How to Trade Fundamental Analysis in Forex

In the world of finance, fundamental analysis plays a key role in the valuation of everything from corporate stock to real estate. For currency traders, it is a primary mechanism for examining the underpinnings of seemingly random exchange rate fluctuations.

Simple Moving Averages (SMA) chart

Forex Fundamental Analysis

Fundamental analysis is the process of breaking down the impact of political, economic and social factors on the relative value of a currency. Through identifying the primary drivers of a currency’s intrinsic value, forex participants are then able to craft informed trading decisions.

What Is Fundamental Analysis?

How To Learn Fundamental Analysis

If you want to learn fundamental analysis, the first task is to eliminate the noise. Focus your study on three principal areas.

Economics 101

Economic factors regularly impact the relative value of international currencies. Being aware of when official reports are released to the public is critical to competently trading forex.

Understanding The Key Economic Announcements

Central Banks

Interest rate adjustments, debt purchases and pegs can all dramatically sway forex values. If you are going to trade currencies, staying on top of central banking activity is essential.

Central Banks


Trade policy, armed conflict and leadership upheavals all create uncertainty in the capital markets. Accounting for these issues as they arise is a vital part of forex fundamental analysis. Understanding how economics, monetary policy and politics can impact investor confidence are the pillars of forex fundamental analysis. Raising your trading IQ in these areas is a solid first step in becoming fluent in fundamentals.

Five Key Drivers Of The Forex Markets

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Technical Vs Fundamental Analysis

Forex market analysis falls into one of two categories―fundamental or technical. Technical analysis is the study of how price moves; fundamental analysis is the study of what moves price.

When examining technical vs fundamental analysis, remember that selecting the ideal analytical basis for your trading strategies depends upon your resources and goals. If you are a long-term investor, then fundamentals are likely to garner importance. Conversely, if scalping is your game, technicals may be more useful.

Trading Using Fundamental Analysis

The Impact Of Inflation

Inflation is a fundamental driver of a currency’s value and monetary policy. It is defined as being an increase in the prices of goods and services. Inflationary pressures are detrimental to pricing stability and can enhance socio-economic tensions in affected regions.

In order to manage inflation, it is first necessary to monitor its presence. Two of the premier metrics in this department are the Consumer Price Index (CPI) and the Producer Price Index (PPI). Each study addresses inflation as it pertains to either the consumer or producer side of the economy.

Understanding CPI and PPI

Combining Fundamental And Technical Analysis Into A Hybrid Strategy

One way of enhancing performance is through combining fundamental and technical analysis into a hybrid trading strategy. A hybrid strategy is one that incorporates specific fundamental elements and technical tools into a broader framework.

For instance, traders often combine leading economic indicators with market technicals in the decision-making process. The results can be powerful, as trade ideas are well-rounded and promote a comprehensive approach to the markets.

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Learn More About Leading Economic Indicators

What Are Forex Signals?

Forex signals are cues to either buy or sell a currency pair at a specific point in time. They may be derived from technical or fundamental analysis and can become an invaluable part of almost any trading plan.

Forex signals are available in the public domain, from third-party vendors, or may be custom built. The single largest advantage to utilizing forex signals is that the guesswork is removed from active trading―you buy or sell according to the signal, without emotion or hesitation.

Forex Signals in Technical Analysis

What To Look For In A Forex Signal Provider

A forex signal provider supplies market participants with actionable trade ideas. In the online environment, there are thousands of such entities, operating on a subscription or complimentary basis. With so many choices, narrowing down the options can be a daunting task.

During your search for a forex signal provider, be sure to look for verifiable results and an extensive track record. An elite forex signal provider will meet both criteria, ensuring that their trading methodologies are sound.

Understanding Forex Signals in Technical Analysis

How to Trade Fundamental Analysis in Forex


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