Fundamental Analysis

Price prediction by fundamental analysis

When it comes to predicting foreign exchange and other rates, the science of fundamental analysis involves taking into account a variety of relevant economic and political factors for one currency relative to the other currency.

Predictions of a fundamental analysis

If you want to do a good fundamental analysis, you will check as many of these points as possible regularly for each currency and then put the two in proportion to make a forecast. In general, such forecasts are not specific objective figures for the exchange rate, but a general trend-setting outlook for the currency pair.

Outlook of a fundamental analysis

For example, their outlook can be positive, negative, or neutral after analysis. This would mean that the analyst expects the exchange rate for the currency pair to rise, fall, or remain roughly constant. These are, of course, important findings in order to be able to assess profit or loss.

Market balance

Moreover, when some new, fundamental information suddenly enters the foreign exchange market, it can lead to significant market movements and volatility as traders respond to the new findings. At such moments, the basic assumption of a market equilibrium that all information is priced in the underlying’s price no longer applies. This state lasts until the market has processed the new input.

If you have a trading system based on purely technical indicators, this is really important because a number of fundamental factors can influence market movements and often do so, which can lead to unexpected results in trading systems based on technical analysis.

Therefore, it is really worth annum for investors to know what impact such fundamental developments could have in a fundamental analysis, so that a quick assessment of the likely future direction can be made.


Important fundamentals are regularly published by relevant authorities or agencies (e.g. Ifo Institute). These statistics are eagerly awaited by the stock exchange and its participants.

The value of the numbers to be published is distinguished into different groups. For example, usa-based labour market figures have a higher weighting on global equity and foreign exchange markets, in particular the EURO/USD exchange rate, than from Brazil.

Basic data elements that have the greatest impact on the currency rate and its relationship to other currencies, and their consequences are listed here.

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Fundamental analysis factors

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