June 21, 2017, 12:10:30 PM EST
Forex market encapsulates all global currencies and trades at roughly $4 trillion everyday, 6 days a week 24 hours a day. and that’s why experienced traders understand that technical analysis isn’t enough for successful forex trading. It is also extremely important to understand what impacts the forex market and makes it move. All the trend lines and patterns are affected deeply by a force that fundamentally dictates their movements.
It’s called: The News!
Experienced traders, big and small, know that they have to count in the day’s news when making trading decisions. After all, it’s the news that keeps the markets moving.
The technical aspect is important too, but latest news and press releases are the fuel that keeps the forex market as exciting as it is!
News That Impacts Forex Movement!
Governments and organizations from across the world release news and announcements of various kinds. These can detail updates on a country’s economy, production figures and a lot more relevant information such as:
- Interest rates
- Retail sales
- Inflation
- Unemployment
- Industrial production
- Sentiment surveys
- Consumer confidence
- Trade balance
- Manufacturing sector
All these economic press releases contain extremely important information for forex traders, and have the power to impact market confidence.
Economic News and the Rise and Fall of Currencies
A forex trader’s playbook is incomplete without an entry for the latest economic reports.
GDP is the most obviously important of all economic news. But it reports on historic trends so it’s a lagging indicator. A trader should also keep an eye on reports for retail sale, employment level, capacity utilization and manufacturing indices etc.
Take for example NZD (New Zealand Dollar). This currency is quite sensitive to the Global Dairy Trade Auction (GDT), the Dairy Price Market base. The reason being, New Zealand is the largest single exporter ofdried whole milk is. So any news from the dairy industry will be impacting the NZD.
The following eight currencies are the most important ones and you should always keep an eye out for news from these countries:
- S. dollar (USD)
- Swiss franc (CHF)
- Euro (EUR)
- Canadian dollar (CAD)
- British pound (GBP)
- Japanese yen (JPY)
- Australian dollar (AUD)
- New Zealand dollar (NZD)
Here’s a quick sample of just of their liquid derivatives (Base pair/Cross Pair):
- EUR/USD
- USD/JPY
- AUD/USD
- GBP/JPY
- EUR/CHF
- CHF/JPY
These currencies are easily tradable anywhere in the world. However, as a general rule, US Dollar is on the ‘opposite side’ of 90% of all trades; that’s because United States produces some of the most impactful economic press releases on the market.
Geopolitical Events and the Rise and Fall of Currencies
Elections, natural disaster, wars, political scandals, peace treaties, nuclear tests, terrorist attacks and anything that leads to uncertainty, be it economic or political, is going to affect the currency of that country, usually in a negative manner!
An impactful Geopolitical event was the recent U.K. General Election. It impacted the GBP/USD currency pair. On June 8, 2017 the GBP Pound sold down from 1.2961 to 1.2700. Leading to an immediate 2 Cent drop right after the exit poll.
A country’s internal conditions can transform a currency’s value and purchasing power for the locals. Forex traders can take advantage of internal events in real-time and enjoy some successful and powerful trading.
Bank Decisions and the Rise and Fall of Currencies
News and updates from central banks for e.g. Bank of England, Bank of Great Britain, Bank of Japan, are likely to cause major changes in the way currencies are traded.
Central bankers set interest rates, affecting foreign exchange rates in a significant manner. Quantitative easing, on the other hand, increases the quantity of currency circulating within an economy, causing the currency to rapidly depreciate.
The primary duty for all central banks is to sustain stable prices in the economy.The worth of local currency has a direct impact on prices of imported goods and services. So, if the central bank changes the discount rate, a higher rate leads to a stronger currency, and vice versa.
Investors are more worried by the simpler things in life: i.e. the return and the risk. And that’s why they must be careful of interest rate differentials for the currency pairs they choose to trade. They must have clear knowledge of what each of the central banks might be up to in their home domains.
Forex traders should be extremely aware that investing or trading in the foreign exchange markets encompasses a great deal of risk and may not be suitable for everyone. Prior to investing in the forex market one should access or consider your investment objectives, level of experience and risk appetite. One should only use risk capital, traders should never invest money that you cannot afford to lose.
Learn To Trade Forex News From The Pros!
Get all the education and guidance you need to understand global current affairs. Learn how to take advantage of all the powerful trading opportunities out there. Stay abreast with the dynamic rapid fluctuation within Forex news and events by staying locked in to NewMovesMarketsForex, your go-to 24/7 news portal!
