Economic Factors That Move the Forex Markets in the Short Term
There are two trading strategies. One strategy depends on fundamental analysis in trading forex. The second strategy depends on technical analysis in trading forex. Whether you use fundamental analysis or a technical analysis as a trading strategy, you should understand the importance of economic data in shaping trading strategies.
US Dollar is the most important currency in the global economy. More than 90% of currency trades are done in US Dollar. In most of the currency trades, US Dollar 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.
With time, you will learn that forex markets reaction to the release of different economic data also changes with time. US GDP figures used to be important for USD but they dont impact much.
EUR/USD is the most liquid pair in the forex market and is heavily traded. The release of Nonfarm Payrolls (NFP) data on the first Friday of each month has become important in recent years. These figures makes EUR/USD and other pairs involving US Dollar highly volatile for some time until the markets digest the importance of these figures.
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.
If you are a range trader who likes to scalp for a few pips every trade, you should avoid trading on the day NFP data is released. Release of NFP figures makes the markets jittery and highly volatile.
However, if you use breakout trading as your trading strategy, understanding which economic data is expected to be released on a particular day can help you in your trading. You should plan your trading strategy in accordance with the significance of the economic data to be released.
In short, knowing what economic indicators move the forex markets most is very important for you as a trader. It is important for you to understand which data the market deems 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. - 23196
US Dollar is the most important currency in the global economy. More than 90% of currency trades are done in US Dollar. In most of the currency trades, US Dollar 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.
With time, you will learn that forex markets reaction to the release of different economic data also changes with time. US GDP figures used to be important for USD but they dont impact much.
EUR/USD is the most liquid pair in the forex market and is heavily traded. The release of Nonfarm Payrolls (NFP) data on the first Friday of each month has become important in recent years. These figures makes EUR/USD and other pairs involving US Dollar highly volatile for some time until the markets digest the importance of these figures.
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.
If you are a range trader who likes to scalp for a few pips every trade, you should avoid trading on the day NFP data is released. Release of NFP figures makes the markets jittery and highly volatile.
However, if you use breakout trading as your trading strategy, understanding which economic data is expected to be released on a particular day can help you in your trading. You should plan your trading strategy in accordance with the significance of the economic data to be released.
In short, knowing what economic indicators move the forex markets most is very important for you as a trader. It is important for you to understand which data the market deems 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. - 23196
About the Author:
Mr. Ahmad Hassam is a Harvard University Graduate. 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 @ 2:47 AM
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