Part 4 Fundamental Analysis – 4 Steps to trade news releases

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The fundamental analysis

Concept and basics of “fundamental analysis”. Factors that influence fundamental analysis.

Introduction

Technical analysis

Fundamental analysis

Trading Psychology

Risk and money management

Creating trading strategy

Fundamental analysis means measurement of a financial asset value in connection with political and economic processes and events.

There is a connection between financial-economic, political, and economic events that take place in individual countries and blocks of countries as well as in the whole world and currency exchange rates and stock prices.This connection can be studied using the fundamental analysis.

Fundamental analysis is the most difficult part of economic analysis of the market. It is more difficult than any other one, because under different conditions the same factors can have different impact on the market and major factors can become quite insignificant. In addition to certain initial official rules, such analysis requires practical experience.

In practice, methods of fundamental analysis are used by market traders in combination with other types of market analysis and allow evaluation of general history and perspectives of trading instrument rates based on interdependence between fundamental, economic and other factors and standard response of trading markets to them.

Fundamental analysis takes into consideration the following factors:

  • Political crises;
  • Much publicized resignations and Cabinet of Ministers reshuffles;
  • Imprudent statements in press;
  • Release of economic indicators for countries and blocks of countries;
  • International conflicts;
  • Awaited elections;
  • Natural disasters (force-majeure).

All events considered in the fundamental analysis can be planned or unplanned. All planned events (release of economic indicators, planned speeches given by the Heads of the Cabinets or other influential officials, release of the election results etc.) are published in the economic calendar. Unplanned events include any force-majeure (fire, natural disasters, acts of terrorism etc.). Furthermore, in the course of fundamental analysis politics means redistribution of public good and resources based on economics-related reasons.

Market response to any unplanned event as assessed in the context of fundamental analysis is unpredictable and depends on a specific situation. The history has seen political events that changed dollar exchange rate against other currencies by 200 points within a very short period of time. (For example Caribbean Sea oil spill, the capture of Saddam Hussein by U.S. forces, Hurricane Katrina and so on).

Nevertheless, it is possible to predict further movements of the trading instrument rate upon the planned release of economic indicators. For example, changes in statistical data on the unemployment rate will have a clear impact on the national currency exchange rate. At the same time, market response to the release of economic indicators follows a certain mechanism.

In your work we recommend using the economic calendar of events that you can find at www.forexpeoples.com.

Release of economic indicators from leading countries influences currency exchange rates to a different extent. According to their importance, such indicators can be divided into the following groups:

1. Very important

  • Gross-National Product
  • Trade deficit
  • Payment deficit
  • Inflation indices (Consumer Price Index [CPI] and Wholesale Price Index [WPI])
  • Unemployment and employment data
  • Money supply data (М4-М0 monetary aggregates)
  • Official discount rates
  • Parliamentary, congressional, or senatorial elections. Presidential elections (currency is influenced by election promises made by the candidates and historical preferences of the parties).

2. Moderately important

The exchange rate can sometimes react to this group of news. Everything depends on the specific situation on the market.

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  • Size of retail sales
  • Size of housing starts
  • Size of factory orders and durable goods orders
  • Industrial production index
  • Producer price index [PPI]
  • Consumer price index [CPI]
  • Productivity.
  • Futures exchange rates
  • Deposit rates
  • Stock indices (Nikkey, Dow Jones, DAX etc.). Growth of these indices shows that national economics is in good state, and increases the demand for national currency of this country.
  • Dynamics of prices for government securities (T-bills, T-bonds).

Influence of the indicator on the currency exchange rate is shown in the Table below.

