Forex Economic Indicators

What Are Forex Boost/Impulse Indicators?

Impulse indicators measure the rate of change in closing prices and are used to detect weakness in trends and potential points of turn. Often not taken into account for their simplicity, but the importance of the boost in the forex market should not be overlooked. They can be a great way to make a profit by identifying a strong movement that is already underway.

In this lesson we will learn some valuable additional tips that will be useful when using impulse indicators: momentum trading can be as profitable as S/R trading (support and resistance).

What Are Impulse Indicators Used For?

Impulse indicators are useful to solve the following types of common traders dilemmas that S/R indicators cannot answer. For example:

A currency pair has broken past all previous S/R points and is making new historical highs or lows, so there are no S/R levels telling us if it is a good time to place or withdraw a position. Is it worth getting on the ride, or would it be better to get out of the way?

He didn’t place positions in time on a trend that’s been working for a while. How can you tell if there is still time to follow the trend? How can you reduce or eliminate the risk of buying at maximum or selling at the minimum? It could expect a setback, but while it waits, it risks losing even more of the movement. This is a natural human error, to assume that one is too late when in fact some of the safest benefits you can take on the market are at this time of apparent “over-buying”.

You have a winning operation open and want to keep it as long as possible, but you don’t want to risk staying too long and losing part of your winnings. Or it’s approaching the resistance and its intended point of exit. Do you take profits or leave part or all of the position in the hope of letting the profits run with a trailing stop?

If we look at what happened to gold from May 2009 to August 2011, from May 2009 to August 2011 it was making new historical highs and showed only 8 months down from a total of 27, rarely regressing to anything but very short-term levels of support.

Those who expected significant setbacks never saw them arrive and missed the biggest trend of the year, while gold consistently reached new historical highs. Expecting a setback in the upward trend here was not a good idea!

We, traders and investors, earn our living by correctly predicting what will happen in the future, even though we don’t have to be exactly right to make money – we just have to be roughly right. However, the S/R indicators we have covered so far tell us about what happened in the past. While that’s helpful in predicting the future price action, S/R indicators can only tell us about the strength of S/R levels. The other half of the image is lost as they cannot tell us if a trend is strong enough to break beyond a certain level of S/R. In addition, cannot tell us anything about future price movements when a currency pair or other assets have broken beyond all levels of S/R to new historical highs or lows. Fortunately, there is a way around this, apparently, very difficult problem.

What should traders do? Employ a style of impulse trading using impulse indicators.

The Advantages of Impulse Indicators

These indicators can give us a better idea of future price movements because:

  • Show whether a trend is strengthening or weakening.
  • They can tell you if an asset is overbought or oversold according to the price range for a certain prior period.

That helps us decide whether the trend is likely to continue or change direction. Knowing this can help us predict changes and have greater profitability. In short, impulse trading with impulse indicators can offer additional clues to assess the odds of hitting even more in your favor.

There are many indicators of momentum, but at the moment we will present you with only a few of the most effective and easiest to use indicators:

  • Double Bollinger Bands.
  • Mobile Stocking Crosses (MA).
  • Three types of basic oscillators: Convergence/Divergence of Moving Mean (MACD), Relative Force Index (RSI), and Stochastics.

Why the Gold Chart? Brief Introduction to Market Relations

Are you wondering why we use a gold chart in a foreign exchange article? The reason for this is that, for a number of reasons, currencies and raw materials are often related to each other and are therefore sometimes traded as substitutes for each other.

For example, because Canada is a major oil producer, the DAC often moves with the price of oil. Under certain conditions, it’s more sensible to negotiate a DAC currency pair than oil and vice versa.

Although different types of goods, such as stocks, commodities, and currencies have some notable differences in their behaviour – for example, Forex currency pairs tend to fluctuate in value in relatively small amounts compared to commodities, that tend to be more volatile – can illustrate truths about successful trading methods by using them all interchangeably.

Gold is a special case because it is considered the main hedge against currency devaluation. When investors are concerned about the decline in the value of one of the most widely held currencies (especially the USD and the EUR), gold can rise.

