Since the forex market is volatile, it’s no surprise there are so many fluctuations. The forex market has a significant impact on the daily exchange rate and the 24-hour local news cycle.
The news in Europe has an impact on the EUR to USD course, as it brings increased volatility to the forex market (as well as more trading opportunities). The EUR/USD pair is deeply liquid, enabling you to keep your transaction costs low.
If you trade forex, you’ll need to be ahead of the game when it comes to news. Once you’ve gained adequate experience, you’ll know which pieces of information will influence the market.
The news cycle can have a dramatic bearing on day trades and can be lucrative. However, the volume of work required to continue to be number one on the news and foresee them rises and, thus, and the risks rise as a result.
For a trader concentrating on day trading and basing them around the news cycle, the most money-making approach is to focus on currency pairs with high-risk, high-reward. This tactic enables traders to confine the educational input required to stay ahead.
The main pieces of information include central banks, policymakers, employment data, and economic data.
Central Banks and Policy Makers
Financial establishments and central banks are the highest movers in markets. For instance, the Bank of England (BoE), the Federal Reserve (Fed), and European Central Bank (ECB) are just a few of the leading names when it comes to determining interest rates and making decisions in terms of the amount of inflation needed – or by how much a currency can fluctuate.
Additionally, these monetary authorities are independent evaluators when an economy requires an incentive or when it requires calming down to prevent it from getting overexcited.
Another vital marker in terms of demonstrating how strong an economy is is the amount of employment or unemployment in a country. Moreover, this aids in firming up or relaxing a currency’s health, as greater employment rates usually denote an increased desire to spend together with greater per-person, per household budgets.
Employment information is diverse, however, the essential reports (or sections of a report) lean towards being unchanging throughout countries. This includes things like Employment Change, Non-Farm Employment Change, Unemployment Claims, and unemployment rate.
In terms of economic stats, it’s important to keep an eye out for certain reports. Firstly, watch out for a country’s GDP as well as the amount of change, as this demonstrates the economy’s general strength and whether it’s increasing or shrinking.
Secondly, watch out for the Trade Balance, as it’s the fastest way to show a country’s export/import analysis.
These reports have a huge impact on the currency when they’re circulated, and sensible forex traders mark the times and dates of these reports in red on their calendars.
Certain other economic information that also influences exchanges are built on inflation. These would involve reports such as the Producer Price Index (PPI) and the Consumer Price Index (CPI).
If you trade forex, it’s important to stay tuned with the news, paying particular attention to significant reports by statistical bureaus and central banks. This allows you to tweak your trading plan when anything new happens. What’s more, you’ll also know when to do absolutely nothing at all, should you feel you’ll be at a loss.
This is how you’ll make lucrative choices and stay on top.