Fundamental analysis within the foreign exchange market, comes down to the main statement which says that the currency of the country with terms better, is stronger against the currency of a country with a lower performance. The result is that the country's currency that has an uptrend will strengthen against the country's currency with the downtrend.
This occurs due to the fact that the country is better viewed by investors who are attracted to each capital, making its currency gain in value as it typically creates a higher demand. Foreign investors wishing to invest within a country need the national currency to replace their own currency, thereby stimulating the growth of the currency in the foreign exchange market and extremely further increase the demand.
Forex traders that wish to predict future currency trends, mainly assess the state of the economy using macro-economic indicators. These indicators show the picture of the economy in different contexts depending on which index you choose to analyze. The most commonly used indicators are: interest rates, gross domestic product (GDP), inflation, unemployment and industrial production.
The most common strategies for fundamental analysis are:
a) Long-term – based on a detailed examination of data economies making up a given currency pair. Investors take a long position in the currency of the country that is better developing, but short on the currency of the country where the economic situation is weakened (eg crisis).
b) Short-term – is to open a position at the time of publication of macroeconomic data. If the data turn out better than expected to open long positions and if they are worse – open short positions. If the forecast is confirmed, we do not make any decisions.
The approach to fundamental analysis depends primarily on each trader and his personal approach and preferred strategy. Every investor is different and everyone should choose what's best for him. Not everyone wants to hold open positions for several months, just as not everyone wants to open positions within 1-2 seconds after the publication of macroeconomic data.
You may very well combine the two methods of analysis or perhaps develop your own way to open positions in the forex market. In addition, you can use the technical analysis of the data analysis of currency pairs and the same economies. There are no rigid strategies, you should follow, but better figure out what suits your way of trading best.