Forex fundamental analysis, in practice
Fundamental analysis in currencies is not about whether an economy is doing well. It is about whether it is doing better or worse than the market had already priced, and what the central bank will do about it. That is a narrower question than it sounds, and it is answerable in ten minutes a day once someone has done the reading.
A full run every morning, an hourly check on trading days.
Four things, and the rest is noise
The risk mood of the whole market comes first, because it moves all eight currencies at once and it can override everything else for days. Then the central bank: what it is steering on, where it is in its cycle, and where its policy rate sits against the others.
Then geopolitics, which is on no calendar and prices in hours. And last, and smallest, the price of that week, which is a check on the story rather than the story itself.
Everything else that gets called fundamental analysis is a version of one of those four. Knowing which one a headline belongs to is most of the skill.
The part beginners get wrong
Good news is not bullish. News that is better than expected is bullish, and only until the expectation catches up. A country can print a fine number and watch its currency fall all afternoon because the market wanted more.
The same goes for rates. A high policy rate does not make a currency strong. A rate that is going to be higher for longer than the market thinks does.
Which is why the first question about any release is not what it said, but what it was supposed to say.
The daily routine
This is the order we work in every morning before the London open, and the order the dashboard is laid out in, so you can read it the same way.
Before the open
Read what changed overnight
Asian data, anything a central banker said, and where the risk mood sits. If nothing moved, that is also an answer and it takes a minute.
The ranking
Put the eight in order
Each currency against the other seven, with the reason next to it. The order matters less than the distance between top and bottom.
The pairs
Look for two legs, not one
A pair is worth the attention when one side has a reason to be bought and the other a reason to be sold. One strong leg and one neutral one is half a trade.
The calendar
Know what is coming today
Not everything, only what the banks themselves say they are watching. A second tier number moves nothing and a first tier one moves everything.
Fundamentals pick the side, not the moment
We measure our own calls in public, with no entry and no stop, from one London opening to the next. Over a single day that sits close to a coin flip, and we publish it anyway, because that is what the macro on its own is worth over 24 hours.
What lifts it is selection: which of the 28 possible pairs are worth putting in front of you at all on a given morning. That part is the work, and the rules behind it stay ours. What does not stay ours is the outcome, which is published every day whether it went well or not.
Either way it is the same conclusion: use the fundamentals to decide which side you are allowed to take, and your own chart to decide when. The numbers, misses included, are on the track record, and the method behind them is on the methodology page.
Questions about fundamental analysis
What is fundamental analysis in forex?
Working out what a currency should do from the economy behind it: what the central bank is steering on, where its policy rate sits against the others, what the data of that week said against what was expected, and what the risk mood is doing to all of them at once. It answers which side to take, not when to take it.
Can you trade forex on fundamentals alone?
You can pick the side, but the timing will hurt you. Our own track record measures the setups with no entry and no stop, and over one day that sits near a coin flip even when the ranking is right. With selection, that is the reason most members use the macro for the direction and their own chart for the moment. The numbers, misses included
Is there a forex fundamental analysis PDF?
We do not sell one, and a PDF would be out of date by the time you read it. The method is written out in full on the methodology page and in the learn articles, free and without an email address, and the part that matters is the daily reading rather than the theory. The method in full
How long does it take each day?
Ten minutes if someone has already done the reading. The work is in tracking eight central banks, their calendars, the releases each of them says it watches and the risk mood, every morning, which is what MacroSetup does before the London open.