Fundamental analysis looks at the economic and business news that pushes prices up or down, such as a change in interest rates or a drop in oil supply. Traders use it to understand why a market is moving, though no single report can reliably tell them where price goes next.
What Is Fundamental Analysis?
Fundamental analysis is the study of what shapes a market’s value over time. For a share, that’s the company’s earnings and outlook. For a currency, it’s the economy and the interest rate its central bank sets. For oil, it’s how much is produced against how much is used.
Technical analysis looks for patterns in past price movement. Fundamental analysis asks why the price is where it is. Many traders use both, with fundamentals suggesting why a market might move and charts helping them decide where to act. Our Technical Analysis Guide covers the chart side. [link to: Technical Analysis Guide]
The Economic Data Traders Watch
Inflation
Inflation measures how fast prices are rising. Most traders follow the Consumer Price Index (CPI), published monthly in most large economies. The US Federal Reserve, the European Central Bank and the Bank of England all aim for inflation of around 2%. A reading well above target can make a rate rise more likely, and markets often react to that possibility long before any decision.
Employment Data
In the US, the monthly jobs report usually comes out on the first Friday of the month at 8:30 a.m. Eastern Time. It covers nonfarm payrolls (jobs added outside farming), the unemployment rate and average hourly earnings. Strong hiring and fast wage growth can point to inflation pressure, and the report often moves the US dollar.
Interest Rates
An interest rate is the price of borrowing money. Higher rates can make a currency more attractive to hold, because cash in it earns more. They can also weigh on shares by raising company borrowing costs and making bonds more competitive with stocks.
Central Bank Decisions
Central banks set their main rate at scheduled meetings. The Federal Reserve’s committee meets eight times a year. Traders read the decision alongside the statement and press conference, where any hint about future moves can shift a currency as much as the decision itself.
Company Fundamentals for Share Traders
Earnings and Revenue
Listed companies in most major markets report results every quarter. Traders compare revenue and earnings per share with what analysts expected. A result above forecasts is a beat, and one below is a miss.
Guidance
Many companies also give guidance, their outlook for the coming quarter or year, and it often matters more to the share price than the result itself. Say a retailer reports earnings of $2.10 a share against a forecast of $1.95, then lowers its full-year sales outlook. The shares can fall on the day, because traders are pricing in the weaker months ahead.
Supply and Demand in Commodities
Inventories
Stockpile figures show how much of a commodity is sitting in storage. Every Wednesday at 10:30 a.m. Eastern Time, the US Energy Information Administration publishes its weekly petroleum report. If analysts expect US crude stocks to rise by 1.5 million barrels and the report shows a fall of 4 million, oil prices can rise as traders read it as a sign of tighter supply.
Production Decisions
OPEC+, the group of oil producers led by Saudi Arabia and Russia, meets regularly to agree output levels. A decision to cut production can support prices, and a decision to pump more can weigh on them.
Weather and Disruption
A hurricane in the Gulf of Mexico can pause oil platforms and refineries, and a drought can cut a wheat or coffee harvest and lift its price.
How Different Markets Respond
| Market | Main fundamentals | How a typical surprise can play out |
| Stocks | Earnings, revenue, guidance, sector news | Shares can jump on a beat with raised guidance, or fall on a beat with weak guidance |
| Forex | Interest rates, inflation, jobs data, central bank comments | A currency often strengthens when data makes a rate rise more likely |
| Commodities | Inventories, production levels, weather, global demand | Oil can climb when stockpiles fall more than expected |
One report can move several markets. A hot US inflation reading can lift the dollar and weigh on share indices and gold, since each is sensitive to where US rates are heading.
How Traders Read an Economic Calendar
An economic calendar lists upcoming releases with their time and expected impact. [BRAND]’s platform includes one.
What the Calendar Columns Mean
Previous is last period’s result. Forecast is the average expectation of surveyed economists. Actual appears the moment the data is published.
Surprise Is What Moves Prices
Markets react most to the gap between forecast and actual. If inflation is expected at 3.0% and comes in at 3.0%, there may be little reaction, even though 3.0% is high. Traders call that priced in.
