Question : Which of the following is an example of a technical factor that can impact foreign exchange rates?
Option 1: Government policies
Option 2: Economic indicators
Option 3: Market psychology
Option 4: Natural disasters
Correct Answer: Market psychology
Solution : The correct option is c) Market psychology
Market psychology refers to the collective emotions, beliefs, and sentiments of market participants, which can influence their buying and selling decisions. In the foreign exchange market, market psychology can have a significant impact on exchange rates. Factors such as investor confidence, risk appetite, market expectations, and sentiment can all influence the demand and supply of currencies, thereby affecting exchange rates. Market psychology can lead to periods of volatility, trends, or reversals in currency markets, which can be driven by factors such as investor sentiment, market rumors, or perceived political and economic risks.
