The exchange rate in the forex market is the main material basis for any currency speculation, since it shows the current value, possible to receive when exchanging currencies …
Thus, it becomes clear that the exchange rate is a fairly predictable indicator, as it is influenced by a considerable number of known factors that a trader can take into account. It is any changes in the exchange rate that give the trader an opportunity to earn money in the Forex market.
There are many different reasons why exchange rates are unstable. Among them, two major groups should be distinguished: fundamental and technical.
The technical factors include temporary inconsistency of supply and demand for currency, caused, usually, by currency speculation in the market. Short-term demand, as well as offer for a certain currency, are completely located at the buy-out of speculators who, by buying currency, increase demand for this currency and its Price, and then sell it, fixing the profit, as a result of this, the value of the currency temporarily decreases, despite the growth in general.
What is the exchange rate in the Forex market?
Similarly, the current exchange rate may be affected by irrational currency panic, for example, temporary correction, end of trend and other technical aspects. The study and subsequent determination of the exchange rate based on past behavior of currencies, forex is engaged in technical analysis.
Since technical analysis affects short-term currency, it turns out that for investing more than one week, it is necessary to take into account the fundamental factors that affect the currency directly.
Fundamental factors in forecasting the exchange rate are the entire wide range of factors that, if we take a medium-term outlook, can reduce or increase the real (objective) rather than fictitious-speculative demand.
Such an analysis, which is called fundamental, tries to predict the possible difference between the current exchange rate and possible changes, determined by the influence of fundamental factors in the market.
Thus, we can conclude that the exchange rate is an expression of the relative value of traded currencies, and its natural volatility and regular change are the backbone of any speculative operations on Forex …