What is Forex Fundamental Analysis ?
Fundamental Analysis focuses on key underlying economic and political factors to determine the direction of a currency's value. Fundamentalists predict price movements by interpreting a wide variety of economic information, including news, government-issued indicators and reports, and even rumors. There are a number of fundamental indicators traders may follow that reflect how an economy is changing and gleam insight into Forex market prices to come
How can economic and political news affect currency price movement ? Lets understand this. Actually, news doesnt affect price movement. Only demand and supply affect every price movement. So what is the corelation between news and demand-supply ? As we have known so far, traders usually react against news. (as human nature always make speculative decision for reaction to every thing that happens repeatedly and / or predictable).
In case an economic /politic news is good for a country, its currency value will increase, and the other side, if related news is bad for a country's economy, its currency value will decrease.
News traders usually pay particular attention to economic reports. Why ? Because they are vital barometers that tell us what the economy is up to and more importantly, in what direction it is likely to go in the future. These indicators describe the economic backdrop that will affect corporate earnings, interest rates, and inflation.