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How to use fundamental analysis when trading forex in Singapore?

When it comes to forex trading, traders take two main approaches:

  1. Technical analysis: Technical analysis looks at past price movements to identify patterns that might give clues about future price movements.
  2. Fundamental analysis.: On the other hand, Fundamental analysis focuses on economic indicators to try and get an idea of which way the market might move.

Both approaches have their merits, but in this article, let’s focus on using fundamental analysis when trading forex in Singapore.

Central bank policy

One of the critical aspects of fundamental analysis is understanding central bank policy. It is because central banks can have a significant impact on currency values. For example, if the US Federal Reserve raises interest rates, this will usually cause the value of the US dollar to increase. When interest rates go up, it becomes more attractive for investors to put their money into US assets. And as demand for US assets increases, so does the value of the US dollar.

Similarly, if the Singaporean government is seen to be taking steps to weaken the Singapore dollar, this will usually cause the currency to fall in value. So it’s essential to keep an eye on central bank policy when you’re doing your fundamental analysis.

Trade balance

Another important aspect of fundamental analysis is examining a country’s trade balance. A country’s trade balance can significantly impact its currency value. If a country is running a trade surplus (i.e.it, exports more than imports), this is usually seen as a positive sign by investors. That means that the country is earning more foreign currency than it is spending. And as demand for the country’s currency increases, so does its value.

Trade deficit

On the other hand, if a country is running a trade deficit (i.e. it imports more than it exports), investors usually see this as a negative sign. That means that the country is spending more foreign currency than it is earning. And as demand for the country’s currency falls, so does its value.

So when you’re looking at a country’s trade balance, you want to see if it is running a surplus or a deficit. If it is running a surplus, this is usually seen as a positive sign for the currency. If it is running a deficit, this is usually seen as a negative sign for the currency.

Inflation rate

Another important aspect of fundamental analysis is looking at a country’s inflation rate. It is because inflation can have a significant impact on currency values. If a country’s inflation rate is high, this will usually cause the value of its currency to fall. When prices are rising quickly, it takes more of the currency to buy goods and services. So as demand for the currency falls, so does its value.

On the other hand, if a country’s inflation rate is low, this will usually cause the value of its currency to rise. When prices are rising slowly, it takes less of the currency to buy goods and services. So as demand for the currency increases so does its value.

So when you’re looking at a country’s inflation rate, you want to see if it is high or low. If it is high, this is usually seen as a negative sign for the currency. If it is low, this is usually seen as a positive sign for the currency.

GDP growth

Another important aspect of fundamental analysis is looking at a country’s GDP growth. It is because GDP growth can have a significant impact on currency values. If a country’s economy is multiplying, this will usually cause the value of its currency to rise. When a country’s economy is doing well, it tends to attract more foreign investment. And as demand for the currency increases, so does its value.

On the other hand, if a country’s economy is growing slowly, this will usually cause the value of its currency to fall. When a country’s economy is unwell, it loses foreign investment. And as demand for the currency falls, so does its value. If you want up to date economic news for Asian traders, you can find more info here.

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