What causes currency prices to change?

by Jun 29, 2020Trading Guides

What causes currency prices to change?

Currency prices are fundamentally affected by supply and demand. Economic and Political factors may affect supply and demand as traders buy or sell currency pairs in reaction to news that was just released. Central bank intervention may affect the supply of a currency by releasing more money in the financial markets, or purchasing currency back, taking said currency out of the markets. A good example of this would be the GBP/USD plummeted after a referendum was passed for the UK to leave the European Union

However, sometimes currency prices change irrespective of Economic, Political and Central bank factors. During non-turbulent times, the currency pair may hit strong support / resistance levels in which buyers / sellers increase or decrease their exposure to the currency.

 

 

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Technical analysis is a type of analysis derived purely from charts and the price movement of the security. The basis of technical analysis is that past price movement is a good indicator for future price movement. Technical analysis uses statistical trends such as trading volume and historical support / resistance levels to gauge the movement of the price in the future. This in contrast to fundamental analysis, which involves looking at a security from a financial and economic point of view.

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