Fundamental analysis is mostly concerned with the economic activity aspect. On the same scenario, the statistical releases which shake the market in the short run are a small part of the tools for analytics which are at the disposal of fundamental trader.
It is most a case that news releases, the statistical data are just an indicators backward looking which has limited value of prediction for the long term. Read more from the professionals at cfd trading South Africa about social, political and economic analysis of the forex market.
Political and social analysis
There are a variety of concepts under this topic, including geopolitical tensions, economic regulations, economic habits that a nation goes through and much more of the aspects which are related indirectly to the functions of the economy and analyzed.
Traders that have a little experience will admit easily that, the rates of the currency are strongly responsive to changes that happen in the political world of any nation. Additionally, it is a well-known fact that, the structure of the regulatory of any country can be quite influential on its economic dynamism, which might be reflected on the values of the GDP and also on the currency rates.
Beyond the basic concepts, political and social analysis of a nation’s trait can be quite helpful in having to predict the economic reaction of the currency to the other global scale economic events.
An example is where most people expect the economy of the EU to be able to perform better as compared to the one for the Americans after the collapse of the 2008 in the economic activity because the European consumer had a debt burden that was smaller and was affected by the real estate bubble collapse to an extent which was low.
But those that defended the proposal neglected performing the social analysis on the habits and mentality of the consumer in Europe. At the end of it all, when the impact of the crisis was felt in Europe, the reduction in the expenditure was quite severe as it was initially thought because of the conservative mindset of the consumers in Europe.
There are various cases where data of raw analysis without putting into consideration a variety of characteristic of different nations might lead to errors and mistakes on a large scale. It is thus important that the characteristics have to be incorporated in the analysis of the changes in interest rates or the global shockers
Alternatively, the differences which happen in the national characteristics aren’t as a result of the genetics and they aren’t irreversible. They only reflect the economic paths which are divergent taken by different nations, the demographic trends and the different regulatory mechanisms which can change with time.
The fundamental analysis is self-evident that it will include the economic analysis according to the definition of the term. It is an aspect of fundamental analysis that focuses on the statistical releases, indicators, and the economic news that are derived from the data which can signal trades which are profitable.