Factors That Move the Forex Markets in the Short Term
There are two types of forex traders. One type of traders depends on fundamental analysis in trading forex. The second type of traders depends on technical analysis in trading forex. Whether you are a fundamental trader or a technical trader, you should not underestimate the importance of economic data 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.
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.
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 depend on range trading as a trading strategy, you should avoid the day NFP data is released for trading. This is a highly volatile and jittery day for the forex market.
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 nutshell, understanding that some economic indicators move the forex markets most is very important for you as a trader. It is also important for you to know which economic data the market deems most 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. - 23200
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.
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.
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 depend on range trading as a trading strategy, you should avoid the day NFP data is released for trading. This is a highly volatile and jittery day for the forex market.
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 nutshell, understanding that some economic indicators move the forex markets most is very important for you as a trader. It is also important for you to know which economic data the market deems most 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. - 23200
About the Author:
Mr. Ahmad Hassam has done Masters from Harvard University. 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 @ 3:05 AM
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