Forex trading is a good way to make money fast; however, it needs to be accompanied with economic news. There are so many news channels that carry economic news throughout the day. The economic news has the power to affect the Forex market, thus, it is important to follow the economic news closely.
Why do forex traders like economic data? Economic news has the power to affect markets whether they are long term or short term. Therefore, it is important for traders to have up to date news and information about economic data. This way, you can better understand short-term market trends.
A big advantage of using economic data releases is you can have an in depth look into a particular region without having to travel there. For example, a forex trader can get insights on how the economy of Canada is doing compared to the US. This would help him/her to determine if the Canadian economy is doing better or worse than the US. Moreover, you can also determine if Canadian dollars will gain or lose value if economic news on the continent is released.
Economic news from economic events such as interest rates, employment figures, retail sales figures and more. This kind of news provides forex traders with important clues on what will happen to certain currency pairs in the short and long term. Short term forex traders can use the data releases to make quick decisions on trades with little amount of time. Traders may like to focus on certain currency pairs that have higher chances of increasing in value over the short term.
Economic news provides the forex market with valuable clues on what will happen in the global economy. The US government for instance usually issues statements about their economic performance. These statements provide investors with useful information on what the federal budgeting process is all about and how the current state of the economy is affecting the US dollar and other currencies. This kind of information is essential to make informed decisions on which currencies to trade. The release of statements by central banks also plays a major role in the Forex market, particularly when these statements come out after the end of a particular month or quarter.
Another very important economic data release is the Consumer Price Index (CPI). The CPI is used by many consumers to calculate the cost of living, which is very important to a trader. Although the monthly index of this cost of living indicator remains volatile, short-term trends in it tend to show slight increases in some items. Currency traders pay close attention to any short term fluctuations in this index as they may indicate future movements in the market that can affect the strength of a particular pair.
Other factors that are used as a tool by forex traders are unexpected changes in interest rates, tariffs on imports, and even announcements by central banks. The most commonly traded Forex pairs in the Forex market right now are the GBP/USD, USD/JPY, and EUR/CHF. The actual data released by each of these currencies usually follows an economic forecast released by a member of the central bank. When this happens, a trader will have to look for a possible support level or resistance level in the opposite direction from the current trend. If such a point is found, then the trader may take advantage of it and purchase a long position. Conversely, if that point is discovered in the opposite direction from the current trend, then a trader can do the opposite and sell a short position.
A very important economic forecast is the national average price of commodities. This is most commonly released by the USDA, and the release is usually followed by a variety of reports about its price changes. When this happens, a trader may decide to invest in raw materials, which can be used to make goods and services more affordable for the consumer. A Forex forecast is very important in the FX market, because knowing how various items in the consumer or industrial sector are going to perform is crucial to a successful Forex trading strategy.