Forex 102Lesson 3

Fundamental Analysis Tools

Fundamentals move the Forex market. Fundamentals affect the supply of a currency. Fundamentals affect the demand for a currency. Fundamentals are where it all begins. If

you can get a handle on fundamental analysis, you are well on your way to making

profits in the Forex market.

When you start to think of everything that occurs around the world every day—from the

performance of the Japanese stock exchange to the number of barrels of oil Saudi Arabia

produces—you start to realize that there are literally thousands of fundamental

factors that could have an impact on the Forex market at any given time. That is quite an

overwhelming thought. Nobody could possibly keep track of every little thing that

happens. And believe us, they don’t. Some Forex investors may be focusing on commodities

prices, while others are focusing on the stock market in London. What is important to one

investor may not be important to another, and that is okay. To be successful in the Forex

market, you do not have to monitor everything that happens everywhere around the

world all the time. You only need to stay on top of the big stuff.

In this section, we outline a few fundamental factors we believe belong in the category of

“the big stuff.”

Many different fundamental factors have affected the Forex market in the past. And while

some of those same fundamental factors will most likely play a role in shaping the future

of the Forex market, many won’t. We focus on six fundamental factors that will play a

significant role in driving the Forex market in the future. We want to point out up front, however, that these six factors do not comprise a comprehensive list of every- thing that

will affect the Forex market in the future. We couldn’t possibly provide such a list. What

we have done is create a solid foundation on which you can build. Can you make profits

utilizing only the fundamental tools we illustrate in the coming pages? Yes. However, what

is likely to happen is you will begin your investing by utilizing a few of these fundamental

analysis tools, and you will naturally expand into more and more tools as you are

exposed to the Forex market. It is a natural process. Never stop learning. And if you invest

correctly, you never will. for additional fundamental analysis reports and commentary.

You will remember that we believe it is in your best interest to begin your investing with fundamental analysis but that you need to follow that up with technical analysis to have a complete investment strategy.

Keep that in mind as you learn about these fundamental analysis tools because we discuss technical analysis next. Each fundamental analysis tool is based on an

underlying fundamental factor (see the chart below) that can give you a glimpse into the future movements

of the U.S. dollar. Tracking the changes in these

fundamental tools will give you advance warning of

reversals and continuations in the movement of the U.S. dollar.

This table contains the six fundamental factors and the eight fundamental tools. Anybody can watch eight fundamental

tools, especially when five of the eight are updated only once

a month or less. Plus, these are all things you are aware of

anyway in your daily life.

You know when oil and gas prices are going up. You know

when commodity and grocery prices are going down. You’re aware of these things because they affect your

life. Well, now paying attention is going to pay off in two

big ways. Paying attention when things are going well in

the U.S. economy will help you make great profits in the

Forex market. Paying attention when things aren’t going

so well in the U.S. economy will help you offset the hits

your pocketbook may take with profits in the Forex market. Life is going to happen. Pay attention and take

advantage of it, regardless of what happens.