The fundamental traders in the Forex market haveto know the various economic conditions that could cause fluctuations in currency. There are several fundamental factors that are studied. Oil is a critical asset and it impacts the manufacturing productivity which isdependent on the changes that are observedby the energy market.
Like for example,Japan is a major importer of the major of its oil requirements from internationalcountries and this means that whenthere is a rise in the price of oil then Japan will find it expensive to buy the supplies of oil that it needs in order for its economy to run. Thisinformation can be used by the currencytraders. So when they see that the price of oil is rising then they could start selling the Japanese currency that is the Yen. This is a way inwhich thecurrency traders form an outlook on a currency.Here are the findingson how to trade with fundamental factors.
Canada has a large supplyof oil and is the secondlargest in the world. Since it has a large oil reserve this meansthat when the oil prices rise it benefits the economy of Canada. This is because the refineries can know change a higher price for the oil. This is againinformation that the Forextrader uses when trading on the Canadian dollar. When the oil pricesrise,they should go long on the Canadian dollar.
Both of the aboveinformation could be used together to take a position in the currency market. Thetrader could combine two events here. The negative bias on Yen and the positive bias on the Canadian dollar. This is where the trader should buy the CAD/JPY because he expects that the CADwill increase in value and JPY will lose value. However, in case the outlook on oil was reverse then, in that case, the trader would have taken a short position on the above currency pair.
Combining the fundamental events
There aremany otherfactors that let the fundamental analysttake a position in the market andtake a trade. It is important that you take a trade considering more than one factor to buy or to sell a currency. This is because it will help to increase the chance of the tradeworking out. Like for example,suppose the oil prices were rising and along with that the Canada economy was alsoimprovingbecauseof the expectations of an increase in theinterestrate by the Bank OfCanada then this makes it a high probability trade.