Technical and fundamental factors: what drives the market

We all know that the dynamics of supply and demand, the number of speculative positions, the monetary policy of the Central Bank, the achievement of historical highs or lows, and the opening of positions by market makers drives the fix apiforexmarket. To simplify this all, there are two global causes that have a direct impact on the market. The question is of fundamental and technical factors. It is these two bases that explain any movement in the foreign exchange market.

Thefundamentalfactorsinclude:

  • Political news (elections in the country, G8 or G20summit, etc.);
  • Meetings and formal meetings (decision on the interest rate of the Central Bank, OPEC meeting);
  • Publication of statistical indicators (macroeconomic data in the form of GDP, inflation, labor market or publication of companies’financial statements).

The following points often related to the technical factor:

  • Achievement of important historical highs or lows;
  • Reaching the level of support or resistance;
  • Triggering of technical patterns (reversal figures or trend continuation).

As you can see, there are many reasons that affect the market. Every fix api trader should know about them, and also to have an action plan in case of triggering at least one of the above factors. In the event that the manager has a system that regulates the process of actions in each of the situations, then it is possible to declare the professionalism of the trader. But! Some managers refer themselves to the first group (fundamental traders who trade on the basis of obtaining information from market data), and some refer themselves to the second group (technical traders who trade on the basis of obtaining information from technical elements).

And the following question arises: which of these factors and their analysis dominates on the market and is better/more reliable?

My subjective answer to this question is that the foundation is moving the market, but the price itself is in the technical channels.

In order to understand this idea, I propose to consider a particular example.

For example, now we see the strengthening of the euro to its basket of major currencies. The main drivers of this movement are simultaneously the rearrange ofECB monetary policy and at the same time, the weakness of the dollar due to the Trump policy (http://www.investopedia.com/terms/m/monetarypolicy.asp). In the first case, the head of the ECB, Mario Draghi, announced the possible curtailment of the quantitative easing program. Thus, the Central Bank intends to reduce the number of redemption bonds and thereby reduce the money supply in the market. If there is less money on the market, the currency value should be more expensive (the elementary rules of the economy fundamentals). At the same time, we see that Trump cannot agree on any of his plans with the Senate, therefore many investors question the very implementation of the plans of the new president, after the election of which the dollar was rapidly strengthened. Thus, we get a “divergence” between the euro and the dollar and, as a consequence, the growth of the currency pair. This all refers to the fundamental data.

As for the technical factors, at the moment of EURUSD’s growth, a side channel was broken and quotes were fixed above it. This is the first technical signal to buy. After the rollback, quotes also broke through and continued to grow, thereby forming the third upward wave and a rising channel. Thus, we obtain a synergy between the fundamental and technical factors.

This is my vision of these factors’work, which are complementary to each other and are two parts of the same whole. So, of course, you need to have a trading system, but what factors are included in it, this is already a second-order issue, because every fix api trader should be guided in any analysis. Even if you have a trading robot in your arms (http://forexzzz.com/product/zzz-2-leg-arbitrage/), it still needs to be adjusted for actual market conditions).

Leave a Reply

Your email address will not be published. Required fields are marked *