Fundamental Analysis is one of the most covered areas when it comes to forex trading. Just turn on any news channel. Now this does not mean that this is all that matters when considering what is going on in the currency markets.
The heart, or meat and potatoes of the subject is economic indicators. There are key economic releases that occur every month. Not only in one country, but rather, all around the world. So what does that mean? Well it is like this. The British Pound will most likely have activity on a day when the employment number for the month is released in England. This would also have a ripple affect on other currencies tied to the Pound.
Now, there will also be activity in the British Pound when the U.S. releases its employment report. Why? Because the British Pound and the U.S. Dollar are pegged to one another. The two countries trade with each other. And in turn, the exchange of goods, services, and currency occur. Therefore, the employment of one country will impact the national currency first. And secondly, the currencies of the countries that trade with the primary country.
There is a similar relationship in how all economic, governmental, and business releases affect the markets. It may seem overwhelming at first, but it is not. Try to absorb a little at a time. Then it will all become clear.
Now it is important that you do not think that just because news is one way that the market will follow. The market is going to do what the market is going to do. It is just that the odds are in your favor of the market moving in a certain way. Always be alert to what really is going on. And that is why you need to have a trading plan also.
What are the key economic indicators for each major currency.
What does good / bad news for a country mean for a currency?
How does Gold, Stocks, and Interest Rates affect Fundamental Analysis?