There are two basic approaches to analyzing the currency market, fundamental analysis and technical analysis. Fundamental analysis is concentrated on analyzing the basic causes of price movements, while technical analysis study the movement of the price itself.
Technical analysis
A technical analysis is the use of measures to try to predict price movements in the future, based on analysis of past time and the reading or understanding of the representation graph. Although during the emergence of a variety of thoughts on various forms in a technical analysis, in general, all based on the historical graph of the currency. During one aware of the difference of fundamental and technical analysis, both of which also can be used to connect to each other, sometimes even they have different conclusions.
Fundamental Analysis
A study of specific situations, such as wars, discoveries, and changes in a government body, which can affect demand and supply, and also on consequence in the market price. Fundamental analysis consists of examination of the indicators of macroeconomic, market considerations and political assets when evaluating a country's currency at a specific time with each other. Macro economic indicators including the values such as growth in value, as specified by the value of Gross Domestic Product of income, interest rates, inflation, unemployment, money supply, foreign exchange reserves, and productivity. Market assets consist of stocks, bonds and housing. Political considerations resulted in the level of trust in a government of a country, state security and stability situation and level of certainty. Sometimes governments stand in the market when forced to give a serious impact on their finances, so from that, the government held a direct intervention to keep the state finances in order they deviation not too far from the desired level. Financial interventions initiated by the Central Bank and is usually scheduled even had an impact on the Forex market for a while. A Central Bank can take steps to buying / selling globally for any currency to another currency, or committed themselves to jointly intervene where collaboration with other central banks to at least reinforce the effect of these interventions. Alternatively, some countries can manage their currencies respectively, IE by giving instructions or provide a threat to intervene.
Technical Analysis or Fundamental Analysis?
One of the most dominant debate in the analysis of financial markets is a validation of the relationship of the second largest tier analysis, that is Fundamental and Technical. In Forex, some learning concluded that fundamental analysis is more effective in predicting the direction of movement for the long term (more than one year), while technical analysis is more towards the certainty for a short period (0-90 days). Combining both approaches is the best step to a placement period of 3 months and one year. However, further empirical evidence that unmasked a technical analysis for long-term help to identify the wave of the movement for the long term, and at the time of the fundamental factors to trigger short-term development.
However, most of the more traders follow technical analysis because it does not require hours and hours of time to learn it. Technical analysts can follow many currency movements at a time. Fundamental analysis, however, seeks to establish itself on the amount of data that is too much in a market. Technical analysis works well because the financial markets are always trying to build a strong movement direction. When the technical analysis has been outlined, it will be used as easily to various time limits in the money market transactions.