Forex Fundamental Analysis

Forex Fundamental Analysis is the analysis of the FX market on a macro level. The analysis is carried out to predict the future price movements of the currency of any particular country using certain tools like economic growth, GDP, interest rate, BOP, employment rate, inflation rate and others. Changes in these factors impact the currency of that country either positively or negatively, that means the currency will either depreciate or appreciate. The Forex  Fundamental Analysis is not easy to conduct like a technical analysis as it needs a lot of expertise and experience. Most Forex traders rely only on technical analysis. But fundamental analysis also can be used to identify riskiness of a particular investment.  

Forex Fundamental Analysis (Image Reference)

In Forex Fundamental Analysis, the analyst need to consider a lot of factors and has to use many tools to conduct the analysis. Political conditions of the country, economical and cultural conditions, technological advancements, foreign reserves, statements of important political figures and many other such type of factors need to be evaluated. Once the evaluation has been done, the analyst has to develop an analysis for forecasting the currency appreciation or depreciation in the near future.

Tools or Signals Used in a Forex Fundamental Analysis

• Past Trends
• Updated news and announcements regarding the currency.
• Statements of important political and bureaucrat figures

Normally peers and co-traders help a lot in sharing latest world news. It is not necessary that you must carry out a complete fundamental analysis considering all the tools and indicators; rather you can do it on daily basis just by keeping an eye on the latest news and announcements. For instance, if there is political instability in a country then of course, the currency of that country will depreciate. An expert Forex trader will have an eye on the news about the political instability of that country and will act accordingly by getting rid of the currencies that might depreciate. On the other hand, if a trader is unaware about latest news may face heavy losses. Hence, it’s very important to stay updated and keep on monitoring the world around you.

It is highly recommended that you, as a trader,  must use both technical and fundamental analysis for better and enhanced grip on the future price movements.