Therefore, at a time when the fundamentals for both the EUR and the USD are not good, but it is not clear whether to go long or short with the USD, the traders play it safe and just have to go long with the gold. We will see that happen at a time when there is a great deal of anxiety about the stability of large parts of the global financial system. For example, gold has tended to rise during episodes of great concern over the EU’s sovereign and bank debt crisis. At times like these, traders often buy gold en masse because:

  • It seems that the EUR might not even survive.
  • The Fed may be printing massive dollars in order to help Europe and steer the US economy away from the possible consequences of an economic crisis in the EU.

In fact, if you compare a timeline of the EU crisis and a weekly gold chart covering those years, you will notice that gold often rose to new highs. Later we will cover this and other relationships between markets and know how to use them.

How Do Impulse Indicators Work?

As its name indicates, the impulse indicators focus on the price exchange rate, that is, if the price goes up or down by more than it used to. While exact mathematical calculations and emphasis vary between different impulse indicators, they all attempt to provide some perspective on:

  • If the price is changing at a faster or slower pace
  • If the exchange rate indicates the strength or weakness of the trend

For example:

  • A steady increase in the speed at which price goes up or down suggests trend strength
  • However, too rapid acceleration is often interpreted as a sign of “trend exhaustion” or a maximum turn (or minimum turn in bearish trends) suggesting a final drastic increase in optimism (or pessimism in bearish tendencies) that drains the remaining buyers (or sellers in the downward trends) and prepares the end of a trend and turn of it.

When this happens, you will hear analysts saying that the pair is:

  • “Overdrawn”, if the price has gone up too fast or for too long, and therefore is expected to turn and start to fall.
  • “Overwritten” if the price has fallen too fast or for too long, so it is expected to rise.

It is important to be careful, however, because sometimes these terms are used too easily. ” Over-buying” and “over-buying” are sometimes used when the price has just gone up or down a lot, when it is really the speed with which the movement has occurred that is the crucial factor.

Forex Economic Indicators

Want to Make a Quick Profit? Watch for These Reports…

As a forex trader, you’ll need to understand what factors drive market prices so that you can make the right financial decisions. In today’s world, forex has blown up into a global marketplace with buyers and sellers from all corners of the world investing in trades that total up to trillions of dollars each and every day. With such a wide range of market participants all over the world, the effect of microeconomic and news events has increased and now plays a large part in the prices you see for different currencies on the forex marketplace. Some of these events don’t have much of an impact on the market, while others play a major role in market prices. Below, we will explain the role of microeconomics in the forex market and review the different economic factors to look out for. 

Here’s a quick overview of the subjects we will cover in this article:

  • Interest Rates
  • Inflation Rates
  • GDP Growth Rates
  • Unemployment Rates
  • Retail Sales
  • Housing Data
  • Political News

Interest Rates

Interest rates have to do with the amount someone must pay to borrow someone else’s money and these prices have an immediate effect on financial markets. In this case, interest rates are related to central banks that need to borrow funds from the Federal Reserve. The federal funds rate, which directly affects the stock market, is adjusted by the Federal Reserve to control inflation. Higher interest rates generally have a negative effect on stock prices, while lower rates have the opposite effect. This is because it costs more money for central banks to borrow money from the Federal Reserve when interest rates are high, causing a ripple effect that goes through the entire economy. 

Inflation Rates

The inflation rate for the economy is measured by the Consumer Price Index (CPI). While you don’t have to have a deep understanding of the factors that drive inflation rates, it’s a good idea to have some knowledge about how this works. The Index reports the average prices consumers are paying for certain goods in order to point out whether those same goods are costing customers more or less. Central banks then look at this data to help adjust their policies. In the event that inflation is present, interest rates will rise to counter the inflated prices.

GDP Growth Rates

GDP stands for Gross Domestic Product and it is used to estimate an economy’s overall health. A higher GDP growth rate indicates a stronger economy and therefore makes the currency stronger. In order to measure this rate, the most recent quarter of the economy’s performance is compared against the previous quarter’s performance. You can perform a quick search engine search for the current GDP rate in any given country if you’re looking for that information. 

