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Forex Basics 7 - Factors Affecting Foreign Exchange Trading Determining Foreign Exchange Rates

In most fundamentals, at a certa rebatef rebateforexexbroker point in time, supply Forex Rapid Rebate demand are the only factors that determine the exchange rate In other words, if a currency rallies there rebateforexfee be excess demand and the ForexRapidRebate causes such prices to rise Conversely, if a currency is to depreciate, in this case there will be excess supply Speculative trading in the foreign exchange market The following are some of the reasons why market participants will buy and sell on the basis of their expected bias in the future exchange rate, based on the premise that the future exchange rate will be profitable at a certain position in a certain direction.  Fundamentals cashback forex economic, social and political, data, reports and news can all be factors in a market participants decision to buy or sell a currency For example, an investor chasing income will invest in a currency pair with a wide spread, such as the Australian dollar/US dollar (AUD/USD) This is known as an arbitrage trade, where the investor will borrow funds from a country with low interest rates and invest them In a country with high interest rates The geopolitical outlook for a country or region – assessing the economic and political stability of a country or region and using this assessment to determine if an investment opportunity will arise For example, in the short term in the Iraq war two benefits of the U.S. dollar against the major currencies, the recessionary fiscal position of the U.S. dollar is due to the balloon cost of the war and the decline in investor confidence Trade flows &ndash ndash; importers and exporters buy and sell foreign currency to buy or pay for their goods or services for example: Japanese companies sell their cars to the United States and then need to convert the revenue into yen this will increase the demand for the yen thus leading to stronger demand for the yen Money flows – speculative and investment capital will flow to higher yielding areas for higher returns such as the stock market, the Stock investments, mergers and acquisitions Technical analysis – chart-based analysis of prices to make trading decisions Technical indicators and analysis can provide traders with exit and entry points Market sentiment – investor confidence and attitudes toward risky markets, as well as market liquidity, are likely to influence investors investment sentiment

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