Skip to content In this fourth chapter of our free trading trainingWe're going to learn how to perform a fundamental analysis on Forex. After discovering how forex worksthe role of a broker and technical analysis, it's time to understand how economic events influence currency prices.
Fundamental analysis is one of the cornerstones of trading. It enables us to anticipate market movements by analyzing the economic, political and social factors that impact currency values. Unlike technical analysis, which focuses on charts, fundamental analysis looks at the reasons behind price fluctuations.
Independent trader since 2012
Fundamental analysis is the study of the economic and financial factors that influence the value of a currency. It is based on an examination of economic data, monetary policy decisions, geopolitical events and macroeconomic indicators.
This approach enables us to understand why one currency strengthens or weakens against another. For example, if the US economy is showing robust growth while the European economy is slowing down, the US dollar should logically appreciate against the euro.
Traders who use fundamental analysis to trade Forex seek to identify long-term trends by analyzing :
Economic indicator publications
Central bank decisions
Geopolitical events
Government policies
International capital flows
The fundamental analysis approach can indeed be a little "scary" when you have no knowledge in the field, but in this trading course for beginners, we're going to focus mainly on using the economic calendar and the understanding of most influential economic indicators. In trading, this is the simplest and most concrete part of fundamental analysis, and is perfectly accessible to individual traders. Mastering this basic skill already enables you to anticipate the market's reactions to economic announcements, which is an invaluable asset. significant advantage to refine your decision-making. You don't need to be an outstanding economist: with the right reflexes and a little practice, you'll be able to interpret key information and integrate it into your trading strategy.
The combination of these two analysis methods provides a comprehensive view of the market. Fundamental analysis provides context and general direction, while thetechnical analysis helps to find optimal entry and exit points. The usefulness of both analyses is easy to understand:
Fundamental analysis answers the following questions:
Why is the market moving in this direction?
Will this trend continue?
What are the potential catalysts?
Technical analysis answers the following questions:
When should you enter the position?
Where to place your stop loss?
What are the resistance and support levels?
A forex trader masters both approaches to maximize his chances of trading success.
Investing.com has become the global benchmark for fundamental analysis. This free platform offers all the tools you need to follow economic news and analyze its impact on the Forex market.
The benefits of Investing.com :
Free access to all functions
Real-time economic data updates
Intuitive, multilingual interface
Worldwide coverage of all financial markets
Expert analysis and commentary
High-performance mobile applications
The platform centralizes all the information you need to perform a complete fundamental forex analysis, while saving you the hassle of juggling several sources of information.
Visit economic calendar : Consult daily announcements and their potential impact on currency markets.
Business news : Follow the latest news that may influence the markets, sorted by currency and importance.
Real-time data : Instant access to currency rates, variations and trading volumes.
Personalized alerts : Set up notifications to alert you to important events.
The platform can also be used to track and analyze CFDs on currencies, indices or commodities.
Tutorial - How to use Investing
Download our PDF guide to learn how to use the Investing.com website and application for fundamental forex analysis.
Economic news is the main driving force behind currency market movements. Each release of economic data can provoke immediate and sometimes spectacular reactions in currency prices.
The process works like this:
Anticipation : Traders position ahead of publication based on forecasts
Publication: Real data revealed
Reaction: The market adjusts prices according to the gap between forecast and reality
Digestion : Traders analyze medium-term impact
The greater the gap between the forecast and the actual result, the more violent the market reaction. Each element can significantly influence the price of an asset, which is why it's crucial to follow analysts' forecasts before each publication. In addition, familiarizing yourself with the explanations behind these reactions helps you to better understand how traders interpret price movements and anticipate future trends.
The most important announcements :
Central bank interest rate decisions
Inflation publications (CPI, PPI)
Employment data (unemployment rate, job creation, Non-Farm Payroll)
Economic growth (GDP)
Balance of trade
Geopolitical events :
National elections
International conflicts
Health crises
Trade tensions
Diplomatic negotiations
Market factors :
Speeches by central bankers
Economic forecast revisions
Changes in monetary policy
Sectoral financial crises
The economic calendar is an indispensable tool that lists all scheduled economic data releases. It indicates the date, time, country concerned, indicator published, analysts' forecast and potential impact on the markets.
This tool enables traders to plan their strategies and prepare for potential market movements. Without an economic calendar, it would be impossible to anticipate the catalysts that can move currencies.
How to get there :
Via your computer: Go to Investing.com, then click on "Tools" to access the economic calendar. Create an account to save your preferences and filter the ads you want to watch.
Via your phone: Install the Investing.com application. In the "More" tab, you'll find quick access to the economic calendar.
