What is fundamental analysis, and how should we use it? To put it simply, fundamental analysis is the study of economic fundamentals, very simple, right?
Foreign Exchange Fundamental Analysis-What is Fundamental Analysis-Yuhui International

Of course, the facts are far from simple. For fundamental analysis, we need to know more.

When we hear someone talk about fundamentals, they are actually talking about the economic fundamentals of a country or economy that owns a currency.

Economic fundamentals involve a lot of information-whether it is economic, political, or environmental reports, data, statements, or events, are related to economic fundamentals. Even the downgrade of a country’s sovereign rating can be included in the fundamental analysis. For example, the downgrade of the sovereign credit rating of euro-zone countries usually leads to a decline in the euro/dollar.

Fundamental analysis is to conduct a comprehensive study and analysis of the above factors and predict the future price movement of the currency pair.

From an economic and financial perspective, fundamental analysis focuses on the macroeconomic components, such as the impact of economic growth, inflation, and unemployment on our ongoing transactions.
Fundamental data and its many forms

It is particularly important to point out that the fundamental analysis gives us an indication of the “should” or possible reaction of prices to an economic indicator.

We can analyze fundamental data from different economic indicators.

Fundamental data can be found in existing home sales data released by the Fed, and also in the possibility that the European Central Bank may change its monetary policy.

The release of fundamental data to the outside world will usually change the market’s view of the economic situation, and investors and speculators will respond accordingly to the data.

Prior to the announcement of the interest rate resolution, investors’ expectations of raising interest rates could begin to digest hours or even days ago.

In fact, after the release of some major economic data, the fluctuation of the relevant currency pair usually exceeds 100 points in a short period of time, which provides a good profit opportunity for those brave traders.

This is why some traders usually maintain a high degree of attention before some major macroeconomic data is released, and so should you.

Generally speaking, in fundamental analysis, economic data analysis accounts for a considerable part of fundamental analysis. Just as a fire alarm sounds when it detects smoke or heat, economic indicators also provide a basis for us to gain insight into the state of the economy.

Although the value of the indicator finally released is very important, the market’s forecast value of the relevant data before the data is also important.

After understanding the release of the final data, the market’s response after comparing with the expected data is the most important part of the fundamental analysis. These factors must be taken into consideration before we intend to trade.

Do you feel a bit deep? Don’t worry, it’s actually much simpler than it sounds.

Fundamental analysis provides a very valuable tool for us to predict the future economic situation of the economy, but it is far from enough to predict the future trend of the currency pair.

Fundamental analysis also has many shortcomings, because the fundamental information is published in the form of a report, or the announcement of changes in monetary policy. The guidance on the exchange rate is more vague than the actual technical indicators.
The analysis of economic data usually looks like this:
“ECB rate cuts may cause the euro to fall.”
“A certain economic indicator remains in that region, and the dollar should go lower.”
“Consumer confidence has fallen by 2% since the last report.”