Economic Indicators

Fundamental analysis is an interpretation and evaluation of key economic development indicators and factors. The goal of fundamental analysis is to determine the true, fair price of currency.

For the vast majority of binary option traders, the practice of fundamental analysis involves the use of economic developments reviews estimates that are the result of specialized institutions. Comparison of these estimates with actual data published is the basis for buying call or put options decisions.

Economic, Financial and Political factors

Fundamental analysis related to the foreign exchange market studies international economic, financial and political factors, as well as their relationship and influence on the behavior of exchange rates. Thus, it sees something that we are not able to find in charts.

The most important part of the fundamental analysis is the ability to analyze trends in the market and thus predict what and how factors effect exchange rates. The main way to study economics is through macroeconomic indicators, published by national statistical agencies.

Macroeconomic Indicators

Macroeconomic indicators typically have three values: the expected, actual and corrected. The expected value is obtained as the result of a collective opinion of analysts. This value, as it approaches the release date of real value, can be adjusted because there is new additional data.

The expected value is the reference point for the market. The real value is the new, revised or corrected value and is a specification of a parameter in the previous period.

Usually, revision has no appreciable effect on the market because, if the real indicators characterize the state of the economy in last month or quarter, the data revision describes an even more remote period in the past.

Economic Calendar

It should be noted that the analysis of economic indicators is made not only to predict the movement of the exchange rate, but also to identify the standard reactions in the foreign exchange market on the publication of these indicator values. The time of most indicator publications is known in advance, and we can see it in the economic calendar.

If the indicator shows economic improvement, it leads to an increased national currency rate. If the indicator shows an economic weakening, it leads a currency to fall in relation to others.

It should be noted that a rapid economic improvement could give rise to overheating, which should force the central bank to raise interest rates, leading to a national currency increase.

On the other side, economic weakening may force the central bank to lower interest rates, resulting in a currency decline.

Macroeconomic indicator importance ratings:

1. Interest rates
2. Inflation
3. Unemployment reports
4. Trade balance
5. Foreign investments inflow
6. GDP
7. Real estate market
8. Retail sales
9. Business activity indicators
10. Durable goods orders

The practice of fundamental analysis involves comparison of the estimates with actual data published which is the basis for trading call or put binary options. To get the best results it is recommended to combine fundamental analysis with technical indicators.