Indicator Change of indicator Change in national currency
Trade deficit Growth Drop
Payment deficit Growth Drop
Inflation indices: Consumer Price Index [CPI] and Wholesale Price Index [WPI] Growth Drop
Official discount rates (repo, Lombard etc.) Growth Growth
Gross-National Product (GNP) Growth Growth
Unemployment Growth Drop
Money supply data (М4, М3, М2, М1, М0) Growth Drop
Presidential or parliamentary elections Growth
Size of retail sales Growth Growth
Housing starts Growth Growth
Size of orders Growth Growth
Producer price index Growth Drop
Industrial production index Growth Growth
Productivity Growth Growth
Forward exchange rate
Futures exchange rate
Effective exchange rate
Deposit repos
Stock indices (DJI, NIKKEY, DAX, FTSE) Growth Growth
Prices of government securities (T-bills, T-bonds) Growth Growth

Release of fundamental data, as we have mentioned above, is a planned event, and according to existing international agreements, countries with leading economics are obliged to publish their projected and actual macroeconomic indicators. Bear in mind that the market takes projected indicators immediatelyinto consideration, and there is a possibility of a rapid market response if an economic indicator released is significantly different from that previously projected or when indicators from the previous periods are reconsidered. Predicting market response is challenging and requires practical experience.

Data from the fundamental analysis can and should be taken into consideration when developing trading strategies but only in combination with technical analysis data. Taking trading decisions based solely on fundamental data or shortly before the release of major fundamental data is unacceptable as the market response cannot be predicted. Besides, there is a practice where a planned release of an economic indicator leads to the re-evaluation of the previously published data on this indicator, which often reverses an overall response of the financial market. Let’s take a look at the example below.

The number of initial unemployment claims in the USA (data published every two weeks) at the moment of release was 418,000. The previous figure was 515,000 and the projected figure was 452,000. The number of initial unemployment claims filed is clearly less than expected, which indicates that economic situation has improved. The market would respond by rapid growth of the US dollar exchange rate against all other currencies by a certain amount (in practice, up to 50 points). Two minutes after the US dollar exchange rate has already started to move, a revision of the previous two-week-old indicator may be published, and the figure of 515,000 may be revised to 468,000. Then, the projected figure is little different from that released two weeks ago in terms of the absolute value, and the reverse reaction would follow returning the exchange rate to its initial level within a short period of time (approx. 10 minutes) or, alternatively, provoking a reverse movement. Commonly, a sharp increase in oppositely directed volatility of currency exchange rates may occur for a short period of time when a group of major macroeconomic indicators are released, followed by the price returning to the same level existing before the release of indicators.

Bear in mind that different macroeconomic indicators influence price movements of financial instruments based on different time intervals. For example, the ratio between discount ratesof State Central Banks is an indicator influencing global trends in the movement of currency rate ratio. The higher the discount rate of the State Central Bank is, the more profitable the investments in this currency are (however, consider inflation expectations). When the Central Bank changes the discount rate level, investors re-evaluate profitability of investments in this currency and refocus their interest towards another financial instrument. A similar situation exists with respect to the assessment of the market value of temporary CFDs for shares of the largest world holdings. The fundamental indicator is the profitability level of stocks (%) over the previous financial period. For assessment of investment profitability in the short term, investors use profitability reports over shorter (up to one month) time periods.

Methods of fundamental analysis are discussed in an easy-to-understand manner in the recommended literature.

Financial News & Fundamental Analysis – page 4

European and Japanese Inflation Data in Focus; Canada Waits on BoC, GDP

Bank holidays in the United Kingdom and the United States on Monday have dampened trading conditions to start the week, but overall, the last week of May should be exciting nevertheless once full liquidity returns. Of note, we’re watching risk trends in Japanese financial instruments develop, given the sell-off of JGBs and the Nikkei at the end of last week, culminating in the USDJPY’s worst single day performance in over two years.

This week, the growing theme that everyone should be focused on is the issue of deflation – or in most cases, disinflation – that’s been plaguing the world’s developed economies. German, broader Euro-zone, and Japanese inflation gauges are due this week, and given the intense focus on inflation in these regions (Germany and the Euro-zone are afraid of it; Japan can’t get enough of it), volatility around these data releases is highly likely.

