Dec 2, 2008

ForexGen | U.S Dollar Weakens On Bad Jobless Data

As trading Forex involves two types of analysis, fundamental and technical, each has its importance. Because of the importance of the fundamental analysis in making trading forecasts, ForexGen has gives it much concern beside technical analysis by following the events and updating the news eventually. Forex market fundamental news and technical reports are updated daily in ForexGen Online News Center.

EUR/USD moved in a fundamental analysis explainable trend today as the dollar fell before and after the quite worrying report on the new jobless claims in U.S. Although the trade balance deficit change was positive, the traders expected such result and didn’t value it much into the actual market. The budget deficit report has also disappointed the dollar bulls, pushing the dollar down on the market. EUR/USD is currently trading near 1.2525.

Initial jobless claims rose from 484,000 to 516,000 last week, breaking the psychologically important level of a half a million in the last fundamental analysis. This shows that the problems in the employment sector are still worsening.

U.S. trade balance deficit tightened to $56.5 billion in September down from $59.1 billion in August as the imports fell faster than the exports. The extremely fast decline in the oil prices was the major contributor to the deficit decrease. Fundamental analysis expected that the trade balance deficit will drop to $56.8 billion.

U. S. Treasury budget deficit grew unexpectedly from $56.8 billion to $237.2 billions October. The median forecast by the economic strategists was at $200 billion.

The Forex fundamental analysis also identifies and measures factors that determine the intrinsic value of a financial instrument, such as the general economic and political environment, and including any that affect supply and demand for the underlying product or service. If there is a decrease in supply but the level of demand remains the same, then there will be an increase in market prices. An increase in supply produces the opposite effect.

For example, a Forex fundamental analysis for a given currency studies the supply and demand for the country's currency, products or services (Merchandise Trade); its management quality and government policies; its historic and forecasted performance; its future plans and the most important for the shorter term, all the technical indicators.

From this data, the Forex fundamental analysis constructs a model to determine the current and forecasted value of a currency against another. The basic idea is that unmatched increases in supply tend to depress the currency value, while unmatched increases in demand tend to increase the currency value. Once the analyst estimates intrinsic value, he compares it to the current exchange rate and decides whether the currency ought to rise or fall.

One difficulty with the Forex fundamental analysis is accurately measuring the relationships among the variables. Necessarily, the analyst must make estimates based on experience. In addition, the Forex markets tend to anticipate events and discount them in the currency value in advance. Finally, serving as both a disadvantage and even as an advantage (depending upon the timing), the markets often take time to recognize that exchange rates are out of line with value.