Forex Fundamentals

Foreign-exchange market (forex) rely on the same two basic forms of analysis that are used in the stock market.
i.e., Fundamental Analysis and Technical Analysis.

The uses of technical analysis in forex are much the same, price is assumed to reflect all news, and the charts are the objects of analysis. But unlike companies, countries have no balance sheets, so how can fundamental analysis be conducted on a currency?

Since fundamental analysis is about looking at the intrinsic value of an investment, its application in forex entails looking at the economic conditions that affect the valuation of a nation’s currency.

Here I list some of the major fundamental factors that play a role in the movement of a currency and will discuss about those in detail some other time.

Economic Indicators

• The Gross Domestic Product (GDP)
• Consumer Price Index (CPI)
• Industrial Production
• Retail
  

Since economic indicators gauge a country’s economic state, changes in the conditions reported will therefore directly affect the price and volume of a country’s currency. It is important to keep in mind, however, that the indicators discussed above are not the only things that affect a currency’s price. There are third-party reports, technical factors, and many other things that also can drastically affect a currency’s valuation.