North America isn’t to be forgotten, with the government reading of consumer sentiment in the US due out on Tuesday, with the first revision to the 1Q’13 US GDP report on Thursday. Straddling these US data releases are two important Canadian events, the first being the Bank of Canada Rate Decision on Wednesday, and finally the 1Q’13 and March GDP reports due out on Friday (Canada reports m/m, y/y, and annualized once per quarter).

Crude Oil, Gold Set Sights on US Consumer Confidence Data

Cycle-sensitive crude oil and copper prices are trading cautiously higher amid a broad-based recovery in risk appetite. A quiet European economic calendar shifts the spotlight to May’s US Consumer Confidence report, where sentiment is expected to print at the highest in six months.

S&P 500 index futures are trading firmly higher ahead of the figure despite its presumed implications for a speedier reduction in Fed stimulus provision, which only last week seemed to unnerve investors. With that in mind it will be curious to watch traders’ reaction once the outcome crosses the wiresas a benchmark for the markets’ preferred interpretation take on the US business cycle

If markets opt to view an improvement in consumer sentiment through in terms of its implications for stimulus, a stronger outcome may undermine risk appetite and weigh on shares along with crude oil and copper. Alternatively, if investors read such an outcome in terms of the supportive role a stronger US recovery would play in underpinning global growth, the opposite result can be expected.

The likely response to stronger US data from the precious metals space seems a bit less ambiguous. An increasingly firm link between the US Dollar and the 10-year US Treasury bond yield suggests a supportive outcome that bolsters bets on a near-term reduction in the size of QE purchases will boost the greenback. This in turn seems likely to weigh on gold and silver amid ebbing anti-fiat demand.

7 features for the fundamental analysis of the fx market

We found this brilliant definition in one of the fundamental analysis textbooks.

Fundamental analysis is what traders do not see on the screens of their terminals and in the charts.

In this article we will discuss why traders need what they do not see and how the invisible hand of fundamental analysis influences price movements.

  • What fundamental analysis of the currency market is.
  • Basic Forex and forward market currencies.
  • Theoretical grounds and indicators of the fundamental analysis.
  • Key indicators, which influence the USD exchange rate.
  • Influence of political events on currency exchange rates.
  • How to trade on fundamental news.
  • Advantages and disadvantages of the fundamental analysis of the currency market.

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What fundamental analysis of the currency market is.

Fundamental analysis of the currency market is an assessment of a change of a currency value on the basis of the economic situation, financial policy of Central Banks, availability of cash in circulation and other macroeconomic indicators.

The currency market differs from the stock one with:

  • Bigger stability. At first sight, this statement seems awkward, but when you analyze it you will understand that there are no sharp falls of everything at the same time, like it happens in the stock market. If one currency falls, another one is bound to grow.
  • Global character. Currencies are traded round-the-clock.
  • Smaller number of markets. There are thousands of companies and only dozens of currencies.

Both long-term position investors and intraday traders use fundamental analysis. Long-term investors identify the main trend and hold the position. Intraday traders use high volatility when news are broadcast.

Basic Forex and forward market currencies.

Basic currencies in the Forex market are USD, EUR, JPY, CHF and GBP. It is believed that the currency value is identified by demand and supply and is in ‘free floating’. Although, there are exceptions, like, for example, it has been with the Turkish Lira (TRY) recently. While TRY was falling, the TRY/USD rate was rather strictly regulated by the government.

One can trade currencies not only in Forex, but also in the forward exchange market (futures).

Trading futures currency contracts in the forward market is more interesting for traders because:

  • futures contracts have the Open Interest (OI) . Globally, the Open Interest shows inflow or outflow of money from the markets. The Moscow Exchange broadcasts the Open Interest online. CME (Chicago Mercantile Exchange) provides data about the Open Interest with a delay, instead it splits it into different groups. And traders can see what major manufacturers, small speculators and hedgers do. Larry Williams built one of his indicators (Willco) using this data.
  • exchanges show real volumes of traded contracts.
  • futures contracts with different expiration days are traded at the same time. One can forecast future movement of currency prices or trade spreads.
  • guarantee collateral on futures contracts allows trading even with a small starting capital. The minimum amount for trades with micro-contracts on CME is from USD 135 to USD 320. The guarantee collateral on futures contracts on the Moscow Exchange is even less – from RUB 2,200 to RUB 13,200.

