Fundamental analysis refers to the study of the core underlying elements that influence the economy of a particular entity. It is a method of study that attempts to predict price action and market trends by analyzing economic indicators, government policy and societal factors (to name just a few elements) within a business cycle framework.
Fundamental trading strategies consist of macro, strategic assessments of where a currency should be trading based on virtually any criteria but the price action itself. These criteria often include the economic condition of the country that the currency represents, monetary policy, and other “fundamental” elements.
Fundamental analysis alone can be difficult to use when dealing with currencies, commodities and other “margined” products. This is because fundamental analysis does not provide for specific entry and exit points, and therefore makes it difficult to control risk when using leverage. However, fundamental analysis can provide a guide as to likely overall direction or trends in a market.