the forex market even though it is not listed on the economic calendar. In order not to miss the news, you really have to diligently monitor forex news and general news. Alternatively, join a trader forum such as Forex Factory or the local traders community, because there must be other traders who are more updated because they can follow the foreign news.

Finally, the factors that affect the forex market in terms of fundamentals can be periodic published economic data, interest rate announcements, or unexpected situations such as the political crisis. Every news has a different meaning. Even though there is an economic calendar that contains a routine data release schedule, often you have to find your own information through newspapers, newspapers, and other information on information provider websites. Aroundforex.com as the largest forex portal in Indonesia has provided it all to help traders get the information they need. Take advantage of it to support your fundamental analysis.
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