Theoretical grounds and indicators of the fundamental analysis.

Let’s restore the macroeconomic theory in our memory before we discuss basic fundamental analysis indicators. This section could be boring. If you know what GDP, unemployment and trade balance are and how they influence currency exchange rates, go directly to the next section.

Fundamental data could be conditionally divided into several big groups:

  • Economic and financial data – these are basic indicators, which influence the price quote movement. Unemployment, inflation, money supply and interest rates.
  • Political events – Donald Trump’s tweets and Theresa May’s resignation.
  • Crises and unforeseen events – crisis of 2008 and earthquakes.

It is impossible to assess the influence of analytical data on currency prices without taking into account business cycles. Economy of any country develops in cycles:

  • Recession – fall of economy, crisis and depression;
  • Restoration;
  • Development – continuation of growth of the economy to a new maximum;
  • and so on in circle.

Economic indicators of the fundamental analysis behave differently at different stages of the business cycle. Some indicators are late, while some are ahead and warn about cycle changing. The state tracks and forecasts cycles.

Changes of indicators for a certain period of time or in comparison with other countries’ indicators, rather than absolute indicator parameters, are important for the fundamental analysis. Data, which significantly differ from the previously forecasted indicators, are of special importance.

Fundamental factors, which influence the currency exchange rate:

  • Central Banks and interest rates;
  • trade balance;
  • stock indices;
  • money in circulation;
  • inflation;
  • unemployment;
  • GDP and industrial production.

Let’s consider each of the factors in brief.

Central Bank.

Central Bank is the main state organization in a country. Central Banks ensure stability of national currencies. They have various instruments of influence on demand and supply. The US Central Bank is called the Federal Reserve System or simply the FED . Central Banks conduct different monetary policy, depending on the state of the economy and business cycle:

  • Expansionist – to stimulate the falling economy. They buy out securities from banks and supply them with cash, decrease interest rates and increase the money supply.
  • Restrictive – to avoid inflation and heavy crisis of the rising economy. Central Banks sell securities, increase interest rates and decrease the money supply. Such a policy results in more expensive loans, growing unemployment and falling consumer demand.

Trade Balance.

Trade Balance is the difference between export and import. Theoretically, if export is bigger than import, the inflow of foreign currency into the country grows and demand on the national currency grows too, since it is needed for exchange. Consequently, the national currency exchange rate gets stronger. If import is bigger than export, it is the opposite and the national currency gets weaker. We said ‘theoretically’, when speaking about the trade balance, for a reason. In real life, macroeconomic factors mix and influence each other, that is why it is impossible to accurately calculate the trade balance influence on currency exchange rates. However, broadcast of news about the growth of a trade deficit of international trade could result in the exchange rate fall. The trade balance also reflects demand on commodities abroad. The low cost of the national currency is good for exporters. They have an advantage in the global market, since their commodities are cheaper. Consequently, the low cost of the currency results in export growth. That is why Central Banks could decrease the currency value for increasing export. Export has a significant influence on economic growth of a country.

  • Американские данные смотрите на справочных сайтах
  • Российские данные смотрите на справочных сайтах .

Stock indices.

Stock indices behaviour or demand on stock also influences the currency exchange rate. Permanent buying interest in stocks, nominated in a certain currency, increases the exchange rate of this currency.

  • The main American Index is S&P 500.
  • The main Russian Index is RTS.

Money supply.

Money supply – surplus of one currency creates an increased supply and reduces the value of this currency. Consequently, the currency deficit increases its value, because the demand increases and supply decreases. The M2 money stock is the key one for the US, while M3 money stock is the key one for the Euro Zone.

