Currency market as any other market is analyzed by looking at charts and technical indicators as well as looking at the overall economic picture. The first way called technical analysis and the second one is fundamental analysis.
Fundamental traders will show you how economic news cause the high volatility of the price. On the other hand technical traders would show you the indicator patterns that give the buy or sell trading signals. And both of them will be right.
Some people looking at the volatility caused by the economic news releases may think that it's the most reliable approach to trade in Forex. However the technical analysis patterns are also very reliable if you know how to recognize them. Technical analysis is very valuable when there is no economic news around to make a huge impact on the market.
At the same time if you use only technical analysis in your trading then a big news event can upset your technical indicators. Since some economic news releases can significantly move the price of a pair against what the indicators tell you. That can cause your trades to get stopped out.
Economic news releases are responsible for short term ups and downs in the market. They also can set up the direction of currency pair movement. Therefore by following the fundamental factors in economy and politics can help you to predict the movement of the price. But technical analysis will help you to recognize the patterns that you can use for taking higher probability trades.
