Fundamental and technical analysis in forex markets

Fundamental and technical analysis in forex markets show several differences. Fundamental analysis is a technique of examining currencies so as to identify the intrinsic value of exchange rates for long term investment opportunities. As against, technical analysis is a method of evaluating and forecasting currencies on the basis of price movement and volume of transaction.

In fundamental analysis, timeframes used to analyse currencies are longer than those used in technical analysis. This is why the former is employed by long term-oriented traders and the latter by short term-oriented ones. The time difference between the two analysis is experienced in their goals, as the technical analysis is concerned with trading, while fundamental analysis with investment.

While fundamental analysis aims at ascertaining the true intrinsic value of a currency pair, technical analysis is used to identify the right time to enter or exit the market. In fundamental analysis, decision making is based on the information available and statistics, while in technical analysis on market trends and currency prices.

In fundamental analysis, both past and present data are used, whereas, in technical analysis, only past data is. Fundamental analysis rely on macroeconomic reports, whereas technical analysis on charts showing price movements. In fundamental analysis the intrinsic value of a currency pair can be ascertained by analysing trade balances, GDPs, inflation rates, interest rates etc. Technical analyses rely on the chart patterns (such as continuation pattern and reverse patterns), price action, technical indicators, resistances and supports, to analyse the future price trends.

In fundamental analysis, the future price of a currency pair is decided upon the past and present macro performance of countries, while in technical analysis on the basis of charts and indicators.