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Forex news and importance

forex news and importance

The most important high impact Forex news release are central bank meetings and interest rate decisions. With a mandate to control inflation and ensure the. Follow all the latest forex news, trading strategies, commodities reports & events at DailyFX. In the fast moving world of currency markets, it is extremely important for new traders to know the list of important forex news. INSTAFOREX PAKISTAN AIR How can I. Updating your portable is not accessible as well as computer enthusiasts and easy to search. I'm moving my have a stable several current company products, including some.

These are also the times that players in the forex market pay extra attention to the markets, especially when trading based on news releases. Figure 1: Times at which various countries release important economic news.

When trading news, you first have to know which releases are actually expected that week. Second, knowing which data is important is also key. Generally speaking, the most important information relates to changes in interest rates, inflation, and economic growth, like retail sales, manufacturing , and industrial production:.

Interest rate decisions 2. Retail sales 3. Inflation consumer price or producer price 4. Unemployment 5. Industrial production 6. Business sentiment surveys 7. Consumer confidence surveys 8. Trade balance 9. Manufacturing sector surveys. Depending on the current state of the economy, the relative importance of these releases may change.

For example, unemployment may be more important this month than trade or interest rate decisions. Therefore, it is important to keep on top of what the market is focusing on at the moment. According to a study by Martin D. Evans and Richard K. Lyons published in the Journal of International Money and Finance , the market could still be absorbing or reacting to news releases hours, if not days, after the numbers are released.

The study found that the effect on returns generally occurs in the first or second day, but the impact does seem to linger until the fourth day. The impact on the flow of buy and sell orders, on the other hand, is still very pronounced on the third day and is observable on the fourth day.

The most common way to trade news is to look for a period of consolidation or uncertainty ahead of a big number and to trade the breakout on the back of the news. This can be done on both a short-term basis intraday or over several days.

After a weak number in September, the euro was holding its breath ahead of the October number, which was to be released to the public in November. A pip is the smallest measure of change in a currency pair in the forex market, and since most major currency pairs are priced to four decimal places, the smallest change is that of the last decimal point. For news traders, this would have provided a great opportunity to put on a breakout trade, especially since the likelihood of a sharp move at this time was extremely high.

The table above illustrates shows—with two horizontal lines forming a trading channel —the indecision and uncertainty leading up to October non-farm payroll numbers , which were released in early November. Note the increase in volatility that occurred once the numbers were released.

We mentioned earlier that trading news is harder than you might think. The primary reason is volatility. You can be making the right move but the market may simply not have the momentum to sustain the move. This chart shows activity after the same release as the one shown in Figure 2 but on a different time frame to show how difficult trading news releases can be. On Nov. The disappointment led to an approximately pip sell-off in the dollar against the euro in the first 25 minutes after the release.

One thing you should keep in mind is that, on the back of a good number, a strong move should also see a strong extension. One potential answer to capturing a breakout in volatility without having to face the risk of a reversal is to trade exotic options. Exotic options generally have barrier levels and will be profitable or unprofitable based on whether the barrier level is breached.

The payout is predetermined and the premium or price of the option is based on the payout. The following are the most popular types of exotic options to use to trade news releases:. A double one-touch option has two barrier levels.

Either one of the levels must be breached prior to expiration in order for the option to become profitable and for the buyer to receive the payout. If neither barrier level is breached prior to expiration, the option expires worthless. A double one-touch option is the perfect option to trade for news releases because it is a pure non-directional breakout play.

As long as the barrier level is breached—even if the price reverses course later—the payout is made. A one-touch option only has one barrier level, which generally makes it slightly less expensive than a double one-touch option. The same criterion holds—the payout is only made if the barrier is breached prior to expiration. This is a good option to buy if you actually have a view on whether the number will be stronger or weaker than the market's consensus forecast.

Options on currencies are a viable alternative for those who do not care to get whipsawed in the markets by undue volatility before they actually see the spot price move in their desired direction; there are different types of currency options available through a handful of forex brokers. A double no-touch option is the exact opposite of a double one-touch option.

There are two barrier levels, but in this case, neither barrier level can be breached before expiration—otherwise the option payout is not made. This option is great for news traders who think that the economic release will not cause a pronounced breakout in the currency pair and that it will continue to range trade.

The currency market is particularly prone to short-term movements brought on by the release of economic news from both the U. If you want to trade news successfully in the forex market, there are several important considerations: knowing when reports are expected, understanding which releases are most important given current economic conditions and, of course, knowing how to trade based on this market-moving data.

Do your research and stay on top of economic news and you too can reap the rewards. Day Trading. Your Money. Personal Finance. Your Practice. Popular Courses. Table of Contents Expand. In the early stages, you will find that some forex news will affect the market as a whole and some will affect certain currencies specifically. Your job as a forex news trader is to figure out what news is important to the currency pair you are trading.

Typically, employment reports , interest rate decisions, and GDP numbers are what is considered important news for a countries currency. These newsprints are important because they can bleed into the decision-making process of the Federal Reserve. Once you have established which reports are important, you'll need to watch the market's reaction to the numbers for a while.

This is a trader's least favorite part because it means waiting. It's important though because sometimes currencies do not act as you would expect to reports and information. At times, currencies will react opposite of what you would expect due to market expectations or market sentiment. Once you figure out how a report will affect a currency, you can prepare for a live news trade.

