Fundamental Analysis

On what basis you’ll make your trading decisions?

Fundamentals are the broad grouping of news and information that reflects the macroeconomic and political fortunes of the countries whose currencies are traded. Most of the time, when you hear someone talking about the fundamentals of a currency, he’s referring to the economic fundamentals.

Economic fundamentals are based on:

1.    Economic data reports

2.    Interest rate levels

3.    Monetary policy

4.    International trade flows

5.    International investment flows

With the help of Fundamental analysis you observe at the market through economic, social and political forces that influence supply and demand. To put it differently you look at whose economy is successful and whose is not. If someone’s economy is doing well; their currency will also be doing well. That happens because the more successful a country’s economy is, the more other countries trust in this currency. For instance, as the U.S. interest rates are increasing, the value of the dollar is also increasing. So the U.S. dollar has been doing well as the U.S. economy is doing well. Later in this course you will learn which specific news events mostly influence currency prices. For now it’s enough to realize that the fundamental analysis of the forex is a way of analyzing a currency through the strength of this country’s economy.