You need to understand the fundamentals before entering the market

The target of foreign exchange investment is the main economy of the country, so foreign exchange investment should start from the fundamentals before entering the market, so as to achieve "a gap in the chest". First of all, it is necessary to understand the status of foreign exchange reserves and the level of foreign debt. The status of foreign exchange reserves is an important factor in the basic analysis of foreign exchange transactions, and its important function is to maintainforeign exchange marketThe stability of foreign exchange reserves in various countries and changes in the level of foreign debt will have an impact on the foreign exchange market, affecting the direction of the relevant currency in the foreign exchange market. The structure and level of foreign debt is also one of the important factors in the basic analysis of foreign exchange transactions. If a country has external liabilities, it will inevitably affect the foreign exchange market; if foreign debt is mismanaged, the resilience of its foreign exchange reserves will be weakened, which will have an impact on the stability of the currency. Many countries, such as Argentina and Brazil, have foreign debt exceeding their reserves. The original idea is that foreign debt will remain liquid.

However, under certain market conditions, if the country's efforts to raise large-scale financing through the international market fail and lose the original financing channels (which is exactly what happened in the South East Asia currency crisis and the Argentine financial crisis), it can only use foreign exchange reserves to meet liquidity and maintain market confidence,: the stability of foreign exchange reserves will be challenged. From international experience, when foreign debt mismanagement leads to exchange rate fluctuations, the exchange rate of the affected currency is often undervalued. The degree of undervaluation mainly depends on the stability of the economic system and social order. If a country's short-term foreign debt is large, it will directly impact the foreign exchange reserves. And if there is a "bailout" by the international monetary fund, the sharp depreciation of the currency will bear the additional burden of adjustment in addition to the commercial conditions of the IMF loan.

The status of foreign exchange reserves is an important factor in the basic analysis of transactions, and its important function is to maintain the stability of the foreign exchange market. Whether a country's currency is stable or not depends to a large extent on the foreign exchange liquidity that its foreign exchange reserves can guarantee under specific market conditions. From international experience, even if a country's currency meets the conditions for exchange rate stability set by all theories, if the currency is hit by speculative forces and cannot meet the sudden expansion of foreign exchange flows in the foreign exchange market in the short term, the currency will have to depreciate. From the 1998 Asian financial crisis, in the strong speculative atmosphere, impatient citizens and cautious foreign investors often lose confidence in the currency, which becomes a deadly force driving the violent fluctuations of the foreign exchange market. Under the impetus of this force, the government's efforts to maintain the exchange rate were effectively abandoned long before the reserves fell to zero.

The study and understanding of the fundamentals helps investors to understand and anticipate the foreign exchange market from the general trend. Although retail investors do not make strategic investments, they can expect the impact on the foreign exchange market from the economic data released by various countries and the political changes that occur. Choose the appropriate time to enter the market, which is much better than the pure analysis of the K-line.