The fundamental analysis is based on the following statement: currency prices on the Forex market are the reflection of the demand and supply which in their turn depend on fundamental economic factors. The aim of the fundamental analysis is to make middle-term and long-term predictions on the Forex market, and it becomes necessary to conduct research on internal deep reasons for changes in currency exchange rates. Only this type of analysis will make it possible to estimate the prospects of dynamics of the currency demand and supply. Besides, this approach will give the investor the opportunity not to take into consideration short-term fluctuations - market noise..
The main drawback of the fundamental analysis of Forex is its complexity; as there are from 20 to 50 fundamental indicators in each country, each of them has its cause and effect relations and many of these relations contradict each other or are reflexive, you will need a whole team of analysts to make decisions. For this reason, the fundamental analysis of Forex for decision making is used by 10-20% of traders according to different estimations, and most of them have skin-deep knowledge of the analysis.Moreover, as we said above, the fundamental analysis is almost useless for short-term trading, so the use of it imposes limitations on the amount of your means.
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