Check Russian data on the website of the Central Bank of Russia .

Interest rates.

Interest rates – the higher the interest rates, the higher the currency exchange rate is. Interest rates depend on the state of the economy and from such indicators as CPI (Consumer Price Index), consumer expenditures, real estate market and employment. Interest rates are set by Central Banks.

Inflation.

Inflation – growth of inflation decreases purchasing capacity of money. Central Banks fight inflation by means of increasing interest rates. This way they remove some money from circulation, because it becomes more profitable to invest into financial assets. As soon as some money is invested into financial assets, the purchasing capacity goes down and inflation also goes down. Growth of money supply increases inflation. Inflation in the sphere of services lags behind inflation in the commodity markets by 6-9 months. The higher the inflation, the lower the unemployment level is. Inflation in the US is measured with the help of two indicators – CPI and PPI. We will consider them in more detail in the following section.

Unemployment rate (UNR).

Unemployment rate (UNR) is a leading indicator at the highs of the business activity and lagging indicator at the lows. Each percent of unemployment decreases GDP growth by 2 percent – Okun’s law. The currency exchange rate goes up when the unemployment level goes down and vice versa. It is impossible for any country to reach the zero unemployment level due to seasonality.

GDP – the stronger the GDP grows, the stronger the national currency is.

The volume of industrial production (IP) grows and the national currency becomes stronger along with export. The business cycle could be tracked by this indicator.

Let’s consider now the key US indicators, which influence the USD exchange rate, in more detail.

Key indicators, which influence the USD exchange rate.

Report on unemployment in the nonfarm sector – Nonfarm Payrolls .

Published on The first Friday of each month.
Influence on the exchange rate The better the data in comparison to the previous month, the higher the exchange rate is.
Additional information This report is important because it is the first during a month and traders use it to forecast further exchange rate development. Employment determines expenditures of the population, since you have no money to spend if you are unemployed.

We marked traders’ reaction to the publication of data on May 3, 2020, with a rectangle in the 5-minute E-mini Euro futures (E7M9) chart below. The data were not just good but much better than the forecasts. The EUR/USD currency pair price jumped down on increased volumes during a short period of time. However, it is rather difficult to see such pronounced reactions nowadays, since political factors and a combination of other economic factors exert influence on currency exchange rates.

A number of permits issued for building purposes – Building Permits .

Published on The third week.
Influence on the exchange rate The better the data in comparison to the previous month, the higher the exchange rate is.
Additional information The most important report in the real estate sphere. The number of permits issued for building purposes grows when the interest rates are low and reduces when the interest rates are high.

Consumer Price Index ( CPI ) or consumer basket price index.

Published on The second week.
Influence on the exchange rate The better the data in comparison to the previous month, the higher the exchange rate is.
Additional information Direct indicator of the level of inflation; if the indicator grows, inflation grows too.

Producer Price Index ( PPI ) is the indicator of the wholesale trade of products in the domestic market.

Published on The third week.
Influence on the exchange rate The better the data in comparison to the previous month, the higher the exchange rate is.
Additional information Primary sign of inflation. Peak highs and lows lag behind by 3-6 months from business activity peaks. As a rule, peaks of CPI and PPI indices fall on one and the same quarter.

Use of production capacities ( CAPU ) is the general output (total productivity). The indicator is closely connected with business cycles and allows forecasting behaviour of Central Banks in difficult moments. Takes big values during recession.

Durable goods orders is the indicator of confidence of a consumer in the future and willingness to spend money on expensive commodities. The growing number of orders stimulates production.

Average Hourly Earnings . Salary increase, which goes ahead of productivity, sends a signal about a possible price increase, which would result in the interest rate increase.

Average Weekly Hours is one of the business cycle indicators. It goes down at the initial stage of the fall, since employers want to keep employees.

Influence of political events on currency exchange rates.

