Technical analysis and fundamental analysis are two primary approaches used by forex traders to evaluate the currency market. Technical analysis focuses on price charts and statistical indicators to identify trends and market patterns. Traders using technical analysis rely on tools like moving averages, Fibonacci retracements and candlestick patterns to forecast future price movements. This method assumes that all relevant information is already reflected in the price and that history tends to repeat itself.
Fundamental analysis, on the other hand, examines the economic, political and social factors that influence a currency’s value. Analysts study macroeconomic indicators such as interest rates, GDP growth, employment figures and inflation, as well as central bank policies and geopolitical events. The goal is to determine whether a currency is undervalued or overvalued relative to its economic fundamentals.
Many successful traders combine both approaches to gain a more comprehensive view of the market. While fundamental analysis provides context for long‑term trends and potential catalysts, technical analysis helps traders time their entries and exits more effectively.