Forex Fundamental analysis (part 1) – Learn how to do fundamental analysis

Are you interested in knowing what are the types of fundamental analysis? Watch our latest video on Forex Fundamental analysis, part 1, to discover the core indicators that Central Banks use.

Forex Fundamental analysis part 1 – The process of fundamental analysis

Hi there! Welcome to this video, which is Fundamental Analysis Part 1. This video is going to be an introduction for you on the road of fundamental analysis in the foreign exchange markets.

All fundamental analysis really revolves around the roles of Central Banks. Now, all developed nations have a Central Bank and the Central Bank has a mandate to ensure both their country’s economic and price stability. The monetary policy, which is set by the Central Banks, directly influences the currency of their own nation. So, Central Banks set the money supply to their nation, the interest rate targets, the required reserves and also they implement various currency measures.

So, fundamental analysis can seem, at first, impenetrable and maybe too complicated to grasp, unless you have a Finance degree. However, all you need to focus on is the core indicators that the Central Bank has identified and, thankfully, this is quite simple, because the bank has a set of four core indicators and they are as follows. The first of the four areas in production involves things like manufacturing data, housing, services, construction.

The second core factor is employment. How many people are earning and what wages are they earning? How many hours are a full-time or a part-time employment? The next core factor is growth. The most popular figure for growth is the GDP which is the measure of a country’s total production. And finally, inflation. And of these four, growth and inflation are two of the most important indicators, while inflation is the single most important area, because inflation concerns how much the cost of goods and services goes up over time and nearly all Central Banks have either a specific or a general inflation level that they’re trying to achieve. For example, the Bank of England, currently has a specific inflation target of 2%, while the Reserve Bank of Australia has an inflation target in the range of 2 to 3%.

So, in the next video, which is Fundamental Analysis Part 2, we will consider the tools that the Central Bank has to make sure they control inflation and maintain price stability.