There are three types of market analysis:

- Technical Analysis.
- Fundamental Analysis.
- Sentiment Analysis.

 + Technical Analysis

Technical analysis is the framework in which traders study price movement.

The theory is that a person can look at historical price movements and determine the current trading conditions and potential price movement. Someone who uses technical analysis is called a technical analyst. Traders who use technical analysis are known as technical traders.

The main evidence for using technical analysis is that, theoretically, all current market information is reflected in the price.
Technical traders generally ascribe to the belief that “It’s all in the charts!”

This simply means that all known fundamental information is priced into the current market price. If price reflects all the information that is out there, then price action is all one would really need to make a trade.

Technical analysis looks at the rhythm, flow, and trends in price action.
Now, have you ever heard the old adage, “History tends to repeat itself“?
Well, that’s basically what technical analysis is all about!
If a certain price held as a major support or resistance level in the past, forex traders will keep an eye out for it and base their trades around that historical price level.
Technical analysts look for similar patterns that have formed in the past and will form trade ideas believing that price could possibly act the same way that it did before.

Technical analysis is NOT so much about prediction as it is about PROBABILITY. 
Technical analysis is the study of historical price action in order to identify patterns and determine probabilities of the future direction of price.

So how the heck does one “study historical price action“?
In the world of trading, when someone says “technical analysis”, the first thing that comes to mind is a chart.

Technical analysts use charts because they are the easiest way to visualize historical data!

You can look at past data to help you spot trends and patterns which could help you find some great trading opportunities.
What’s more is that with all the traders who rely on technical analysis out there, these price patterns and indicator signals tend to become self-fulfilling.

As more and more forex traders look for certain price levels and chart patterns, the more likely it that these patterns will manifest themselves in the markets. You should know though that technical analysis is VERY subjective.

The important thing is that you understand the concepts under technical analysis so you won’t get nosebleeds whenever somebody starts talking about Fibonacci, Bollinger Bands, or pivot points.

+ Fundamental Analysis

Fundamental analysis is the process of breaking down the impact of political, economic and social factors on the relative value of a currency. Through identifying the primary drivers of a currency’s intrinsic value, forex participants are then able to craft informed trading decisions.

Interest Rate

The interest rate is the amount a lender charges for the use of assets expressed as a percentage of the principal. The interest rate is typically noted on an annual basis known as the annual percentage rate (APR). The assets borrowed could include cash, consumer goods, or large assets such as a vehicle or building.

Employment

Whether we’re talking about Non-Farm Payrolls (NFP) in the US or Employment Change in Australia, economic announcements about jobs are an incredibly important measure of the growth or contraction of a particular region. Many of the central banks around the world have “healthy employment” or some derivative of that as one of their mandates. So if employment isn’t performing up to the level they would prefer, they could adjust their monetary policy to boost it, therefore influencing a variety of other factors as well.

Consumer Price Inflation (CPI)

Almost always lumped in with employment on the mandates of central banks around the world is “price stability.” While there are plenty of measures for inflation including Producer Price Index (PPI), Import/Export Prices, Food Price Index (FPI), Retail Price Index (RPI), Wholesale Price Index (WPI), among others, the CPI is usually the most respected due to its proximity to the consumer. Most developed economies prefer their CPI to be around 1%-3%.

Central Bank Meetings

One of the reasons we watch other economic announcements so diligently is to try and predict what the central banks will be doing with their future monetary policy. Therefore it only makes sense that we pay close attention to what they actually do when they make their decisions as well. Interest rate hikes or cuts, forward guidance on future policy, or even the introduction of unconventional measures are things we have come to expect from these meetings and their effects are both immediate and long-lasting.

Consumer and Business Sentiment

The multitude of consumer and business sentiment reports that are released across the globe on a monthly basis is staggering; however, they all play their part in shaping the market’s expectations for the future. Anecdotally, businesses are usually ahead of consumers in feeling apprehensive or optimistic for the future, and if both sentiment indicators are heading in the same direction, that is typically a stronger signal.

Retail Sales
One of the main drivers of developed economies is their propensity to consume. Retail Sales measure that consumption proclivity better than most other indicators and is widely followed because of it.

+ Sentiment Analysis

Sentiment analysis is used to gauge how other traders feel, whether it’s about the overall currency market or about a particular currency pair.

This is why sentiment analysis is important. Each trader has his or her own opinion of why the market is acting the way it does and whether to trade in the same direction of the market or against it.

Each trader’s thoughts and opinions, which are expressed through whatever position they take, helps form the overall sentiment of the market regardless of what information is out there.