Fundamental analysis is the study of the economic, financial and political factors that affect the value of an asset. While technical analysis is based on charts and price behaviour, fundamental analysis aims to determine the true potential value of an asset. This means understanding why and how the economy, companies and government policies influence price movements, regardless of short-term market fluctuations.

The importance of fundamental analysis

Fundamental analysis is used to:

• Estimate the intrinsic value of an asset (stock, currency, cryptocurrency): this means determining the real value of an asset based on its current financial condition and economic conditions, not just based on the current market price.
• Understand current and future economic conditions: Analysts monitor macroeconomic data to predict the direction of the economy and possible effects on assets.
• Make decisions based on macroeconomic data and news: The release of important economic reports, central bank decisions or geopolitical events can provide trading opportunities.
• Evaluate risk and profit potential: By comparing fundamentals to current market valuations, a trader can identify undervalued or overvalued assets.

Economic calendar: what to watch

The economic calendar presents important events and reports that impact the markets. Understanding and correctly interpreting this calendar is an essential element of fundamental analysis.

Key indicators:

• GDP:Reflects the economic growth of a country. Higher growth is positive for the currency and national stocks. Low or negative growth signals recession and economic weakness.
• Inflation (CPI, PPI): Rising inflation usually leads to monetary tightening by central banks, which strengthens the currency. However, too high inflation can hurt consumption and growth. Stable inflation is that which maintains 2-3% per year. It is important to know that CPI- is consumer prices or simply put the prices of goods you pay to live. PPI- these are producer prices refer to businesses and how much it costs them to produce a product.
• Interest rates: central banks use interest rates as a tool to control inflation and stimulate or limit economic growth. A rise usually strengthens the currency but can depress stocks.
• Unemployment Rate (NFP): Indicates the state of the labor market. High employment suggests economic stability, while rising unemployment is a negative signal. NFP is new jobs in the US economy outside the agricultural sector, published every 1st Friday of the month.
• PMI (business activity index): Imeasures activity in the manufacturing and service sectors. Values above 50 indicate growth, below 50 - contraction.

How to read the calendar:

• Keep an eye on the time and date of publication: Markets often react instantly after news, especially if high volatility is expected.
• See Previous value (previous): how much the value was at the last publication. forecast: what analysts expect. and Actual value (actual): the new value at publication: comparing these three values shows whether the result was better or worse than expected. Usually markets react more to (forecast).
• A strong deviation from the forecast can cause large market movements: sometimes even a small change can be enough if the market is in tension.

Interpreting news according to the market

Forex:

• High inflation can cause central banks to raise interest rates, making the currency more attractive to investors.
• Political instability weakens the currency as investors turn to more stable economies.
• Central banks such as the Federal Reserve (Fed), the European Central Bank (ECB) and others are leading figures. Their comments and decisions often trigger instant reactions in currency markets.

Cryptocurrencies:

• Regulatory news (e.g., new laws, pronouncements from government agencies) can have a huge impact on cryptocurrency prices.
• Announcements about ETFs new technology solutions, approvals or hardforks often lead to a sharp rise or fall.
• Social media sentiment especially in crypto, plays a key role. The market reacts strongly to posts from influencers (e.g., Elon Musk).

Equities:

• Financial statements of companies (such as revenue and earnings per share) are a major source of information about actual performance.
• Management changes new strategies, mergers and acquisitions can significantly affect investor confidence.
• The economic environment as well as industry news, affects prices - e.g., a decline in the price of oil will affect energy companies differently than transportation companies.

Intrinsic value and valuation

Fundamental analysis looks for the intrinsic value of an asset. If the market price is lower than the intrinsic value, the asset is undervalued➜ buying potential. If it is above it➜ possible sell/short position.

Examples:

• Stocks: ratios such as P/E, PEG, P/B, earnings growth are used.
• Crypto: Analysis of network activity, project goals, developers.
• Currencies: Compare states of economies and central bank policies.

Synthesis: Fundamental + Technical Analysis

Fundamental analysis shows the direction and overall assessment, while technical analysis determines inputs and outputs. Example: you know the Fed is going to raise rates➜ USD is likely to strengthen ➜ You are looking for a technical signal to enter a long USD/JPY position.

Conclusion

Fundamental analysis is an indispensable tool for any trader or investor who wants to understand the deeper reasons behind market movements. It requires patience, analytical thinking and the ability to interpret data in a broader context. Without mastering this type of analysis, trading can remain superficial and too dependent on chance. Understanding economic processes not only improves a trader's performance, but makes them more resilient and prepared for any market conditions. Constant monitoring of macroeconomic data, combined with the ability to isolate key signals from the noise, builds a solid foundation for long-term trading success.