Forex Fundamental Analysis

This type of analysis studies the macroeconomic events, political news and other events of the world which somehow affect the rates of the currencies. The main difference between the fundamental and Technical analysis is that the Fundamental one is based on the principle that the prices of the currencies on the Forex market are the reflection of supply and demand, which in their turns depend on fundamental factors of the economy. In contrast, technical analysts do not consider the study of the reasons of price changes important and put an emphasis only on the study of the price dynamics and history of price movements.

Events affecting the market may be distinguished between 2 groups: expected and unexpected. These events include the publication of various economic indicators, which contribute to prediction of upcoming important events. In contrast, unexpected events may not be forecasted in any way because the group of such events includes natural disasters, political revolutions, acts of terrorism, etc.

According to Fundamental analysis predicting the changes of the prices is possible through predicting the factors which affect the supply and demand. So, the difference between the two analysis methods is the following: for technical analysts if the prices have changed, then something has changed in supply or demand, and the reason is longer important because the prices have already changed. In contrast, fundamental analysts pay high attention to the factors affecting that change.