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.
Over 90 percent of currency transactions are done against USD. USD is either the base currency or the counter currency in most of the currency trades.
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.
Similarly, the release of US housing sales number every month has become very significant for USD in the recent years. Previously, forex markets used to give more importance to US Trade Balance.
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, as a breakout trader, understanding of which economic data is expected to be released can help you in your trading. You should plan your trades in accordance with the importance of the economic data to be released.
In brief, knowledge that certain economic indicators make the forex markets move most is important for you as a trader. It is also important for you to know that particular economic data, the market considers 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. - 23208
Over 90 percent of currency transactions are done against USD. USD is either the base currency or the counter currency in most of the currency trades.
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.
Similarly, the release of US housing sales number every month has become very significant for USD in the recent years. Previously, forex markets used to give more importance to US Trade Balance.
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, as a breakout trader, understanding of which economic data is expected to be released can help you in your trading. You should plan your trades in accordance with the importance of the economic data to be released.
In brief, knowledge that certain economic indicators make the forex markets move most is important for you as a trader. It is also important for you to know that particular economic data, the market considers 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. - 23208
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 @ 3:13 AM
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