Important columns:
Time : Precise time of publication (displayed in your local time zone)
Currency : Currency concerned by the economic announcement
Impact: Level of importance of the event (low, medium, high)
Event : Nature of economic indicator
Current Actual result published at the time of announcement
Forecast : Estimates made by analysts or financial institutions
Previous : Previous publication value (for comparison)
The impact of the ad:
On Investing.com, the importance of each event is represented by a visual code :
Three bulls / three stars : Impact high - high probability of significant movement
Two bulls / two stars : Impact moderate - possible market reaction
A bull / a star : Impact low - limited influence expected
The higher the impact, the more likely it is that the publication will trigger volatility on the currency pair concerned. Traders keep a particularly close eye on three-bull announcements, which can create interesting trading opportunities, but also increased risks.
Visit central banks hold regular meetings at which they announce their monetary policy decisions, such as the level of interest rates. These announcements often have a strong impact on marketsparticularly on the forex market. They determine the return on investment in a currency and directly influence international capital flows.
Impact mechanism :
Rising interest rates = more attractive currency = appreciation
Lower interest rates = less attractive currency = depreciation
Decision calendar :
Each major central bank organizes 8 meetings a yearabout once every six weeks:
Fed (United States)
ECB (Euro zone)
BoJ (Japan)
BoE (United Kingdom)
These dates are known in advance and are integrated into the economic calendar. So it's easy to prepare for them and anticipate the volatility these decisions may cause in the currency pairs concerned.
Inflation measures the general rise in prices in an economy. It directly influences the monetary policy decisions of central banks.
Key indicators :
CPI (Consumer Price Index) : General inflation
IPC core : Inflation excluding energy and food
PPI (Producer Price Index) : Upstream inflation
Currency impact mechanism :
High inflation = risk of rising interest rates = strong currency
Low inflation = risk of falling interest rates = weak currency
The labor market reflects a country's economic health. A low unemployment rate indicates a dynamic economy, while a high rate signals difficulties.
American indicators (the most closely followed) :
NFP (Non-Farm Payrolls) : Monthly job creations
Unemployment rate : Percentage of active population without work
Average salary : Revenue trends
Publication: First Friday of each month
Why are US indicators so important?
The United States is the world's largest economy, and the dollar is the world's most important currency. dominant reserve currency in international trade. This is why US economic indicators, such as NFP and the unemployment rate, have a major influence on the way we do business. all financial marketsincluding other currencies. Even if you don't trade USD directly, these publications can cause volatility on many pairs.
Gross Domestic Product measures the wealth created by a country. It is the benchmark for assessing economic growth.
Publication types :
Preliminary GDP : First estimate
Final GDP : Revised final figures
Quarterly GDP : Comparison with previous quarter
Annual GDP : Growth over 12 months
If you want to understand more about the importance of GDP, take a look at this article written by Investopedia.
Extreme volatility
Prices can change by dozens of pips in a matter of seconds, making it very difficult to manage positions.
Price gaps
Sudden gaps can appear between two successive quotes, short-circuiting stop-loss orders.
Widening spreads
Brokers increase the difference between bid and ask to protect themselves, increasing transaction costs.
False breaks
The market may initially react in one direction, then suddenly reverse, trapping traders.
Defensive strategies :
Close your positions before important announcements
Reduce size of your positions
Set your stop-losses wider (without neglecting your risk management, which we'll look at in the next chapter).
Avoid entering position 30 minutes before and after
Offensive strategies:
Uses pending orders on either side of the current price
Trade post-announcement reaction after stabilization
Exploits trend reversals
Surf volatility with short positions
Fundamental analysis must become a reflex in your trading routine. Here's how to integrate it effectively:
Morning routine:
Consult Investing.com's economic calendar
Read the night's top stories
Identifies currencies that could be affected
Adapt your trading plan accordingly
Weekly analysis :
Studies major economic trends
Analyzes central bank decisions
Identify key themes for the week
Select the currency pairs you prefer
Real-time monitoring :
Set up alerts on important events
Monitors market reactions to announcements
Adjust your positions as the context evolves
Document your observations in your trading journal
Combination with technical analysis :
Do a fundamental forex analysis to identify the general direction
Use technical analysis for entry points
Confirm your technical signals with the fundamental context
Adjust your goals according to the identified catalysts
Fundamental analysis in trading is not an exact science, but it gives you a considerable advantage in understanding the forces driving the currency market. Mastering this approach takes time and practice, but it's indispensable to becoming a profitable and successful trader.
In the next chapter
In the next chapter of this free trading course, we will look at an essential pillar of successful trading: the risk management. You can continue directly or come back later: remember to bookmark this page so you don't lose any of your progress.
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