How to Combine Technical and Fundamental Analysis for Maximum Edge

22 September 2025

Two market analysis techniques compete when it comes to Forex trading: technical analysis and fundamental analysis. Both of them have their pros and cons. However, the secret to profitable forex trading lies in employing a combined analysis strategy where both fundamentals and technicals complement each other to provide high probability trading setups. Technical analysis involves reading the market behavior on the price chart of an asset, where price, volume, and indicators are analyzed to time trades with high precision. Fundamental analysis, on the other hand, explains and anticipates price movements by analyzing macroeconomic data like GDP, CPI, NFP, and more to gain an edge.
When you merge them, they form one coherent trading method where fundamentals determine the direction while technicals define entries and exits.
In this guide, we will present practical ways to use both fundamental and technical analysis when trading currencies on Forex without overcomplicating things. From this guide, you can expect better accuracy in your trading decisions, better timing, and more confidence in your FX trading.

The two pillars of Forex analysis - Technical versus fundamental analysis

Forex trading is impossible without knowing the fundamentals. And at its core, FX trading involves using technical and fundamental analysis. Both of them have their place in trading, and when combined, they provide unparalleled insights into price whereabouts.

Technical analysis - Your compass in FX trading

Technical analysis in Forex and all other markets in general simply means to analyze price charts of an asset. It studies price action to get insights on when to act and initialize trading positions.

What it uses

Technical traders use trend analysis of higher highs and lower lows, support and resistance, supply and demand zones, candlestick patterns, moving averages, and other indicators, Fibonacci retracements, and many more. These tools enable traders to determine what price was doing, where it is now, and what it can do most likely in the near future. For example, the most popular and effective methods of technical analysis are support and resistance levels, which help traders spot major points of pullbacks and reversals in the market. Technical indicators, on the other hand, include popular tools like RSI, MACD, Fibonacci, and others to gauge market sentiment and get timely signals for entries and exits.

Why traders love technical analysis

Technical analysis is objective and repeatable. However, here lies a trap of too many indicators and the subjectivity of determining support and resistance zones. Despite this, many tools are objective and provide data that everyone can use for analysis. For example, the ATR or Average True Range indicator is objectively calculated from price data, and it can not be used for subjective speculation. So, there are objective tools, and some tools are also subjective. But in the end, most of the technical indicators are objective, and traders can develop rules-based entries and exit trading strategies, which makes technical analysis widely popular among retail traders.

Timing advantage

Technical analysis employs various methods like breakouts, retests, and divergences, which let traders enter after confirmation, place tight stop-loss orders, and manage risks with clear levels. It enables traders to determine how much they want to risk and how many pips to target, enabling them to operate in a relatively controlled environment. Timing in Forex trading is essential, and technical analysis is the best way to determine the best entry and exit points in the market. However, when you trade Forex using both types of analysis, the chances of success are even higher.

Fundamental analysis - Markets’ driving force

Another dominant method of analysis is fundamental analysis, which involves analyzing macroeconomic factors influencing the price to determine how the price would react to important news. Many factors affect fundamental analysis, and they can cause prices to move violently or to change the trend direction drastically.

Key drivers

The main fundamental drivers of forex markets are macroeconomic factors such as GDP, PMIs, inflation, employment numbers, interest rates, and more. The most important factors here are inflation and employment rates. Central banks set interest rates, which have a profound effect on price direction and market volatility.

Central banks

Central banks are integral to forex markets as they directly affect currencies and, as a result, forex pairs. Expectations around iterate rate decisions, like rate hikes or cuts, often determine medium to long-term direction in the FX market.

Why fundamentals matter

Macroeconomic trends directly affect the economy and currency. For example, when inflation rises, the currency loses its value, and interest rates are effective methods for controlling inflation. As a result, interest rate decisions can put forex markets into a frenzy and cause greater volatility.

Why you should trade Forex using both types of analysis

Relying only on charts can miss macro changes and rate cuts, or any other news can come as a surprise, throwing even the most profitable strategy into losses. Conversely, only using news as trading signals can lead to early entries and exits. The edge is attained when the combined analysis trading method is applied. This is because fundamental and technical analysis are in synergy; fundamentals help traders determine the main price trend, while technicals help them enter at the best prices.

Technicals are used to confirm the direction after big events like FOMC, ECB, CPI, etc. A structure shift or key level break is used as a confirmation for a news event to pick the correct direction. For example, USD rallies after the FOMC meeting, and instead of chasing the initial price spike, you should wait for the price to pull back to broker resistance (now support), and when it prints bullish rejection, only then enter the trade. That's combining analysis in FX trading with macro trends plus technical triggers to get higher quality entries.

Building a combined analysis strategy

Combining both fundamental and technical analysis is essential to building a well-rounded strategy that has a higher chance of success in the markets.

