Forex analysis falls into three main categories. Each one looks at the market from a different angle, and most traders use a mix of all three to build a clearer view of price direction.

Fundamental analysis focuses on the economic forces that drive currency values. Traders watch interest rate decisions, inflation data, GDP reports and employment figures. They also pay attention to central bank statements because they reveal how policymakers see the economy. When fundamentals shift, they often create long-lasting trends, so this type of analysis helps traders understand the bigger picture behind a move.

Technical analysis studies price charts, patterns and indicators. Instead of trying to interpret economic events, traders analyse historical market behaviour. Tools like moving averages, RSI, MACD, and trend lines help them spot trends, reversals and potential entry points. Technical analysis works well for short-term and medium-term strategies because it focuses on what the price is doing right now, not what it should do based on economic theory.

Sentiment analysis looks at how traders as a whole feel about the market. It measures whether the crowd is leaning toward risk or safety. Positioning reports, market news tone, and volatility levels can all reveal shifts in sentiment. This type of analysis helps traders understand whether the majority is buying, selling or waiting.

Combining all three usually leads to better decisions. Fundamentals explain the “why,” technicals show the “when,” and sentiment reveals the overall mood. This balanced approach helps traders stay prepared for both trends and sudden market surprises.