So, you are willing to deal with New Zealand Dollar? Well, that’s a good choice, but you must be aware that dealing with it randomly and making an investment might expose you to potential risks. As this fluctuating market demands, you need to do an NZD currency forecast – analyse the present trends and future possibilities of profit before investing your money into this market.
Why do you need to predict?
Forex being the busiest financial market is also a fluctuating industry where anything can happen anytime. If there are great options for earning profit, there are high chances of losses as well. So, to avoid any such financial disaster, prediction becomes a must, prior to making an investment.
How to do NZD currency forecast?
As you are a debutant in foreign exchange market, here are few important approaches for trends forecast.
This expands to Purchasing Power Parity, and it is a very popular technique of prediction. This concept is same as the theoretical concept of ‘Law of One Price’; i.e., the price of identical goods in New Zealand and its paired country should be identical as well.
Consider a pair, for instance, NZD/AUD. The cost of bag should be same in both New Zealand and Australia. The value would include exchange rate, however excluding shipping costs and transactions. Suppose you predict, cost of the bag will rise in New Zealand by 4% by next year and that in Australia would go up only by 2%. Here, 2% is the inflation difference between the two countries and New Zealand prices are expected to go up faster. Hence, according to PPP approach, the NZD currency forecast would be – for keeping prices equal, NZD would have to depreciate by around 2%.
Approach of relative economic strength
Here, the power of economic growth is considered in different countries to determine the movement of exchange rates. High growth along with a strong economic environment attracts more foreign investors. You should also check whether the country has high interest rates that would give highest results on your investment. This would ultimately create an increased demand for that currency. Through this approach, a trader can have a fair idea about the currency’s strength and behaviour.
Predictions in forex market remain incomplete if you don’t consider facts and data. In this method of market forecasts, you need to gather factors that you predict to affect currency movement. After that, you have to create a model that would relate exchange rates with those factors. These are usually based on economic theory.
Time series model
This fourth model is a completely technical concept where you have to use data of previous behaviour and patterns of price movements for NZD currency forecast. Basically, you need to collect a time series of information for predicting various parameters and create a model as per your requirement.
For newbies in this industry, there is a wonderful opportunity with demo accounts that authentic online forex trading websites offer. You can access them completely for free. You can get hands-on experience of the real market without having any chances of loss. Practice will help you make an accurate NZD currency forecast.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.