Political events always influenced exchange rates. Donald Trump became the US President in January 2020. He is an active Twitter user and his messages periodically shake up currency and stock markets. The US introduced sanctions against Russian companies on April 6, 2020, and the RUB exchange rate fell sharply. We can see the reaction of traders in the 30-minute USD/RUB futures (SiM9) chart.

Donald Trump wrote about imposition of tariffs on Mexican goods in his Twitter on May 31, 2020.

Reaction of traders that trade Mexican Peso (MXN) was immediate. USD/MXN rate grew up to the 3-month high.

How to trade on fundamental news.

Trading on news is a risky undertaking. Nevertheless, if you want to try this trading approach, here are some important recommendations:

  • Identify what takes place at the current price level BEFORE the news broadcast. Check whether there is a focused movement or obvious overweight of sellers or buyers. Maybe the reaction on the news already was taken into account by the market. The news broadcast could significantly move the price if the market is in equilibrium.
  • Check whether one of the sides received a reward after the news broadcast for pushing the price. That is whether a big price movement is confirmed by significant volume and delta overweight. If so, the price movement would probably continue.
  • Monitor corrections or pullbacks attentively, since the more significant the news is, the smaller the pullback from the movement would be.
  • Enter a trade with the limit orders, because the market orders might be executed at an unprofitable price.
  • A VSA expert Sebastian Manby states that more than in 50% of cases, the market makes a false movement in the opposite direction half an hour before the news broadcast.
  • Use the footprint.

Footprint is displayed in the real-time mode. It helps a trader to understand who does what at each price level. Let’s assess advantages of a footprint in the 5-minute GBP futures (6BM9) chart after broadcast of bad news about PMI in April.

The picture below shows two footprint variants: Bid*Ask Imbalance to the left and Bid*Ask Volume to the right. We show two different footprint variants, because they are visually clear for different types of traders. If you prefer to work with highlighted numbers, the left chart is for you. If you like bars and colors more, the right chart is for you. There are 15 variants of footprint display in ATAS.

We marked multiple imbalances of sellers, which warn traders about further price decrease, with numbers 1 and 2 in the left chart. A short position could be opened here. Maximum volume levels of each 5-minute bar move down – we marked this movement with a red arrow. The price drop stops at the day’s low. Seller imbalances vanish and POC of two neighbouring bars form the support level, marked with a red line. Buyer imbalance emerges under number 4. However, this imbalance raises doubts, since:

  • it is located at the very high of the bar, where unlucky buyers usually get stuck;
  • the price pulled back from the buyer imbalance and closed below – a green band shows us the exact level of opening and closing;
  • imbalance consists not of new positions but of stops – zero values from the bids side.

It is worth waiting for additional confirmation of the price reversal in order to open a long position.

We marked a sharp price fall with number 5 in the right chart – a thin long bar. Such sharp movements, as a rule, do not stop at once, the inertia would continue to push the price further down for some time. Buyers tried to turn the price in point 6, but failed, since the next bar was opened below this level. While POC levels continued to go down. Sells exhaust in point 7.

Footprint shows whether you go with the market or stand on the way of the smart money. It increases confidence in execution of the trading strategy.

Advantages and disadvantages of the fundamental analysis of the currency market.

Advantages Disadvantages
Allows forecasting global changes of the business cycle Complexity
It is good for position traders and long-term investors A big number of indicators, the influence of which is not evident
Volatility increases during the news broadcast and creates opportunities for an intraday trader Volatility increases during the news broadcast, which is disastrous for beginners

We complete practically all our articles with the thought that a competitive advantage leads to a profitable trading. A thorough knowledge of the fundamental analysis of a selected currency pair could become your advantage. Or a combination of the cluster and fundamental analysis could become your advantage. Try ATAS free of charge and find out which advantage saves your nerve cells and increases confidence.

Fundamental Analysis

Fundamental analysis is a way of anticipating price movements in the forex/CFD market by analysing the economic, social, and political forces that may affect the supply and demand of the asset you are trading.

