Economic Factors That Move the Forex Markets in the Short Term
Fundamental traders depend on fundamental analysis in trading forex. Technical traders depend on technical analysis in trading forex. But the importance of economic data cannot be underestimated in shaping trading strategies.
USD is the most important currency in the world. 90% of currency transactions are done in USD. In almost most of the currency trades, USD is either the base currency or the counter currency.
Choosing the right currency pair to trade is very important for you. USD is the most important currency and most probably you will be also trading USD most of the time. You should know that the release of certain economic data has significant and lasting impact on USD.
You should know as a forex trader that currency markets reaction to the release of different economic data with time also changes. Some years back, US GDP figures used to be important for US Dollar but dont have much impact in recent years.
EUR/USD is the most liquid pair in the forex markets. The release of Nonfarm Payrolls (NFP) on the first Friday of every month is the most volatile day for this pair and other pairs involving USD as a base or counter currency.
Some years back, the release of US housing sales number figure every month was not significant for the currency markets. But these figures have become very significant for US Dollar in the recent years especially after the US housing market crash. Forex markets used to give more weight to US Trade Balance figures in the past but they dont react to these figures much now.
Range traders like to trade when the currency pair they are trading tends to range. If you are a range trader who wants to scalp for a few pips every time you trade, you should avoid the day NFP data is released for trading. This is a highly volatile day for the markets.
However, if you are a breakout trader, the knowledge of which economic data is expected to be released can help you in determining the size and confidence of the trade.
In nutshell, understanding that some economic indicators move the forex markets most is very important for you as a trader. It is also important for you to know which economic data the market deems most important at any point in time.
You should also understand which economic data causes knee jerk reaction in the currency markets and which pieces of economic data will have lasting reaction in the currency markets. - 23199
USD is the most important currency in the world. 90% of currency transactions are done in USD. In almost most of the currency trades, USD is either the base currency or the counter currency.
Choosing the right currency pair to trade is very important for you. USD is the most important currency and most probably you will be also trading USD most of the time. You should know that the release of certain economic data has significant and lasting impact on USD.
You should know as a forex trader that currency markets reaction to the release of different economic data with time also changes. Some years back, US GDP figures used to be important for US Dollar but dont have much impact in recent years.
EUR/USD is the most liquid pair in the forex markets. The release of Nonfarm Payrolls (NFP) on the first Friday of every month is the most volatile day for this pair and other pairs involving USD as a base or counter currency.
Some years back, the release of US housing sales number figure every month was not significant for the currency markets. But these figures have become very significant for US Dollar in the recent years especially after the US housing market crash. Forex markets used to give more weight to US Trade Balance figures in the past but they dont react to these figures much now.
Range traders like to trade when the currency pair they are trading tends to range. If you are a range trader who wants to scalp for a few pips every time you trade, you should avoid the day NFP data is released for trading. This is a highly volatile day for the markets.
However, if you are a breakout trader, the knowledge of which economic data is expected to be released can help you in determining the size and confidence of the trade.
In nutshell, understanding that some economic indicators move the forex markets most is very important for you as a trader. It is also important for you to know which economic data the market deems most important at any point in time.
You should also understand which economic data causes knee jerk reaction in the currency markets and which pieces of economic data will have lasting reaction in the currency markets. - 23199
About the Author:
Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading; stocks and forex. Read about Trend Forex System. Best Forex Signal Service. Learn Forex Trading.
posted by X - Men @ 2:07 AM
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