Key Concepts in Fundamental Analysis for Forex Traders

What is Fundamental Analysis?

Fundamental Analysis vS Technical Analysis

• While the focus of fundamental analysis generally remains on news, sentiment and the release of economic indicators, technical analysis relies on the price and price movements of the underlying asset or the exchange rate of a forex currency pair.

Fundamental Analysis Indicators

• Employment Reports - including the unemployment rate, the number of claimants or jobless individuals applying for services, payroll levels, and other job related data

Fundamental Analysis Indicators

• Trade Balance – the difference between a country’s imports and exports which has a direct effect on the demand for that nation’s currency.

Fundamental Analysis Indicators

• Current Account – one of two components of a nation’s balance of payments, the current account is the balance of trade and net cash transfers for a country

Fundamental Analysis Indicators

• GDP – changes in a nation’s Gross Domestic Product can have notable effects on that country’s currency.

Fundamental Analysis Indicators

• CPI – the Consumer Price Index shows the level of prices of products on a consumer level and is a key inflation indicator.

Fundamental Analysis Indicators

• PPI – the Producer Price Index gauges what manufacturers are paying for their material before making a finished product.

Fundamental Analysis Indicators

• PMI – The Purchasing Managers’ Index surveys the activity of purchasing managers and can be a leading economic indicator.

Fundamental Analysis Indicators

• Commodity Prices –the price of commodities can have a significant effect on the currencies of both producing and consuming nations and are directly related to inflationary and disinflationary cycles.

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