What is fundamental analysis?

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Fundamental analysis is the method of forecasting future currency value by looking at the causes of current and future price moves. For example, Interest rate announcements, Unemployment data, GDP data etc .

 

It involves analysing the economic, political and social factors of a country to see what events or announcements will impact the direction of their currency and therefore the potential currency market movement .

 

Fundamental analysis is all about the long term. It focuses on establishing the likely duration and direction of the main currency trends over the long-term, and does not take into consideration factors such as short-term price fluctuations.

 

Below is a diagram which helps to distinguish the main difference between fundamental and technical analysis:

 

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