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Forex Trading Based On Economic News


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When trading Forex, it is very important for new traders to be aware of the various economic indicators and the news and publications that shape the markets. Being able to distinguish which data to pay attention to, understand what it means, and knowing how to trade it can give traders an edge and set them up for the long term.

Forex Trading Based On Economic News

Trading technical chart patterns can be complex and this is where a good knowledge of news events and economic data releases comes into play. We’ve compiled a list of the five most important press releases and economic indicators you need to know.

Important Forex Economic Indicators

Every month, the various central banks of the world meet to decide on the interest rates they are responsible for. They are faced with the decision of whether to leave interest rates unchanged, raise interest rates, or lower interest rates. The outcome of this decision is extremely important for the currency of the economy and as such for traders.

A rise in rates is generally considered bullish on a currency (meaning its value increases), and a fall in rates is usually considered bearish on a currency (meaning its value decreases), while an unchanged decision can be either bullish or bearish. depending on the economic understanding of the time.

While the actual decision itself is crucial, so is the accompanying policy statement, where the central bank provides an overview of the economy and how they see the outlook for the future. Monetary policy is also announced here, which touches on vital issues such as the implementation of quantitative easing, an economic concept we cover in our courses.2. Gross domestic product (GDP)

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Gross domestic product is an important indicator of a country’s economic health. Every year, the country’s central bank has been waiting for growth prospects, which determine how fast the country should grow as measured by GDP.

When GDP falls below market expectations, currency values ​​tend to fall, and when GDP exceeds expectations, currency values ​​tend to rise. Thus, currency traders closely monitor the release of this figure and can be used to cautiously anticipate central bank movements.3. Consumer Price Index (CPI)

The consumer price index is the most widely used measure of inflation among various economic indicators. The index provides information on historical average prices paid by consumers for a basket of market goods and indicates whether the same goods cost the consumer more or less.

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Central banks monitor this publication to help guide their interest rate and policy setting. When inflation is evident and exceeds a certain target, an increase in interest rates is used to combat it.4. Employment indicators

A country’s unemployment rate is crucial for markets and very important for central banks as an indicator of the health of the economy. Higher employment leads to a rise in interest rates as central banks aim to balance inflation with growth, and so the number draws traders’ attention to the market.

Besides the unemployment rate, the two most important labor statistics are the US ADP and NFP data, which are released each month, with NFP coming first. Read our in-depth report on the NDP for more information.5. FOMC meeting

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While the central bank meetings of all economies are extremely important, the meeting of the US Federal Open Market Committee takes a turn because the US dollar is currently the world’s reserve currency.

The Committee meets monthly to set interest rates and express an opinion on current economic conditions and the effectiveness of current monetary policy, and to provide forecasts of future economic conditions and monetary policy expectations.

The committee is made up of members who vote at each meeting, with “Hawkish” members who favor raising interest rates and “Dovish” members who favor lowering interest rates.

Top 5 Economic News Events For Forex Trading

The committee’s statement will be closely watched by traders looking for clues about how the central bank will behave in the future, and even the most trivial terminology can cause major market swings, as seen in the past with the Fed’s use of and after. deletion of the term “patient” in relation to rate increases.

The key to all economic indicators and news releases is not just what the actual release means, but how the market anticipates and subsequently reacts to the release. This is where trading opportunities are created. It can be very difficult for new traders looking to trade news events as the volatility and uncertainty can be huge, but to keep up with the schedule you can follow our economic calendar and understand it all in our newsroom analysis.

Margined Forex and CFD trading are leveraged products and can result in losses in excess of deposits. The value of your contract can go down as well as up, resulting in you getting back less than the original down payment. Make sure you understand the risks and effectively control your risks. does not provide investment advice. Financial data reports are essential for the foreign exchange (forex) trader. These important economic indicators create volatility and always have a lot of speculation around them, and the United States Gross Domestic Product (GDP) is one such report. Not only doforex(FX) traders continue to monitor these important economic data, but use them to either create a new position or support an existing one.

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Gross domestic product is simply the market value of all goods and services produced in a particular country. In the case of the United States, this total can be divided into four main categories: consumption, investment, government spending (or spending), and net exports.

The sum of these numbers is the gross domestic product of the United States, which can be compared to the results of another year to derive the percentage increase or decrease in GDP during a particular period.

Gross domestic product indicators can be published on a monthly or quarterly basis. For the United States, the Bureau of Economic Analysis (BEA), a branch of the U.S. Department of Commerce, publishes final quarterly data with additional updated or preliminary data at the end of each month. This report can be published in real or nominal terms, with the former adjusted for the effect of inflation. The BEA also publishes its GDP price index, which has been used as a measure of consumer inflation in competition with both the Consumer Price Index (CPI) and the personal consumption expenditure deflator.

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Like all other important economic data, the Gross Domestic Product report carries a lot of weight for currency traders. This is evidence of the growth of a productive economy while signaling the contraction of a withered economy. As a result, currency traders tend to look for higher GDP or growth, believing that interest rates will follow the same direction. If the economy has a good growth rate, the benefits will shift to the consumer, increasing the likelihood of spending and expansion. Higher spending in turn leads to higher prices, which central banks try to tame by raising interest rates.

Although there are three versions—improved, preliminary, and final—it is the relationship between the three that is important, not just the individual versions. Forex professionals emphasize advanced reading when trading. However, they leave no difference when comparing advanced to both initial and final readings.

For example, a final reading of 1.5% increase compared to the earlier enhanced version of 3.5% is worse compared to a similar print of 1.5% in both advanced and final readings. A positive growth figure is always good for the economy, but not when the final GDP figure falls below the advanced ones.

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1. A lower-than-expected GDP reading is likely to cause the domestic currency to unload against other currencies. In the case of the US, a lower GDP figure would mean a contraction in the economy and hurt US interest rate hikes by reducing the value or attractiveness of US dollar-denominated assets. In addition, the lower the real GDP reading is than the estimate, the steeper the drop in the dollar.

2. The expected reading requires a bit more comparison from the FX investor. Here, the analyst or trader wants to compare the current reading to the previous quarter’s reading – perhaps even the previous year’s reading. In this way, a better assessment of the situation can be gathered. Given this factor, you can expect the resulting price action to tend to be mixed as the market sorts out the details.

3. A higher than expected reading strengthens the underlying currency against other currencies. Therefore, a higher figure of US GDP will benefit the greenback, which will encourage some appreciation of the US dollar against its counterparts; the higher the real GDP reading, the steeper the appreciation of the dollar.

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The EUR/USD currency pair above has broken down from the high of 1.4200 (on the right side of the chart) in the last couple of sessions to support just below 1.4050 in the 60-minute timeframe. Watch as the Euro appreciated by around 50 pips shortly after the disclosure at 8:30 AM on March 28, 2011. At the time, it turned out that the world’s largest economy grew less than expected. Instead of an estimated 1.9% increase, the US grew by only 1.8%. It was also less


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