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 sense!
Just like in your Economics 101 class, it is supply and demand that determines the price.
Or in our case, the currency exchange rate.
Using supply and demand as an indicator of where prices could be headed is easy.
The hard part is analyzing all the factors that affect supply and demand.
You have to look at different factors to determine whose economy is rocking’ like a BLACKPINK song, and whose economy sucks.
Understand the reasons why and how certain events, like an increase in the unemployment rate, affect a country’s economy and monetary policy.
These things ultimately affect 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.