What is #Fundamental #Analysis? Whereas #technical analysis involves poring over #charts to identify #patterns or #trends, fundamental analysis involves poring over #economic data reports and #news headlines. (And even random #tweets from a certain world leader before he was banned.) Fundamental analysis is a way of looking at the #forex market by analyzing economic, #social, and #political forces that may affect currency prices. If you think about it, this makes a whole lot of sense! Just like in your Economics 101 class, it is #supply and #demand that determines price, or in our case, the currency exchange rate. Using supply and demand as an #indicator of where price could be headed is easy. The hard part is #analyzing all of the factors that affect supply and demand. In other words, you have to look at different factors to determine whose economy is rockin’ like a #BLACKPINK song, and whose economy sucks. You have to understand the reasons why and how certain events like an increase in the #unemployment rate affect a country’s economy and #monetary #policy which ultimately, affects the level of demand for its #currency. The idea behind this type of analysis is that if a country’s current or future economic outlook is good, its currency should strengthen. The better shape a country’s economy is, the more foreign #businesses and investors will invest in that country. This results in the need to purchase that country’s currency to obtain those assets. In a #nutshell, this is what fundamental analysis is: Forex Fundamental Analysis For example, let’s say that the U.S. #dollar has been gaining strength because the U.S. economy is #improving. As the economy gets better, raising #interest #rates may be needed to control growth and inflation. Higher interest rates make dollar-denominated financial assets more #attractive. In order to get their hands on these lovely assets, traders and investors have to buy some U.S. dollars first. This increases demand for the currency. As a result, the value of the U.S. dollar will likely increase against other currencies with lesser demand.