What Affects 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.
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.
Since majority of the currency trades involve USD, you as a forex trader will also most probably trade USD most of the time. Release of certain economic data has significant and lasting impact on currencies like USD.
With experience, you will understand that currency markets reaction to the release of different economic data with time also changes. A few years back, US GDP figures used to be important for USD but they dont have much impact now.
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 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 know which data causes knee jerk reaction in the markets and which pieces of data will have lasting reaction in the forex markets. - 23223
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.
Since majority of the currency trades involve USD, you as a forex trader will also most probably trade USD most of the time. Release of certain economic data has significant and lasting impact on currencies like USD.
With experience, you will understand that currency markets reaction to the release of different economic data with time also changes. A few years back, US GDP figures used to be important for USD but they dont have much impact now.
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 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 know which data causes knee jerk reaction in the markets and which pieces of data will have lasting reaction in the forex markets. - 23223
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 @ 3:01 AM
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