What is fundamental analysis?
The analysis methods of the foreign exchange market are divided into two categories: "Fundamental analysis" and "Technical analysis". Both types of analysis methods are used to judge the future trend of the market, but their focus and analysis objects are very different.
- Fundamental analysis is based on economics and judges future price trends based on changes in the supply and demand relationship in the foreign exchange market.
- Technical analysis is based on the premise that "the price trend is regular", and analyzes the past graphic trends to predict future price changes.
Traders using fundamental analysis will analyze a series of economic situations, political situations, government and central bank policies, natural disasters, and emergencies to predict exchange rate changes and market trends in a certain economic cycle. They usually pay attention to the following main macroeconomic indicators:
- Interest rates at the world's major central banks
- Gross Domestic Product (GDP)
- Consumer Price Index (CPI)
- Purchasing Managers Index (PMI)
- Non-Farm Payroll Report (NFP)