The general concept of this analysis is that if a country’s current or future economic outlook is good, their currency should strengthen. In the same way if the demand for a country’s goods and services is increasing, or the number of people who want to invest there is growing, firstly they should buy that country’s currency as to buy its goods or invest, and this consequently causes the currency’s increase in value (https://www.independentinvestor.com/forex/guide).
The basis of technical analysis is again the study of price movement. However, while using this type of analysis you should look at historical price movements and based on the given data try to determine the current market conditions and speculate on further price movements. In this connection the market resembles a balance which is set as new information about fundamentals becomes available by moving in one direction and then another, and from time to time finding a point where it might have a brief rest till the emergence of new information. After all this takes place prices show patterns that tend to be repeated.
Charts give opportunity to make use of market patterns, trend data and technical indicators, as well as provide a visual representation of price and volume levels which will be of great help for you to determine coming move for a currency. And the identifying these patterns by studying charts of past price behaviour is known as technical analysis.
The overall sentiment of the market is formed by the help of each trader’s thoughts and opinions that are expressed by whatever position they take. Here what is stable is the traders’ tendency of overreacting; pushing prices to higher levels than their true value, and then overreach in the opposite direction, pushing them to levels below true value. Sentiment analysis is based on all those reactions. It tries to analyze what is driving trader’s decisions for now and the immediate future. One of the indicators that can determine the direction that the weight of trading money is flowing is the volume of trade. It can also be useful in revealing what the market is going to happen, which is market sentiment.
Here is found the difference between technical and sentiment analysis. In the first case what the market is likely to do is based on its past behaviour, whereas in the sentiment analysis what it actually does is based on each market situation.
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