Trading the capital markets requires a number of different techniques, which include understanding the fundamentals of the underlying instrument, the macro events that could alter the path of that instrument, as well as how price action is performing and what is likely to happen in the future. There are a number of similarities that an analyst can garner from determining the future direction of stocks and forex markets. There are also some individual differences which mainly include the specific fundamentals such as earnings and revenues of a company which don’t apply to both.
Interest rate levels play a major role in determining the future direction of both stocks and forex. For stocks, higher levels of interest rates are generally a headwind for upward movements of prices. On an individual level, most companies values are based on the present value of future cash flows which are eroded in value if interest rates increase. The opposite occurs if interest rates move lower.
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