Market trends are one of the tools that allow traders to make a profit. It is the change in prices that leads to the emergence of gains or losses. There are four main factors that affect fluctuations in the prices of currencies in the market. Among them: supply and demand, government policy, international transactions, speculation and expectations.
Constant observation of the listed factors, their correct interpretation and analysis will make it possible to understand how trends will develop in the future, what new trends may appear. This will surely create a base for making a profit.
The government of each country also has a significant impact on the situation in the stock markets. By changing interest rates, it can change the rise or fall in demand for various types of currencies, and by pursuing fiscal policy, the state can regulate prices and reduce the unemployment rate in the country. Therefore, the policies of countries are considered one of the most powerful levers influencing the Forex market.
Currency exchange that takes place between different countries also affects the stock markets. The economy of a country is the weaker, the more national currency leaves this country. Exporting countries, on the other hand, at the expense of the exported goods and the services they provide, attract money for themselves, which stimulate and stabilize their financial markets.
Expectations and speculation are essential components of the financial system. The development of the economy in the long term plays an important role for politicians, investors and consumers. It also determines their behavior in the financial market, however, as well as behavior in general. The expectations of market participants depend on the trends that operate in the present, as well as with a perspective for the future. Sentiment indicators of groups of people play an important role in assessing the situation in general and in the Forex market in particular. Along with the use of technical and fundamental analysis, the study of indicators of behavior and sentiment helps to form a clear idea of what is happening and to predict how the situation will develop in the future.
Supply and demand for currencies and other investment instruments forms two-stage price dynamics. Changes in the relationship between supply and demand also change price levels. When supply rises, but demand remains at the same level, then prices go down, and vice versa.
All the factors considered have a direct impact on the Forex market, causing short-term and long-term fluctuations, creating trends. All factors are different from each other, but, at the same time, they are closely related. Thus, the government of the countries influences international transactions, which, in turn, influence expectations and speculation. Supply and demand are relevant for both cases, since any change is reflected instantaneously either in the demand of buyers or in the supply of sellers.
