Fundamental analysis in forex examines economic, social, and political factors that affect currency values. It helps traders understand why prices move.
Key Economic Indicators
| Indicator | Effect on Currency |
|---|---|
| Rising interest rates | 📈 Bullish |
| High inflation | 📉 Bearish (usually) |
| Strong GDP | 📈 Bullish |
| High unemployment | 📉 Bearish |
| Trade surplus | 📈 Bullish |
Central Bank Influence
Central banks are the most powerful force in forex:
- Fed (USD) — Federal Reserve
- ECB (EUR) — European Central Bank
- BOJ (JPY) — Bank of Japan
- BOE (GBP) — Bank of England
Rate decisions and forward guidance move markets significantly.
Fundamental vs. Technical
| Fundamental | Technical | |
|---|---|---|
| Focus | Economic data | Price charts |
| Timeframe | Long-term | Any timeframe |
| Tools | Calendar, news | Indicators, patterns |
| Best for | Trend direction | Entry/exit timing |
Key Points
- Combine with technical analysis for best results
- Major news events create volatility
- Long-term trends driven by fundamentals