Fundamental Analysis

We already know that trading in the foreign exchange market (forex) rely on the two: technical analysis and fundamental analysis. This time, we will tackle about the other analysis which is the fundamental.

Fundamental Analysis in Forex is a type of market analysis which involves studying of the economic situation of countries to trade currencies more effectively.

Fundamental analysis involves examining the intrinsic value of a nation’s currency based on economic news releases that reflect the strength, or weakness, of a country’s economy. Fundamental traders follow these news announcements, known as “fundamental indicators,” because they paint a picture of a currency's strength in relation to other countries.

Economic Indicator

Fundamental analysis involve a lot of analysis on the macroeconomic situation.

Thus, economy indicators of the country such as GDP growth rates, unemployment rates, retail sales, and interest rate are used heavily in when valuating a country's currency. Some of the frequent used economy indicators in Forex trading are as below:

  • The Gross Domestic Product
  • Retail Sales
  • Interest Rates
  • Unemployment Rate
  • Industrial Production Reports
  • Consumer Price Index (CPI)
  • Manufacturing PMI-ISM
  • Manufacturing Production

While technical analysis gets into actual and historic movements in the forex market, fundamental analysis, on the other hand, takes an overview of forex movements. Fundamental analysis paints for the forex traders a broad picture of the conditions affecting the price of a currency. In order to get the best analysis, forex traders have to supplement their findings in the fundamental analysis with that of the technical analysis.

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