What is Fundamental Analysis?

The Fundamental analysis is to determine the intrinsic value of an investment. It is based on the principle that an active market price tends to converge towards its ‘real value’ or ‘intrinsic value’.

In terms of Forex, Fundamental Analysis is to assess the price of a currency and anticipate future market trends, analysing the present economic conditions, government policies and the impact of the social environment on the business activity. Forex traders measure a country’s economy by considering the following macroeconomic data:

• Levels of Interest Rates
• Gross Domestic Product (GDP)
• Consumer Price Index (Inflation) and Consumer Spending
• Labour market indicators
• Retail sales and consumer confidence
• Balance of payments
• Monetary policy and government tax policy

For more information on these statistics and their impact on the markets, visit our page about Economic Indicators.

The advantages of Fundamental Analysis
It makes it possible to estimate the intrinsic value of an investment.
It helps to identify long-term investment opportunities.

The limitations of Fundamental Analysis
Beginner investors may be confused by the number and variety of macroeconomic indicators available.

Our Invest Alpha Patrimoine experts offer online training on Fundamental Analysis: