market FUNDAMENTAL ANALYSIS

Here are a some of the most popular strategies

fundamental analysis comparison

Definition =      Various economic data used to establish value/ target price
Data considered=       Inflation, GDP, interest rates, etc
Time horizon=        Medium and long term
Skillset required=      Economics & statistical analysis

Fundamental analysis involves assessing a country’s economic well-being, and expansion, currency. Fundamental does not take into account currency price movements. it Forex traders will use data points to determine the strength of a particular currency.

fundamental forex trader will analyze the country’s inflation, trade balance, gross domestic product, growth in jobs and even their central bank’s benchmark interest rate.

Below is an example of an economic calendar where fundamental traders will be able to keep up to date with the latest data releases. There are many data releases on any given day which is why traders should know how to filter the calendar to show relevant information only.

By assessing the relative trend of this and other data points, one is analyzing the dependent health of a country’s economy and whether to trade the future movement of that country’s currency.

The table below summarizes the general effects that various economic figures have on the strength of the currency. However, this is not guaranteed as there are many factors that influence currency movements.

How economic data affects currencies

EXPECTATIONS

EFFECT ON CURRENCY

Gross Domestic Product (GDP)

Better than expected

Positive

Consumer Price Inflation (CPI)

Better than expected

Positive

Trade Balance

Trade deficit (imports > exports)

Negative

Central Bank benchmark rate

Increase in interest rate

Positive

ism, Manufacturing Index

Better than expected

Positive

PPI Producer Price Index

Better than expected

Positive

Fundamental traders monitor economic data releases and do so with the intention of trading many news stories. It is essential that traders should adopt sound risk management when volatility may increase immediately after critical release.
Technical traders have different styles and strategies. This type of analysis to find out what suits your personality.
And if you are just starting out on your forex trading journey, you can learn the basics with our free New to Forex guide.

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