Why is the economic outlook important in fundamental analysis?

  1. Why is the economic outlook important in fundamental analysis?
    Correct Answer:
    Consumers spend more when they anticipate strong economic growth
    Your Answer:
    Forex seers can gauge potential currency direction better with economic outlook
    INCORRECT
    Explanation:
    See the explanation in the School of Pipsology

Ok, this one is an error for sure. The accepted answer is just one factor in a fundamental analysis that would need to include other considerations.

I’m not sure who forex seers are, but I assume, traders, and they [B]can[/B] use fundamental analysis to gauge potential currency moves.

They can, to some extent, under some circumstances; it’s true.

But that doesn’t necessarily make it the most appropriate answer to the question.

Bear in mind that these are actually multiple-[B]response[/B] questions, not multiple-[B]choice[/B] questions (two different things!): one isn’t being asked to assess the comparative extent to which each different response is true, but to select the one that best encapsulates, in one sentence, an answer/completion to the stem question.

In this instance, my own feeling is that “Consumers spend more when they anticipate strong economic growth” was fairly clearly the one intended. It’s supposed to relate to “feelgood factor”/“sentiment index”, probably?

(These things are always a bit interpretative: having been taking exams intermittently for most of my life, I’ve never yet seen a complete set of MRQ’s in which none of the answers was debatable! :33: ).

The question is about economic outlook, and positive sentiment is only pertinent to the buy/long side of the equation.

Even if you disagree with that, how is my ‘incorrect’ answer less true? You can’t predict currency direction without assessing economic outlook if you are using fundamental analysis.

global financial crises 2 is coming

Yes … true enough. I do see what you mean. Well, it’s a “bad question”, then, in a sense, I suppose? The other one you’ve posted in another thread is [I]definitely[/I] a mistake, anyway.

Hi clemmo,

the next time you can post fundamental analysis question in this part of the forum which might be a bit more appropriate:

http://forums.babypips.com/fundamental-ville/

I probably should have posted under bugs/suggestions. Just noticed there is a sub-forum for that.

Probably better. I’ve asked the moderators to move it there. :wink: