Fundamental Analysis
Fundamental analysis is a method of analysing financial markets by examining economic, financial, and other qualitative and quantitative factors that affect the value of a currency. In forex trading, fundamental analysis is used to predict future price movements based on factors such as interest rates, economic data, and geopolitical events. The main principle behind fundamental analysis is that a currency’s value is determined by the underlying economic and financial factors of the country that issues it. For example, if a country has a strong economy with low inflation and high growth, its currency is likely to be in high demand and increase in value relative to other currencies. Fundamental analysts use a range of tools and indicators to help them evaluate the economic and financial health of a country. Some of the key indicators used in fundamental analysis include:
Interest Rates
Changes in interest rates can have a significant impact on currency prices. Higher interest rates generally lead to a stronger currency, while lower interest rates can weaken a currency.
Gross Domestic Product (GDP)
GDP measures the size and growth of a country's economy. A strong GDP can indicate a healthy economy and boost a currency's value.
Inflation
Inflation measures the rate at which prices for goods and services are increasing. High inflation can lead to a weaker currency, as it reduces the purchasing power.
Employment Data
Employment data, such as nonfarm payrolls and unemployment rates, can provide insights into a country's economic health and impact currency prices.
Geopolitical Events
Political and economic events, such as elections, wars, and natural disasters can have a significant impact on currency prices