Step-by-step process

To develop viable strategies using both fundamental and technical analysis, traders need to follow the following algorithm:

Macro scan - Start by scanning the economic calendar to see which major news is releasing and what central banks might signal.
Bias map - Analyze which currencies are stronger and which ones are weaker using the currency strength meters.
Pair selection - Focusing on 2-3 pairs is key. Selecting many different pairs will make it difficult to analyze them with high accuracy. Forex major pairs are usually the best ones as they offer both liquidity and fair volatility. They provide many trading opportunities while offering low-cost trading.
Chart analysis - Define key support and resistance levels and use multi-timeframe analysis to take high probability trading setups.
Risk management - Position sizing is key, and traders must have a very well-defined stop-loss and take-profit rule before entering markets.
Journaling - This simply means to write down your trading results and all necessary stats like opening price, closing price, date, time, and so on. Add any information you find crucial for your trading strategy.

By following these simple steps, you will be able to use both fundamental and technical analysis when trading currencies on Forex, increasing your chances of winning several times. In the end, the main direction should be determined by fundamental analysis, while technicals give exact points for stop-loss and take-profit orders placement. To monitor fundamental news, use the economic calendar, where all the important macroeconomic news events are released.

Practical ways to properly combine FX analysis

One useful trading methodology where traders can employ a combined analysis strategy is to use a top-down workflow. Here is how it goes: global macro analysis → currency selection and bias → technical levels → lower time frame trigger on H4 or H1. Another way to trade with combined analysis is to use event-driven setups. After a major macroeconomic event occurs, wait for the price to retest key zones and only then enter the trade to have a confirmation.

However, it is also important to avoid analysis paralysis. Try to make it a simple process and create a checklist before starting to trade.

Popular combined analysis trading methods

Combining analysis in FX trading is profitable, and there are several strategies to explore. Popular strategies include trend-following with news confirmation, carry trade with technical refinement, breakout around major news events, and so on.

Trend-following + news confirmation

The trend following strategy is a popular technical analysis trading strategy that tries to catch the big moves. It capitalizes on trends, but produces many false signals. Traders succeed because of positive risk-reward ratios, meaning they risk small amounts, aiming to catch big moves. One method is to trade with the dominant long-term trend and add to the position when news also indicates the same direction. The advantage here is to follow big moves by having clear rules. However, around major news, whipsaws are a frequent occurrence, and traders should be patient.

Carry trade with technical confirmations

Carry trade is a popular strategy where traders take positions in higher-yield currencies and short lower-yield currencies. Use technical analysis for entries by waiting for retests and breakouts on technical levels. The main disadvantage of carry trade methods lies in the rate differentials, and if one country suddenly changes interest rates, the profits can easily be wiped out.

Breakout around major news events

Breakout strategies are most popular in Forex markets, especially among seasoned professionals. Traders wait for the price to break important psychological, support, resistance, supply, and demand zones to enter the market and catch large price swings. However, false breakouts are frequent because of market manipulations, and this is where fundamental analysis can help. Traders can map those levels before important news and wait for the price to retest those levels, and only then enter in the dominant direction where news events are also pointing.

Common mistakes when combining analysis in FX trading

Beginners often make mistakes when trying to properly combine FX analysis methods into one working strategy. Sometimes they might be overweight in one side of trading analysis, which usually leads to bad trading performance. Traders should try to make balanced trading decisions, giving both fundamental and technical analysis the same weight in decision-making. Another commonly occurring mistake is also among beginners, and it happens when traders pre-set entries before the major economic news event takes place. This is a mistake as markets become extremely volatile during major news releases, triggering stops in the process. Traders should wait for the price to confirm the main direction after an important news update before entering the trade.

Another common mistake is to enter when the two analyses are giving conflicting signals. If macro is bearish while chart analysis indicates bullish momentum, traders should avoid trading until both analysis types agree on the trade direction.

Indicator overload is another mistake beginners make very often. They try to use too many indicators and make it nearly impossible to read the price action. The solution is to pick a structure and only add a few indicators. No more than 5. Pick a core set of indicators and methods to reduce noise, but also make your analysis simple. This way, you will increase profit chances without experiencing analysis paralysis.

Conclusion

If you want to trade profitably, trade forex using both types of analysis. Let fundamentals set the bias to determine the medium and long-term trends. Use technicals after this to define entries, exits, and risks. Keep our workflow simple without overcrowded charts and test your rules on a few pairs rather than trading a multitude of pairs. Track win rate and risk-reward ratio to stay competitive. By combining both analysis types, you can enhance not only your win rate, but also trade in the direction of main trends to increase profit potential. By avoiding common mistakes like entering conflicting signals, indicator overload, and overweighting one side, even beginners can develop viable trading methods to capitalize on major movements in FX markets.