The art of Forex fundamental analysis is both intricate and crucial to understanding the true valuation of any investment or trading vehicle, in this case currency pairs. Fundamental analysis is a method of analysing the financial markets with the purpose of price forecasting.

Forex fundamental analysis focuses on the overall state of the economy and researches various factors including interest rates, employment rate, GDP, international trade and manufacturing, as well as their relative impact on the value of the national currency they relate to. It is wise to view fundamental analysis as the overall umbrella which covers the crucial factors affecting the price fluctuations of a financial market. Understanding the factors, how they work together and how they effect the overall, is where the art of Forex fundamental analysis lies.

The core premise of Forex fundamental analysis, as well as other financial markets, is that the price of an asset may differ from its real value. For this reason, various markets may sometimes misprice an asset in the short run. Fundamentalists claim that despite being mispriced in the short-term, the assets will always return to the correct price eventually. The end goal of performing fundamental analysis is to discover the true value of an asset, to compare it to the current price, and to locate a trading opportunity.

This also nicely demonstrates the key difference between fundamental and technical analysis. While forex technical analysis barely pays attention to anything but the current price, fundamental analysis researches everything but the current price. Whilst it is true that fundamental analysis may not be the best tool for a short-term trader in day-to-day markets, it is the fundamental Forex factors and how they are analysed that answer what happens in the long-term.