What is Fundamental Analysis?

Judging what a currency or asset should be worth from economic forces — interest rates, inflation, growth and central-bank policy.

Fundamental analysis evaluates what an instrument should be worth by studying the forces behind it. In forex that means interest rates above all — money flows toward currencies whose central banks pay more — along with inflation, employment, growth, trade balances and political stability. When the Federal Reserve raises rates while another central bank cuts, that widening gap tends to strengthen the dollar against that currency over weeks and months, whatever any single chart pattern says.

For most retail traders the practical use of fundamentals is context rather than precision timing. Knowing which currencies are backed by hawkish central banks and which are weakening tells you which direction has the wind behind it; technical analysis then times the entry. The two approaches answer different questions — fundamentals suggest why and which way, technicals suggest where and when — and traders who dismiss either one usually end up surprised by the half of the market they ignored.