Fundamental analysis in Forex trading requires that you analyze economic indicators such as, Interest Rates, Gross National Product (GNP), Retail Sales, Consumer Price Index (CPI), Non-Farm Payroll and so on.Fundamental analysis in forex trading is one of the components of forex strategies. Just as there are strategies in running businesses there are forex-trading strategies too, namely forex-trading strategies based on fundamental analysis, and those that are based on technical analysis. We just learnt of pivot points, charts, resistance level and so on, which all comes under the category of forex technical analysis. What then is fundamental analysis? Fundamental analysis is simply the larger picture. It is an economic evaluation of the countries whose currencies are traded in the forex market. For example if we were to consider GBP/USD, a comparative analysis of the economic data pertaining to England and US would indicate to us which way the Pound would move in relation to the Dollar. From time to time, the Central bank and regulatory authorities of most countries whose currencies are traded in the forex market release data pertaining to the economic indices of their respective countries. Based on an analysis of these economic indices, supporters of fundamental analysis formulate their own view of the overall health of a country’s economy. This is how they predict price trends in forex.
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