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How to use CDS in forex fundamental analysis?
The value of CDS used as tool for fundamental analysis is based on the sovereign CDS. The current value of sovereign CDS can be used to predict the direction of currency movement of a country in the future. The higher the CDS of a country, the higher the risks of those countries. For example, the European crisis that happened in Eurozone worried investors and market analysts. It means the crisis influenced the value of CDS. Therefore the risk of bankruptcy would increase exponentially. It is due to the lack of investor's confidence in the value of those countries' currencies.
In the picture above, we could see 5-year CDS from Portugal, Greece, Italy, and Spain experienced sharp increases in February 2012. It showed that in medium to long-term, the crisis in Europe was still going to be the main news and could possibly crush Euro. We could see how the crisis affects Eurozone economic recovery, and consequently, the Euro.
Continue Reading at The Most Accurate Fundamental Analysis
How to read PMI data for forex analysis?
PMI comes on a scale of 100, with a median of 50. Any number under 50 means the economy is in contraction, while over 50 suggests business expansion. A decrease could be read as an economic decline during the period, while an increase shows ongoing recovery.
Continue Reading at Guide to PMI Data in Forex Analysis
What is an example of interest rate change in forex?
Let's use EUR/JPY. Say the BoJ (Bank of Japan) rate is 0.1% and ECB (European Central Bank) is around 0.5%. If BoJ increased interest rates to 0.5%, then their rates will be the same as ECB. However, these changes will entice investors to move their assets to Yen, because they want to get some profit from the changes. Such movement will cause the rise of demand on Yen so that its exchange rates against Euro will rise too.
On the contrary, if BoJ lowers their interest rates to 0.05%, investors will sell their Yens and move their investment into other kinds of assets like bonds, property, or another currency with higher interest, Yen's exchange rates will decrease.
Continue Reading at Central Bank Policies That Affect the Forex Market
Yes, it does.
The Commitment of Traders (COT) report is a document that comes out every week and tells trader how different groups of people are trading in the U.S. futures market. This report is put together by the CFTC in the U.S.
Continue Reading at What is Market Sentiment in Forex and How to Measure It?