Fundamental Analysis

Fundamental analysis focuses on the economic forces of supply and demand that causes a currency pair to move. It is a technique used by traders who rely on economic market news to determine where the price of a currency pair could go next. The main difference between fundamental analysis and technical analysis is that fundamental analysis studies the cause of market movement, while technical analysis studies the effect.

Studying the economy of a country and watching for fundamental events may seem important in relation to determining the overall bias of a pair. However, the problem is that the charts and fundamentals are often in disagreement with each other. You might see positive news on USD data, yet USD/CAD has dropped, completely contradicting the news. The reason for this is market manipulation. Market makers will show false bias on a certain currency to lead traders on the opposite side of the trade and cause them to make mistakes and lose money.

As a technical trader, he/she will see that technical analysis trumps fundamental news events. By following the price action trends, the trader will be comfortable in circumstances where price movement disagrees with the fundamental news.

By studying technical analysis, fundamentals are already shown in the chart. Therefore the study of fundamentals is not needed. Looking for market patterns and key levels is all that you will need, as they are a visual form of fundamentals.