This is a common phrase used in the forex market because often times it seems that when a news report is released, the movement doesn’t match what the report would lead you to believe. For example, let’s say that the U.S. unemployment rate is expected to increase 16/04/ · Because news can bring increased volatility in the forex market (and more trading opportunities), it is important that we trade currencies that are deeply liquid. Currencies with deep liquidity have the tightest spreads which are what allows you to keep your transaction costs low 27/03/ · The news represents great profit opportunities for Forex traders. By news, we mean various economic data releases. Every major economy regularly publishes statistics like GDP, inflation, unemployment rate, etc. If you trade Forex during the times of these releases, you have a chance to make a lot of blogger.comted Reading Time: 9 mins
High Impact and Most Important Forex News - List | FXSSI - Forex Sentiment Board
ForexTips. News trading has been becoming increasingly popular among Forex traders because it offers opportunities to make large profits within a relatively short period of time. However, what is the significant of news forecast in forex trading, just like not all fingers are not the same, not all macroeconomic news events have a similar impact on the market. For example, the German Flash Manufacturing PMI will always have more impact on the Euro compared to the French Flash Manufacturing PMI.
If you have opened an economic calendar, you can already see which news higher impact on the market and others that you can easily ignore. So, out of the hundreds of news releases, how do you know which news events you should keep an eye on? The good news is, just like the Pareto principleonly a handful of news releases are responsible what is the significant of news forecast in forex trading the bulk of the price movement for most currency pairs.
Some of these news events are common for almost all currencies and if you can just understand how these affect your favorite currency pair, then you will be far ahead as a trader than most novice traders who are only looking at a chart.
One of the key responsibilities of the central banks around the world is to maintain a low unemployment rate. All of the major monetary policy decisions taken by any central bank is to keep it near the Non-Accelerating Inflation Rate of Unemployment or NAIRU. Partly because when the unemployment rate goes down below NAIRU, which is always near 4. This expectation of higher inflation and higher interest rate is highly correlated with a low unemployment rate. Hence, unemployment rate acts as a leading indicator of future monetary policy decisions.
Currently, the unemployment rate of the EU is much higher than in the UK. The Gross Domestic Product GDP is like the scorecard for a game.
It measures the overall health of an economy and the higher the GDP growth rate, the stronger the currency would be.
Figure 2: GDP Growth Rate of the United States and the United Kingdom. However, often one overtakes each other. The Consumer Price Index CPI measures the inflation rate in the economy compared to a base year.
You do not need to be an economist to understand how inflation affects a given set of currency pair, but some basic understanding would help you go the extra mile. You see, most central banks have a monetary policy that tries to limit inflation rate to a certain predefined range. When inflation goes above this range, central banks usually increase the interest rate to curb down inflation. Most central banks try to limit inflation rate to 2. However, the Federal Reserve, the central bank of the USA, uses the Personal Consumption Expenditure index instead of CPI.
So, if you are trading the U. Dollar and want to anticipate the future interest rate landscape, use the PCE index. Nevertheless, what is the significant of news forecast in forex trading, anytime you see a forecast of growing CPI, it would be bullish news for the currency. For example, if the forecast for CPI of UK is 2. You see, what is the significant of news forecast in forex trading, banks also borrow money from each other, but they do it on an overnight basis.
Central banks try to influence the overnight rate by lending in the money market at their own overnight rate and it is an important what is the significant of news forecast in forex trading in their monetary policy arsenal.
Overnight interest rate is the key reason prices fluctuate in the market as it also affects the swap rate. In fact, many traders think that the main purpose of fundamental analysis is to predict future interest rates of major central banks. While understanding monetary policy is difficult, even for veteran economists, the way to interpret this news is rather easy. If you see a forecast that says the Federal Reserve will likely increase the overnight rate, it will likely have a bullish effect on the U.
The nonfarm payrolls figure measures the number of additional jobs added from the previous month in the corporate sector in America, which is an important leading indicator of the overall employment situation in the country.
The U. Dollar is the de facto reserve currency in the world and the nonfarm payrolls data is usually released on the first Friday of each month by the U. Bureau of Labor Statistics BLS.
While there is not an equivalent data release in every economy, you should definitely keep an eye on the U. NFP as it will eventually have major impacts on almost all currency pairs involving the U. If you see the forecast of the NFP is higher compared to last month, it is bullish news for the U.
OPEC is basically a cartel on an international level. OPEC countries consist of 15 or so major crude oil-producing nations like Saudi Arabia, Kuwait, Iran, etc. There is a strong correlation between the currency market and oil price because of how resources are distributed.
Hence, it can affect the balance of trade BOT of a currency, and influence market psychology. You see, Crude oil is quoted in U. dollars because it is the de facto reserve currency. Hence, any national currency of a country that has a large crude oil reserve will be impacted by the crude oil price. Furthermore, low energy price means more disposable income will be left to consumers and it can create demand for goods and services, boosting sales.