It's always crucial to managing your risk, though. Some brokers have what is called a variable spread and some have a fixed spread. The issue that you will face with fixed spread brokers is that sometimes you get price slippage, or a requote. Either way, it can make it pretty pointless to have even made the trade if you're looking to get out short term. With a variable spread broker, the problem with news trading is that when markets get volatile, the spread can increase exponentially.

This can cause your trade to be immediately negative, even if you technically received a good price on your entry. Spread widening is often limited and if the spread is too wide, it may be best to abort your trade because the widespread is seen when banks think the risk is too high to be exposed. Keeping these two issues in mind, it's important to understand your broker's policy on news trading. You may want to consider trying it in on a demo account first to get a reasonably good simulation.

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If you see a forecast that says the Federal Reserve will likely increase the overnight rate, it will likely have a bullish effect on the U. The nonfarm payrolls figure measures the number of additional jobs added from the previous month in the corporate sector in America, which is an important leading indicator of the overall employment situation in the country. The U. Dollar is the de facto reserve currency in the world and the nonfarm payrolls data is usually released on the first Friday of each month by the U.

While there is not an equivalent data release in every economy, you should definitely keep an eye on the U. NFP as it will eventually have major impacts on almost all currency pairs involving the U. If you see the forecast of the NFP is higher compared to last month, it is bullish news for the U.

OPEC is basically a cartel on an international level. There is a strong correlation between the currency market and oil price because of how resources are distributed. Hence, it can affect the balance of trade BOT of a currency, and influence market psychology. You see, Crude oil is quoted in U. Hence, any national currency of a country that has a large crude oil reserve will be impacted by the crude oil price. Furthermore, low energy price means more disposable income will be left to consumers and it can create demand for goods and services, boosting sales.

But it may not have a significant impact on the Japanese Yen because Japan does not have large oil reserves. While it is difficult to analyze what would be the impact of oil price on a given currency, knowing and understanding the impact by reading detailed analysis can help you sense the pulse of the market and make better trading decisions.

Retail sales reports are usually issued on a monthly basis and market analysts consider it as a leading macroeconomic indicator. When consumers feel safe and secure about their jobs, they tend to spend more on durable and non-durable goods, which boosts transactions and creates value. In terms, retail sales can be a pretty good indicator of future the GDP growth rate. How retail sales are influencing it can give you an edge in the market because you can predict GDP growth well before the quarterly reports!

However, analyzing retail sales is somewhat tricky because it is also dependent on wage growth and overall productivity level in the economy. Therefore, before analyzing retail sales data, you have to keep in mind that while increasing sales can lead to inflation, it can also indicate overconfidence in the economy. After all, if productivity and wages are not growing, but only retail sales go up, it can also indicate that people are buying things to stock necessary items because they expect a slowdown in the economy!

In the end, the rule of thumb is, if retail sales go up of one country and it is the base currency of the pair, but it remains stagnant in another which is the quote currency, it will be a piece of bullish news for the base currency. The survey asks managers to rate what is their perspective about the business over a 6-month period if they plan to hire new workers or reduce the size of the workforce, and things like the inventory level to fill new orders.

The way to interpret the PMI is keeping an eye on if the number is above or below If it is below 50, it indicates there might be a recession coming and if it is over 50, then the economy is expected to expand.

During the normal growth period, the PMI usually hovers near 55 to 60, but the trick is to see if there is a trend. If you see PMI consecutively going up over the last few months, consider it to be bullish news for the associated currency. Just think for a second, when would you buy a house or start a major remodeling of your kitchen? The answer is when you have ample savings or expectation of stable income, right?

So collectively, when the prices of houses go up or sales of housing units go up, it is common sense to interpret it as a sign of strength in the economy. Also, new housing projects employ a large portion of the workforce that can reduce unemployment and prompt central banks to increase the interest rate.

As a result, when you see positive housing data, consider it to be major bullish news for the currency. For example, if you see Housing Starts , that counts the number of new housing units being built, going down, it can signal a slowdown in the economy and traders will interpret it as bearish news for the U. However, if you are just starting out and wants to feel the pulse of the market, the 5 economic news releases we discussed should act as a good starting point.

This content is blocked. Accept cookies to view the content. This website uses cookies to give you the best experience. Agree by clicking the 'Accept' button. Advertisement - External Link. The most important Forex news. Online forex market-makers and brokers offer a variety of channels to help you track forex news and perform fundamental analysis. As part of your evaluation process of potential forex platforms and brokers, include an assessment of their market information supply.

Similarly, reputable industry communication outlets, like the Wall Street Journal and Financial Times , despite their selective firewall practices, enable and encourage readers to subscribe to email newsletters wherein breaking news is regularly conveyed. While ignorance is bliss, trading with less knowledge than other market participants is blatantly self-destructive.

And while exposure to the cacophony and multitude of opinions and facts can result in more stressful decision-making, a winning formula requires no less. Find out why it is important to always be aware of forex news and how it can help you successfully trade online. The single greatest factor in currency evaluation is relative interest rates. The value of a currency to external investors is largely composed of the returns available by holding securities denominated in that currency.

Additionally, macroeconomic and political news affect currency evaluation by the additional insights on what is the currency economy's true underlying worth. Among the forex news events that warrant your regular attention are:. Finally, periodic events like elections and one-off occurrences like weather-related disasters are all part of the information set that comprises forex news.

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