While most individual traders doubt the usefulness of fundamental or macroeconomic analysis, many of the largest players in the FX market rely heavily on it.
Although the conclusions you draw from macro or technical analysis might ultimately be similar, having a tangible rationale for entering the market, as opposed to simply obeying a line on a chart, can do a great deal to bolster confidence in your trading and deepen your understanding of how foreign exchange works.
We’ll review some of the key macro factors in the FX markets and see how they can provide insight into potential market moves. Then we’ll look at some recent trades illustrating how to combine macro research with technical patterns.
Although there are any number of fundamental factors at work in the FX market at a given time, we will address the following three: interest rate differentials, commodity prices and the level of risk aversion among traders at a given time. They are easy to understand and illustrate in the market.
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