Hence, when OPEC increases production, it tends to increase GDP growth in the U. But it may not have a significant impact on the Japanese Yen because Japan does not have large oil reserves.
While it is difficult to analyze what would be the impact of oil price on a given currency, knowing and understanding the impact by reading detailed analysis can help you sense the pulse of the market and make better trading decisions. Retail sales reports are usually issued on a monthly basis and market analysts consider it as a leading macroeconomic indicator. When consumers feel safe and secure about their jobs, they tend to spend more on durable and non-durable goods, which boosts transactions and creates value.
In terms, retail sales can be a pretty good indicator of future the GDP growth rate. How retail sales are influencing it can give you an edge in the market because you can predict GDP growth well before the quarterly reports! However, analyzing retail sales is somewhat tricky because it is also dependent what is the significant of news forecast in forex trading wage growth and overall productivity level in the economy.
Therefore, before analyzing retail sales data, you have to keep in mind that while increasing sales can lead to inflation, it can also indicate overconfidence in the economy. After all, if productivity and wages are not growing, but only retail sales go up, it can also indicate that people are buying things to stock necessary items because they expect a slowdown in the economy!
In the end, the rule of thumb is, if retail sales go up of one country and it is the base currency of the pair, but it remains stagnant in another which is the quote currency, it will be a piece of bullish news for the base currency. The Purchasing Managers Index PMI is based on survey results of key purchasing managers in the economy.
The survey asks managers to rate what is their perspective about the business over a 6-month period if they plan to hire new workers or reduce the size of the workforce, and things like the inventory level to fill new orders. The way to interpret the PMI is keeping an eye on if the number is above or below If it is below 50, it indicates there might be a recession coming and if it is over 50, then the economy is expected to expand.
During the normal growth period, the PMI usually hovers near 55 to 60, but the trick is to see if there is a trend. If you see PMI what is the significant of news forecast in forex trading going up over the last few months, consider it to be bullish news for the associated currency.
Just think for a second, when would you buy a house or start a major remodeling of your kitchen? The answer is when you have ample savings or expectation of stable income, right? So collectively, when the prices of houses go up or sales of housing units go up, what is the significant of news forecast in forex trading is common sense to interpret it as a sign of strength in the economy.
Also, new housing projects employ a large portion of the workforce that can reduce unemployment and prompt central banks to increase the interest rate. As a result, when you see positive housing data, consider it to be major bullish news for the currency. For example, if you see Housing Startsthat counts the number of new housing units being built, going down, it can signal a slowdown in the economy and traders will interpret it as bearish news for the U.
However, if you are just starting out and wants to feel the pulse of the market, the 5 economic news releases we discussed should act as a good starting point. This content is blocked. Accept cookies to view the content. click to accept cookies. This website uses cookies to give you the best experience. Agree by clicking the 'Accept' button. The most important Forex news Home Forex The most important Forex news. The most important Forex news.
Rolf ForexTips 5, what is the significant of news forecast in forex trading. Figure 1: Unemployment Rate of the United Kingdom and the European Union Currently, the unemployment rate of the EU is much higher than in the UK.
Figure 3: GDP data release leads to a sudden price advance 3: Consumer Price Index CPI The Consumer Price Index CPI measures the inflation rate in the economy compared to a base year.
Nonfarm Payrolls NFP Data The nonfarm payrolls figure measures the number of additional jobs added from the previous month in the corporate sector in America, which is an important leading indicator of the overall employment situation in the country. The Only Trend Continuation Patterns We Need To Know.
A pullback is not just a pullback. There are different kinds of pullbacks. They can all be classified into channels. Yesterday, I did a live Facebook video where I answered a few trading questions from the attendees. The 1 Risk Management Advice For Novice Traders? Over the past few weeks, we asked 17 trading professionals from all different areas of trading to answer one question:. Why Full-Time Trading Is Not The Right Answer For Everyone And How To Find Your Goals…. This is going to be a personal article and I am sure that after reading it many traders will realize.
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How To Tell If News Will Be Positive Or Negative (Forex)
, time: 7:24The most important Forex news -
This is a common phrase used in the forex market because often times it seems that when a news report is released, the movement doesn’t match what the report would lead you to believe. For example, let’s say that the U.S. unemployment rate is expected to increase 16/04/ · Because news can bring increased volatility in the forex market (and more trading opportunities), it is important that we trade currencies that are deeply liquid. Currencies with deep liquidity have the tightest spreads which are what allows you to keep your transaction costs low 27/03/ · The news represents great profit opportunities for Forex traders. By news, we mean various economic data releases. Every major economy regularly publishes statistics like GDP, inflation, unemployment rate, etc. If you trade Forex during the times of these releases, you have a chance to make a lot of blogger.comted Reading Time: 9 mins
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