Moving from country to country, while still having monetary responsibilities to my native country, has meant that I have had to keep some of my attention on currency forecasts and how much my current paycheck was actually worth in my hometown. Over the course of the last three or four years, it has basically felt like a game of financial Frogger, as I find it continually necessary to weigh whether transferring, converting, or saving my funds in their various and sundry currencies is wise or foolhardy. For those of us who live this sort of peripatetic lifestyle, and there are many of us, attempting to predict the ebb and flow of our money can be a truly daunting task. Currency forecasting, the act of predicting the value of a currency over time, is by no means an exact science, and if you flip between network news coverage on any given night, the information will vary wildly from program to program and expert to expert. So what is a world traveller to do? Your best bet is to familiarize yourself with at least the basics of currency forecasting, so that when you are planning to take advantage of that great ski deals in Switzerland package you stumbled upon online, or are moving from your teaching job in Sri Lanka to your new job in France, you do not find yourself completely broke. As not everyone is adept at math and, let’s face it, currency forecasts are highly educated guesses at best, the information below is meant to help you understand and interpret the currency fluctuations you see and hear about, at a basic level.
End of article. How It Works
Currency forecasting occurs via two different models – fundamental analysis and technical analysis. Like pretty much everything science and/or math based, fundamental analysts and technical analysts continually argue about the pros and cons of both methods. If you are flipping between channels, websites, or programs, and getting different information from each one, it is often due to a difference in the analytical style of the expert commentator.
Fundamental Analysis
Fundamental analysis requires a lot of, well, analysis. Traders who utilize fundamental analysis examine models produced by banks and other financial institutions around the world. These models analyze everything from interest rates to purchasing power to assets from each market. Fundamental analysts compare the various models, and the external cultural and political factors that could be affecting the various markets, in order to predict the path of the currencies involved. For those of us concerned with exchange rates, fundamental analysis addresses the gross domestic product of the countries, inflation, productivity, and unemployment to determine the value of one currency against another.
Technical Analysis
Technical analysis does not use models. Instead, it focuses directly on the trading systems of each market, examining monetary trends over time, via a combination of chart examination and mathematics. When dissecting the available data, traders using technical analysis will examine support and resistance lines, which determine the general rate at which prices within a currency pair will trade. They also use technical indicators to study the economic stability of a currency. Technical indicators are, in essence, reports of a particular economy generated daily or hourly. They also follow trends, literally the movement of a particular currency pair, and pay attention to whether the currencies are moving down, up, or some other direction altogether. For those of us who are not full-time traders, or quantitative analytical political scientists, the technical analysis model is rather more useful, as it allows us to examine a particular currency, as opposed to the movement of an entire market or economy. When it comes to exchange rate forecasting, the technical analysis model focuses on patterns and the flow of money between businesses and consumers within a particular market. Online trading sites such as Forex, TD Waterhouse, and Etrade UK make it possible for the average person to have some idea of the ebb and flow of one currency against another. These sites continually update charts and trends, and with a bit of practice, a layman, can glean a great deal of information from the available data.
The Rest of Us
Now that you have some idea of what to look for, hopefully your next experience of moving from country to country and currency to currency will feel less like a leap of faith, and more like an educated guess. Even if your interest in following currency trends is only passing at best, having some understanding of what you hear and read about your money is useful. The next time you are planning a move, take a good look at your current currency versus your potential new currency. Having a functional knowledge of your own money’s worth will go a long way to increasing your comfort level wherever you choose to live.
Source | The Currency Forecasting Blog (CFB) | http://currency-forecasting.blogspot.com/2011/08/guest-article-shell-game-currency.html
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