Why Price Can Move the Other Way
A strong headline doesn’t promise a rise. Other figures in the same report can point elsewhere, and traders may have positioned for an even bigger number. Many traders treat a release as information to weigh and never as a price prediction.
Worked Example: Reading a US Jobs Report
| Release | Previous | Forecast | Actual |
| Nonfarm payrolls | +210,000 (now revised to +160,000) | +180,000 | +95,000 |
| Unemployment rate | 4.1% | 4.1% | 4.3% |
| Average hourly earnings (monthly) | 0.3% | 0.3% | 0.5% |
Hiring came in well below forecast, last month was revised down by 50,000 jobs and unemployment rose. Traders could read that as a reason for the Federal Reserve to cut rates sooner, and the dollar weakens. EUR/USD, at 1.0850 before the release, climbs to 1.0915 within minutes. That’s 65 pips, worth $65 on a position of 10,000 euros, where each pip is worth $1.
By midday, traders have looked at wages. Earnings grew 0.5% in a month against a 0.3% forecast, which can point to inflation pressure and make a cut less likely. EUR/USD slips back to 1.0870, and the $65 gain on that position shrinks to $20. One report gave traders reasons to buy and sell the dollar in a single morning.
[Chart: EUR/USD 5-minute chart on the morning of a US jobs report, with a sharp jump to 1.0915 at 8:30 a.m. and a drift back to 1.0870 by midday]
On the chart, you’d see a tall candle at 8:30 a.m. as the payrolls figure appears, then a slower slide over the next few hours as traders weigh the wage data.
Common Mistakes When Using Fundamental Analysis
Reacting to the Headline Alone
The first number on screen is one part of a release. Revisions and the smaller figures can change how the market reads it within minutes.
Forgetting What Was Expected
A good number can disappoint if traders were hoping for a better one. Check the forecast before a release and judge the result against it.
Trading the First Spike
Spreads can widen around major releases and prices can jump between levels. A stop loss may then fill at a worse price than the one you set.
Reading One Report in Isolation
A single weak jobs report is one reading. Traders usually look at several months of data and at what central banks are saying before forming a view.
Matching the Wrong Time Frame
Fundamentals can take weeks or months to show up in price. They’re less useful for timing a trade that lasts a few minutes.
Key Takeaways
- Fundamental analysis studies the economic and business forces behind market prices.
- Forex traders follow interest rates, inflation, jobs data and central bank comments.
- Stock traders focus on earnings and the guidance companies give for later quarters.
- Commodity prices often respond to inventories and production decisions.
- Markets react to the gap between forecast and actual, and no report reliably predicts price.
Fundamental Analysis FAQs
Is fundamental analysis better than technical analysis?
Neither suits every trader. Fundamental analysis helps explain why a market might move over weeks or months, while technical analysis focuses on price patterns and timing. Many traders combine them, using fundamentals for direction and charts to choose entry and exit levels. Which one you lean on usually depends on how long you plan to hold a position.
Can you use fundamental analysis for day trading?
Yes, though day traders use it differently. Most track the economic calendar to know when big releases are due and how much volatility to expect. Some trade the reaction to a release, and others wait until spreads settle. Longer-term fundamentals, like a company’s long-term growth, matter less for trades that open and close on the same day.
What economic data moves forex the most?
Interest rate decisions usually move currencies the most, followed by inflation and employment data. In the US, many forex traders watch the CPI report and the monthly jobs report closely. Comments from central bank officials can also move a currency, especially when they hint at future rate changes.
Does fundamental analysis work for crypto?
It works differently. Cryptocurrencies don’t have earnings or central banks, and their prices are highly volatile. Traders look at network activity, regulation news, adoption by large companies and each coin’s supply schedule. Crypto prices can also react to US interest rate expectations, like other markets that are sensitive to the cost of money.
Why do stocks fall after good earnings?
A stock can fall after good earnings when the result was already expected or when the company’s guidance disappoints. Traders often look past the quarter just reported and focus on the outlook for the next one. If the share price had already risen ahead of results, some traders may also close positions once the news is out.
