Fundamentals

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Fundamentals
There are two ideas for analyzing financial markets: fundamental and technical analysis. Technical analysis studies price changes, while fundamental analysis studies the economic reasons behind price changes.
Fundamental analysis
Fundamental analysis studies the economic reasons behind changes in foreign exchange market prices. Investors applying this analysis method should be long-term investors. Fundamental analysis purely focuses on the economic, geopolitical, and social events that drive supply and demand. Supply and demand play important roles in changes in currency prices.
From a fundamental perspective, the main factors affecting exchange rates are:
interest rate
Capital and trade flows
Economic situation (unemployment, inflation, etc.)
interest rate
Any news about interest rates may affect exchange rate stability. When the interest rate of a currency rises, it becomes more attractive to investors seeking higher returns. If more investment enters a country, the value of its currency will rise relative to other countries.
Capital and trade transactions
The funds represented by capital flows from one country to another, which determines the net amount a country buys or sells currency. A positive cash flow is when the amount of investment flowing into a country exceeds the amount of investment flowing out. Negative flow is the opposite. Trade transactions measure the balance of trade (exports imports).
Trade is the buying and selling of goods and services between two countries. The net export of state-owned trade surplus is because they sell more goods to other countries than they sell in. For net importing countries, there is a trade deficit because they purchase more goods than they sell. Net exporting countries usually have higher requirements for their own currency, as more people purchase their goods and therefore require this currency to pay for these goods.