Forex traders always look at trends and economic conditions to predict the price movement of a currency pair. Many of those who followed the release of fundamental data such as interest rates, GDP, etc., but you also can predict price movements in the forex market by looking at the stock market. The stock market consists of major companies from around the world who provide reports its condition and could be used as a source of information for forex traders through price movement of shares or stock price index, in addition to major world commodity prices such as crude oil.
In the end, the movement of the currency pair is determined by market supply and demand factors. If the demand for a currency increases a lot, then the value of the currency will tend to be higher compared to other currencies. Conversely if the supply increases, the value of the currency will tend to weaken. The basic principle is influenced by several factors that cause fluctuations in the movement of the currency pair each day. One factor is the movement of stock prices.
Looking at the global market
Currently the forex market is the largest market kind in the world, much bigger than the stock market in any country. If you talk about the interaction between the stock market and the forex market, you should look at the global market conditions. The company is fit for use as a reference is operating internationally and conduct transactions with multiple currencies. For example, the company the world's largest retailer Wal-Mart will be more frequent transactions using foreign currency (other than the US dollars) compared to the other big companies that are not classified as a multi-national. Other big names are Coca-Cola. The second condition of large multi-national companies are always considered the forex market participants, especially the price of its stock.
Shares a great country could be affected by the forex market. Weak currencies strongly supports exporters in the country. If the currency is weakening, then the trading partner countries, the export products of the country are becoming increasingly cheap. This encourages increased export volumes means more profits for exporters and domestic manufacturers of the products. If production increases, the growth of the country will rise, and the stock market in the country will be more excited. The main stock prices will rise, or the stock price index rises. This kind of situation occurs in almost all the world's major stock exchanges are supported by major currencies (USD dollar, Japanese Yen, Euro, Pound Sterling and others).
Nevertheless the forex market are considered Lagging indicators (indicators that tend to be slow) by the industry players predicting economic conditions and make decisions. Investors realize the impact of fluctuations in currency values. Often the end result is very different from the acquisition of his company estimates or research that has been done before, simply because currency moves were not unexpected. Therefore they do hedging strategy (hedge) to prevent losses due to fluctuations in currency values. In this regard can clearly affect the forex market the Stock market
