Analysis of the spot market consists of both technical and fundamental analysis. Technical analysis is the study of charts, trend lines, support, resistance levels and patterns. Technical traders analyze technical data in order to predict the direction a currency will move. A key assumption of technical analysis is that prices, at any given point in time, reflect all known factors affecting supply and demand for a particular market. Consequently, technical analysis focuses, not on evaluating those factors directly, but on an analysis of market prices themselves. Technical analysts believe that detailed analysis of price fluctuations (daily, weekly, monthly) is the most effective means of predicting the future course of price movement. Technical strategies generally utilize mathematical measurements and calculations to monitor market fluctuations. Trading decisions are based on signals generated by charts, manual calculations, computers or their combinations. Fundamental analysis includes the analysis and interpretation of global economic and political events as well as other variables that may cause a currency to fluctuate. Fundamental Analysis is based on the study of factors external to the trading markets which affect the supply and demand of a particular market. Fundamental analysis focuses on the economic forces which cause prices to move. Consequently, fundamentals indicate one currency is actually worth against another currency, what is termed “intrinsic value”. If the intrinsic value is under the current market price, then the currency is overpriced and should be sold. If market price is below the intrinsic value, then the security is undervalued and should be purchased. Fundamental analysis seeks to understand the cause of market movement, while technical analysis seeks to understand and predict the effect. Traders often classify themselves as either a fundamental or technical analyst when in actuality there is extensive overlap. Fundamentalists at a minimum have a working knowledge of chart analysis. At the same time, most technicians have at least an awareness of the fundamentals. An intriguing problem is that technical and fundamental analysis are often in conflict. Usually at the inception of important market movements, fundamental analysis does not explain or support the markets movement. It is at these critical points that the two approaches differ most.