Fundamental Analysis is a very important tool that professional traders use in Forex trading. It is the careful study of the economic, political, fiscal and social factors that affect the value of the currency of a country.
However, the general economic outlook of the country related to the currency also determines the strength or weakness of that currency. If the economic outlook of a country is good, the currency of that particular country will become strong.
In Fundamental Analysis, traders check for economic data through various economic indicators for a currency pair before they make trade decision whether to buy or sell the currency. Traders also use this analysis to forecast future exchange rates of currency pairs.
Furthermore, traders make use of Interest rate data, Employment reports, Inflation reports, Consumer Price Index reports and so many other economic indicators in the analysis of a currency pair. These help traders in determining whether the currency rate will rise or fall.
These reports are available online and can be viewed on the economic calendar (https://www.fxstreet.com/economic-calendar).