Understand the economic forces that move currency prices — and trade with the news, not against it.
Fundamental analysis is the study of economic, social and political forces that affect the supply and demand of an asset. Unlike technical analysis — which focuses on price charts — fundamental analysis examines why prices move.
In forex, this means studying a country's economic health: interest rates, inflation, employment data, GDP growth, trade balances and political stability. A stronger economy generally means a stronger currency.
Many professional traders combine fundamental analysis to determine what to trade and which direction, and technical analysis to decide the precise entry and exit timing.
Biggest driver of currency value
Measures economic health
Jobs data moves markets
Affects rate decisions
These are the most market-moving economic releases every forex trader must understand.
Central bank rate decisions (Fed, ECB, BOE, BOJ) are the single biggest driver of currency moves. Higher rates attract foreign capital → stronger currency. Lower rates → weaker currency. Rate expectations often move markets before the actual announcement.
Released the first Friday of every month, the US NFP report shows how many jobs were added or lost. A strong jobs number boosts the USD; weak numbers weaken it. This single release can move all USD pairs by 100+ pips in minutes.
The Consumer Price Index measures the rate of inflation. High inflation prompts central banks to raise rates → bullish for currency. Low inflation or deflation leads to rate cuts → bearish. CPI surprises routinely cause sharp currency moves.
GDP measures the total value of goods and services produced by a country. Strong GDP growth signals a healthy economy → bullish for currency. Two consecutive quarters of negative GDP = recession → bearish. Released quarterly.
The difference between a country's exports and imports. A trade surplus (more exports) is bullish for currency as foreign buyers need to purchase the local currency. A deficit is bearish. Key indicator for commodity-linked currencies like AUD and CAD.
Purchasing Managers' Index surveys businesses on production levels. PMI above 50 = expansion (bullish); below 50 = contraction (bearish). Released monthly and often one of the first indicators available for each period.
Never miss a market-moving news release. Track upcoming events with impact ratings in real time.
Most successful traders use both. Here's how they complement each other.
Use fundamental analysis to identify the big picture bias (e.g. "USD should strengthen due to Fed rate hikes"), then use technical analysis to find the optimal entry point on a chart pullback or breakout. This combination dramatically improves trade quality.