Fundamental Analysis: Importance of the trade balance:
In the fundamental analysis to the forex market there are important points to discuss as they provide quality information about the evolution of the economy. One is the trade balance, this is obtained by subtracting net exports to net imports. This simple calculation provides important information for investors and that an imbalance that occurs increasingly lead to a decline in the trend of the currency of the country.
The trade deficit is not bad per se but depends on the evolution of the economy and the business cycle. If an economy is in a recession a trade deficit may worsen the circumstances but in times of economic expansion is a positive element.
The reason why the trade balance is an element to be evaluated for a foreign investor is that the demand for currency and export levels are closely related. A major export increased demand for the currency of the country in question because who import products must acquire the currency to pay.
