There are two styles of analyzing market movement forecasts: fundamental and technical analysis.
Fundamental analysis is very useful for determining trends within a currency pair. By focusing on long term economic factors that affect countries, fundamental analysis predicts long term trends.
When the dollar weakens the EUR/USD will rise. If the USD recovers then a strong foreign demand will send the EUR/USD lower. If you think the U.S. economy will become weaker and hurt the US dollar, you can buy the EUR and sell the USD. If you think that there will be increased foreign demand for US financial instruments such as equities and treasuries that benefit the US dollar, you can sell the EUR and buy the USD as you are expecting the euro to lose value against the dollar.
For more examples of Fundamental Analysis, please see our Economic Calendar.
The foundation behind technical analysis is to find trends when they first develop, which allows the trader to follow trends until they end. The foreign exchange market is typically composed of trends and therefore is a place where technical analysis can be effective.
Technical analysis offers many different ways for traders to analyze market information.
For more information about Technical Analysis, please see our Trading Central. You can find it after you log in. Go to the top bar and select Technical Analysis under the Tools menu.
If you have questions about technical or fundamental analysis or would like more information about Forex trading, please contact XForex today and get started with the Forex market.