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Fundamental Analysis – Top Economic Indicators and Their Basic Rules

Some of the most essential trading tips include the process by which investors can forecast a financial instrument’s future market direction based on factors relating to political, economic and environmental indices. This is purely what we refer to as fundamental analysis. We find a broad number of market players making use of fundamental analysis as well as technical analysis.

A vivid distinction between the two is that technical analysis is versatile and be employed on any type of market condition. Whereas, fundamental analysis applies to specific market as it deals with what should occur in the market. This is why this analysis type factors in certain indices: Supply & demand, Government Policy, Seasonal trend and weather.

While a technical trader would focus on price actions, a fundamental trader is termed as a person who’s engaged in strategic or micro estimation of the direction a currency pair and how it should be traded along. Such predictions are hinged on price movements of currency pair as well as the country’s economic situation based on the pair that’s being traded.

Major Economic Data

Mainly I’ll be looking at some of the economic indicators that are used in the United States as it affects the global currency markets. In view of the economic data, we should also as well consider market predictions, investor’s sentiments and the effects of the impact of the forecasted numbers and the actual numbers on the market.

You’ll find a good number of investors who are willing to adhere to these macro indicators. The published numbers come out conflicting time to time. The numbers are measured in a greater than or less than proportion. It is in view of this that investors find this numbers very important in forecasting future price movements.

We find fundamental data coming out of the United States during weekdays and are marked as Low (L), Medium (M) or High (H), based on how they impact the financial markets. Let’s examine a couple of such major economic data

Consumer Price Index (CPI)

The Consumer Price Index is high impact fundamental analysis news that helps investors determine inflation caused by price movement.  With exclusion to taxes, CPI can also be referred to as the monthly tracking of consumer goods and services. Inflation is indicated by an increase in CPI, which radically moves the market.

Consumer Confidence Index (CCI)

This is high impact fundamental news that reveals a survey that’s samples 5000 U.S. households. It is considered to be an accurate measurement of confidence. Spending power and confidence is boosted when the economy demands for more jobs, lower interest rate and more wages. The respondents are asked to fill a survey in regards to their current pay scale as well as the prevailing market condition. The Federal Reserve looks out for confidence when determining interest rates and as such the importance of this fundamental analysis.

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