Fundamental analysis
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    Fundamental analysis

    Fundamental analysis is one of the main types of analysis of the market situation, as well as technical analysis. Fundamental analysis is based on four factors that influence the price.

    These factors are:

    • Economic – the analyzed issue is the economic performance of the country which’s currency (tool) you trade (example: GDP, Central Bank interest rates, inflation, economic trends, etc.).
    • Political - consideration of the political situation and its stability, possible changes in the political life of the country.
    • Force majeure - factors that can not be predicted (natural disasters).
    • Rumors and expectations - Statements of politicians, gnomes and just rumors may also weigh with the market conditions and the expectations of its participants.


    Fundamental analysis – is a key part of working with forex market, and one of the most difficult. To carry out a fundamental analysis is more complicated than any other, because the same factors in different conditions could have a different impact on the market, or may become inconspicuous instead of decisive causes.

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    Exchange market fundamental analysis includes an estimate of the currency market indicators that weigh with exchange rates:

    • Gradations of the financial securities market various sectors, which is a principal competitor of the foreign exchange market;
    • Various speculation on the foreign exchange market;
    • The state of the country's solvency and this country currency’s credibility;
    • The rate of inflation;
    • Development of the money supply within the internal market;
    • Economic development (gross national product, production output, etc.).


    How to understand what is happening in the economy? Economists use special economic data to monitor, predict and analyze changes in the economy generally and in individual sectors.

    There are various economic data published by the state and other institutions, but economists interested in the ones that reflect the current and future state of the economy. These reports are called economic indicators (activities), because they represent the state of the economy.

    Where can we get the economic data? In addition to specialized sources, you can find it and it’s analysis in the business press, especially in the national daily business newspapers, the Internet, the economic calendar on the website.

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    Economic Indicators for Fundamental Analysis:

    Economic
    Indicators Country/
    Economy Description Impact of volatility Remarks

    Current Account All Current Account Medium to High A high reading is seen as positive (or Bullish) for thecurrency, whereas a low reading is seen as negative (or Bearish).

    Trade Balance All Trade Balance Medium to High A high reading is positive or bullish, while a low reading is negative (or bearish). Trade balance generally creates more volatility for USD.

    Treasury International Capital (TIC) US Treasury International Capital (TIC) Medium A high reading is positive (or bullish) for the USD, while a low reading is negative (or bearish).

    Manufacturing/ Physical Output of factories, Mines & Utilities US ISM Manufacturing Index Medium A result above 50 is seen as positive (or bullish) for the USD, whereas a result below 50 is seen as negative (or bearish).

    US Empire State Business Conditions Index Medium A positive result indicates bullish for US Dollar, while a negative result shows poor growth of US Dollar.

    All Industrial Production Low to Medium (Medium for Japan) High reading is positive (or bullish), while low reading is negative (or bearish)

    All Purchasing Managers' Index Medium A result above 50 signals is bullish for the currency, whereas a result below 50 is seen as bearish.

    Durable Goods US Durable Goods Orders Medium A high reading is positive (or bullish) for the USD, while a low reading is negative or bearish.

    Consumer Confidence All Consumer Confidence Medium A high reading is positive (or bullish) for the currency, while a low reading is negative (or bearish).

    US Reuters/Michigan Consumer Sentiment Index Medium A high reading anticipates positive (or bullish) for the USD, while a low reading is seen as negative (or bearish).

    All Retail Sales Medium to High (High for US) A high reading is seen as positive (or bullish), while a low reading is seen as negative (or bearish).

    US Retails Sales Ex Autos High A high reading is seen as positive (or bullish), while a low reading is seen as negative (or bearish) for USD.

    US Personal Spending High A high reading is seen as positive (or bullish), while a low reading is seen as negative (or bearish) for USD.

    Japan Consumer Confidence House Holds Medium A result above 50 is positive (or bullish) for the JPY, whereas a result below 50 is seen as bearish.

    Inflation US Personal Consumption Expenditure -Price Index, Core High A high reading is bullish for the USD, while a low reading is bearish.

    All Consumer Price Index (CPI) Medium to High A high reading is seen as positive or bullish for the currency, while a low reading is seen as negative.

    US Gross Domestic Purchase price Index High A high reading is seen as positive, or bullish for the USD, while a low reading is seen as negative, or bearish.

    UK Core Consumer Price Index Medium A high reading is seen as positive (or bullish) for the GBP, while a low reading is seen as negative (or Bearish).

    UK Retail Price Index High A high reading is seen as positive (or bullish) for the GBP, whereas a low reading is seen as negative (or bearish).

    All Producer Price Index (PPI) Low to Medium A high reading is seen as positive (or bullish) for the currency, whereas a low reading is seen as negative (or bearish).

    US Consumer Price Index (CPI) Ex Food & Energy Medium A high reading is seen as positive (or bullish) for the USD, while a low reading is seen as negative (or Bearish).

    All Import Price Index Low to Medium. Medium for US A high reading is seen as positive (or bullish), while a low reading is seen as negative (or bearish).

    UK BOE Inflation Letter High A high reading is seen positive (bullish) for the GBP, whereas a low reading is seen as negative (bearish). It is worth noting that this tentative letter is only published when the CPI (YoY) is above 3.0%.
    Interest Rate All Interest Rate Decision High Raising interest rate is positive, or bullish, for the currency. While interest rate cuts are negative or bearish for the Forex pair.

