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How to Analyze Exchange Rates as a Professional

Buying or selling a currency against another when trading in Forex market could be one of the most difficult decisions that traders face, but when we simplify it, this decision is actually determining the long/medium-term directions of currencies through simplified fundamental analysis. There are several factors that should be considered in order to analyze exchange rates correctly.

How can we analyze exchange rates in the Forex market using fundamental analysis?

This can happen by evaluating the level of inflation, interest rates, employment reports and unemployment rates to determine the general currency’s long-term direction; it is also recommended to consider reports of the economic committees in central banks, which helps traders determine the general trend. These reports summarize the economic plans that is intended to lower or raise the currency’s price.

Is it possible for a country to seek reducing the price of its currency?

Sure, most exporting countries seek that to encourage other countries to import from them by paying less for their purchases as a result of lowering the price of the currency of the exporting country. Examples include China’s attempts to reduce the price of its currency and the U.S. opposition because of the large share of the U.S. export ratio occupied by China, in addition to the size of China’s share in the U.S. debt. This fact does not apply on the economy of the Arab countries where most of them are importing countries, not exporting ones.

How does the state of the labor market affect the exchange rate?

The labor market always has a significant impact on the exchange rates as it is related to the movement of the economy or the natural cycle of money from one person to another in the community. For example, if the unemployment rate increases and decision-makers cannot provide any solutions or ideas, the rate will continue to grow, which will affect the consumer’s confidence in the economy, and thus, aggravate recession as a result of the slow economy, which will force institutions or services to end or reduce their activities; clubs, restaurants, cafes and other entertainment places. This will lead to a decrease in the income of those working for these institutions to try and cover the minimum expenses. There are also countries that provide unemployment pays to their citizens who are unable to find jobs, only to fight the problems that result from the growing unemployment rate, which represents a burden on the country’s treasury as a loss.

To conclude the previous information; there are economic events and indicators that affect the state of the country’s currency, so these events and indicators have to be interpreted properly to analyze exchange rates, which will make it easier for traders to seize opportunities on the short-term price charts and exploit the long-term price movements.

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About Razi Hammoudeh

Razi’s professional experience was gained over the course of more than a decade working with leading Forex market makers in the Middle East, Asia and Europe where he learned about trading, financial instruments and global markets. Being exposed to the wide range of skills he acquired along the years, he continued to develop his trading strategies and further improving his track record in Forex trading. He used innovative business development strategies to find FXLORDS, helping it to rapidly become a major provider of education and trading tools to the successful trader. He is an enthusiastic individual, motivated by challenge and renowned for pushing the limits, always looking to gain some more experience and help as much as possible along the way.

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