Trading the fundamentals is also referred to as trading the news, as you need to pay close attention to changes in newly released economic indicators such as interest rates, employment rates, and inflation. The end goal of performing fundamental analysis is to discover the true value of an asset, compare it to the current price and locate a trading opportunity. For example, a country with a strong and growing economy will experience stronger demand for its currency, which will work to lessen supply and drive up the value of the currency. So, essentially, it all boils down to the basic principles supply and demand.

Using supply and demand as an indicator of where price could be headed can appear easy. The real challenge however, is analysing all of the factors that affect supply and demand. There are a great number of economic theories which surround fundamental Forex and CFD analysis. Attempting to put various pieces of economic data in context to make them comparable requires a lot of work and discipline.

Forex and CFD Fundamentals
Forex and CFD prices are impacted by macro and micro-economic data, geo-political events and their linkages. These factors may include for example, GDP growth rates, potentially disruptive geopolitical events, employment statistics, interest rates, and balance of trade reports among others. By assessing the relative trend of these data points, a trader is essentially analysing the relative health of the country’s economy and determines the future movement of their currency.

For traders trading stocks CFDs, they look at the company’s most recent earnings reports, expenses, assets, and liabilities. Fundamental traders will use those data points to determine the health of the company. If their economic wellbeing is trending better as their company’s earnings and balance sheet are growing, then a fundamental trader would choose to place a buy position on that firm’s stock in anticipation of demand growing for that stock.

Trading the News
Economic data tends to be one of the most important catalysts for short-term movements in any market, but this is particularly true in the currency market, which can react to news from around the world. Typically, employment reports, interest rate decisions, and GDP numbers are what is considered important news for a country’s currency. These news are important because they can affect monetary decisions by central banks. If the data paint a picture of a strong economy for example, central banks will likely opt to raise interest rates which in turn typically cause their currency to rally. Since the U.S. dollar is on the “other side” of 90% of all currency trades, U.S. economic releases tend to have the most pronounced impact on the market.

Key Releases
When trading the news, a trader needs to know which releases are actually expected that week. BDSwiss provides its traders with a complete Economic Calendar of the world’s biggest financial announcements will take place as well as what the projected value will be. Traders are also given the ability to filter your results based on date, country and/or importance.

Some of the most important economic events that drive Forex price movement include:

  • Benchmark Interest Rate Decisions: Central bank rate decisions cause the most volatility in currency pairs, especially when a change in key interest rates was unexpected.
  • Inflation Data: The level of the price of goods in a nation can significantly affect central bank monetary policy.
  • Key Jobs Data – Unemployment rates and the amount of people receiving benefits for unemployment provides a barometer for a nation’s economic growth. U.S. Non-Farm Payrolls data in particular, is one of the most closely watched economic indicators and can have a substantial market impact.
  • Preliminary GDP Data – A country’s gross domestic product is one of the most important measures of an economy’s health and can also encourage monetary changes.
  • Trade Balance and Current Account Data – Variations in the balance between a country’s imports and exports has a substantial impact on a currency.

Using News Trading Tools
Perhaps one of the most important tools for a news trader is a well-rounded forex news calendar which includes all the currencies they intend to take their positions on. An economic calendar is used by investors to monitor market-moving events. Investors will typically research the date and time of a specific event and pay close attention to the announcement because of the high probability that it will affect the direction of the market. You can find a detailed listing of all major future events along with their respective date, time, forecast, the underlying currency on BDSwiss’ Economic Calendar.

Understanding Market Consensus
Market consensus is one of the most important concepts to understand when contemplating trading market news releases. Simply put, consensus refers to the average expectation of financial analysts and market participants for a particular economic report. As many analysts express their views, a general market consensus eventually forms; this is seen as the market “standard” against which the actual result will be measured. If the observed result is better than what analysts were expecting, related assets tend to edge higher in value. On the contrary, if the result turns out to be weaker than market consensus, then investors will be disappointed and prices will likely drop.

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