    Employment US Non-Farm Employment Rate High A high reading is seen as positive (or bullish) for the USD, while a low reading is seen as negative (or bearish).

    All Unemployment Rate (Jobless Rate) High to Medium A decrease of the figure is seen as positive (or bullish) for the currency, while an increase is seen as negative (or bearish).

    US Personal Income High A high reading is positive for the USD, whereas a low reading is negative.

    US Average Hourly Earning High A high reading is also positive for the USD, while a low reading is negative.

    US Average Weekly Hours High A high reading is positive (or bullish) for the USD, while a low reading is negative.

    Employment US FOMC Meeting Minutes High (specially in volatile markets) If they show a hawkish outlook, that is seen as positive (or bullish) for the currency, otherwise it is seen as negative (or bearish).

    All Central Bank Chairman/Governor's Speech High (specially in volatile markets) If they show a hawkish outlook, that is seen as positive (or bullish) for the currency, otherwise it is seen as negative (or bearish).

    UK Bank of England (BOE) Minutes High The comments may determine a short-term positive or negative trend. If they show a hawkish outlook, that is seen as positive (or bullish) for the currency, otherwise it is seen as negative (or bearish)
    .
    GDP All Gross Domestic Product Medium to High (High for US) A rising trend has a positive effect on the currency, while a falling trend is seen as negative (or bearish).

    Market Sentiment Reports Germany ZEW Survey Medium An optimistic view is considered as positive (or bullish) for the EUR, whereas a pessimistic view is considered as negative (or bearish).

    Germany IFO- Business Climate and Expectations Medium The positive economic growth anticipates bullish movements for the EUR, while a low reading is seen as negative (or bearish).

    Japan Tankan Index Medium for Non-Manufacturing. Low for Manufacturing A result above the 0 level is seen as positive (or bullish) for the JPY, whereas a result below 0 is seen as negative (or bearish).

    Housing US Mortgage Bank Association (MBA) Mortgage Applications Medium A high reading is seen as positive (or bullish) for the USD, while a low reading is seen as negative (or bearish).

    US New Home Sales Medium A high reading is seen as bullish for the USD, whereas a low reading is seen as bearish.

    US Housing Price Index Medium A high reading is seen as positive (or bullish) for the USD, while a low reading is seen as negative (or bearish).

    US Construction Spending Medium A high reading is seen as positive, or bullish for the USD, while a low reading is seen as negative, or bearish.

    US/Canada Housing starts Low to Medium. Medium for Canada and US A high reading is seen as positive (or bullish) for the Currency, while a low reading is seen as negative (or bearish).

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    I actually want to ask which one is more profitable if we are trading based on technical or fundamental analysis. Because there are some pure fundamental trader. Perhaps there is master here who share tips on how trading fundamental analysis and how to trade based technical analysis .

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    Quote Originally Posted by mamamerana View Post
    I actually want to ask which one is more profitable if we are trading based on technical or fundamental analysis. Because there are some pure fundamental trader. Perhaps there is master here who share tips on how trading fundamental analysis and how to trade based technical analysis .
    Trader using the TA should pay attention to the FA to monitor the indicator release. Because in this case market volatility will increase. And this point must be taken into account.
    I am pure technical trader, I can not trade in reliance on fundamental analysis. It is difficult to understand how the market will react to the FA , mostly there is an oft-repeated unexpected reaction.

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    Quote Originally Posted by RoboForex Trader View Post
    Trader using the TA should pay attention to the FA to monitor the indicator release. Because in this case market volatility will increase. And this point must be taken into account.
    I am pure technical trader, I can not trade in reliance on fundamental analysis. It is difficult to understand how the market will react to the FA , mostly there is an oft-repeated unexpected reaction.
    Yes when some fundamental events occurs such as a strong news, the market will not obey the technicals at that moment due to high liquidity and thus a trader must use TA as well as FA both so that can trade with the combination of both the analysis to make their trade more powerful and profitable.

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    Quote Originally Posted by Razor1911 View Post
    Yes when some fundamental events occurs such as a strong news, the market will not obey the technicals at that moment due to high liquidity and thus a trader must use TA as well as FA both so that can trade with the combination of both the analysis to make their trade more powerful and profitable.
    Indeed, a trader should use technical analysis and fundamental analysis if he wanted to always exist in intraday trading, but I think we can be profitable only with technical analysis, because forex trading is not just analysis, but more than that, I think we should have a good trading system with a combination of market analysis, money management, risk management, control emotions, etc.. If we use a risk management very well then we do not need to worry about the fundamental effects. We know of no accurate analysis, fundamental or technical, so even though we have a good skill in fundamental analysis, we can not necessarily profitable in trading. To be profitable in forex is not only need analysis.

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    Technical analysis is the best analysis methods in the forex market and I see that he can be relied upon easily next news analysis until they are able to market and achieve success

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    the forex market accord to the two both analysis but i see the most one and the base its fundamental analysis because when you lnow it and learn it all you can use fundamental alone without technical

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    Quote Originally Posted by adelbougroura View Post
    the forex market accord to the two both analysis but i see the most one and the base its fundamental analysis because when you lnow it and learn it all you can use fundamental alone without technical
    Fundamental analysis also I prefer to rely on him but only 6 times in a month because I do not do all trading on the news, but the important news only

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