At first glance, forecasting exchange rate does not seem feasible but if you know the basic technical aspects, you can carry out this procedure yourself without resorting to professional assistance.
First of all, you should know two main points – what external factors influence the exchange rate and what patterns can be detected by analyzing the currency pair chart.
Currency forecasting can be used not only for speculative operations on Forex but also to assess the risks of transactions in business activities of some companies closely related to currency exchange.
In addition, realizing exchange rates forecast you should remember that you need to consider in what currencies you want to forecast. For example, the U.S. dollar cannot grow simultaneously in relation to all world currencies, there is such a thing as correlation and it means that some monetary units will rise simultaneously with the U.S. dollar.
The relationship based on the same influence of external factors, such as news about oil price rise will immediately cause a price changing of some major world currencies.
Thus, If you trade on Forex, analyze a currency pair and only then proceed directly to currency forecasting.
During the trading process, it is very important to highlight the two main groups of factors which are the basis for the future forecast: internal and external factors.
1. Internal factors
These factors can be detected by examining the graph of the currency pair and it called regularities which are based on the history repetition, for example, a seasonal price increase of a certain currency pair or a sharp drop in the trading session.
Also, you can use the graph to determine the general mood of the market and current trend.
Technical analysis provides a basic framework for getting data that will help to predict the exchange rate and after holding it you can go to the study of fundamental factors.
2. External factors
These factors include the economy of a state the analyzing currency, it will be better to take data over the past six months to monitor the changing development.
If you make a short-term forecasting you should use tools such as Forex calendar, it is possible to obtain information not only about the time of the promulgation of the current economic and financial indicators but also the experts' forecast.
Using the obtained data with the technical analysis results it is possible to predict the probability of a course change, for example, if the market at the moment is in an uptrend and the situation in the country issuing the currency has a positive trend with high probability it shows a continuation of the upward trend.
Currency forecasting is a complicated process but if you identify the basic aspects that you should pay attention, it is possible to significantly facilitate and simplify this work.