Unemployment Rates

Central banks consider unemployment rates to be a good measurement of the health of an economy, therefore, higher unemployment rates cause banks to increase interest rates in order to balance inflation rates with growth. Labor statistics that are released from the NFP also play a primary role in the central bank’s view of the economy based on employment. 

Retail Sales

Retail sales are considered to be a good indicator of the GDP rate for an economy because people tend to spend more money when they feel that their jobs are safe. Central banks eye spending reports that are released monthly in order to have an idea of how the economy is performing, however, there are other factors that must be considered, like wage increases, which can also lead to an increase in spending. 

Housing Data

Central banks pay attention to housing data because the sector makes up around 15% to 18% of a country’s economy. Although the exact percentage can vary slightly, the figures are usually quite impactful. When the price of houses in a certain country go up, it is a sign that the economy is strong and the building of new homes can also help raise unemployment rates. If people aren’t buying houses and prices are dropping, it’s a sign that the economy isn’t performing well.  

Political News

Different types of political news play an important role in market prices, from government spending, regulation shifts, elections, and referendums. Generally, central banks pay the most attention to fiscal and monetary policies in order to make government influenced decisions that could affect interest rates.

Forex Economic Indicators

The Secret Politics of the Dollar: Federal Reserve Vs. White House

The Strange Relationship Between the Federal Reserve and the White House has shown once again that silence is gold and the word is silver. Unlike Donald Trump, who the more he talks, the less people trust him, confidence in the Fed’s president has grown to its peak since 2004, when Alan Greenspan was in charge.

A whopping 58% of Gallup respondents believe Jerome Powell will do something that will benefit the economy. Interestingly, the lowest rating was that of Janet Yellen, who just took over as director of the central bank in 2014. And I understand that: the inner world of men is more complex, while that of women is more unpredictable.

Donald Trump has changed a lot as he rules the country. Previously, he actively criticized the Fed president for the extremely high-interest rates, compared to other states, or for the unwillingness to revive QE. Like a true friend, he whispered in Powell’s ear: write, call, when you have money, visit me!

– Mr. President, judging by your statements, you understand that true friends do not grow on trees.

– You never know.

Admittedly, Jerome Powell gave the White House owner everything he could. And the federal funding rate dropped to almost zero, and he promised to buy unlimited amounts of treasury bonds and mortgages. No one is calling the Fed any other way than “good crazy” and “runner under the rake” these days. There is no reason for criticism, so it is time to turn to other problems and scapegoats. For example, negative oil prices or China.

Donald Trump previously stated that low energy prices were a blessing for the U.S. economy. But not so low!

– How much is the oil?

– It is free!

– Why so expensive?!

Amid the sharp collapse of oil demand and social isolation, record oil production in the United States led to storage shortages, falling oil prices to -37 USD per barrel, and an intention to end the quarantine. Get Grandpa out of the bunker, it’s time to fill him with oil!

The president of the United States cannot sleep well, thinking that China will stop the recession faster. He used to attack Beijing because his predecessors turned a blind eye to China’s dishonest trade. Now is the time to try to figure out who is responsible for the pandemic. The virus came from Asia, and Donald Trump is trying to make everyone understand what the Great Wall of China was built for. Apparently, there have been unpleasant precedents.

Trump has radically changed his views. The best example is his new attitude toward the US dollar. He used to say that a strong currency is bad, now he thinks the opposite… I would say that the strong position of the dollar makes “everyone want to invest in our country” because “people are looking for security in our country”. At the same time, new loans are hardly difficult, as debt-servicing costs are low. Despite all these changes, Trump remains active. So we can’t say that people are washing their hands during the pandemic while Trump is washing his hands of the pandemic.

Forex Economic Indicators

Why is the Interest Rate Important in the Forex Market?

The factor that has the greatest influence on the Forex foreign exchange market is the changes in interest rates made by any of the 8 major central banks worldwide. These variations usually respond indirectly to other economic indicators released through the month and have the power to move the market significantly immediately, and with great force. Because surprise changes in interest rates usually have the greatest impact on this market, understanding how to predict and react to these volatile movements can lead to faster responses and higher levels of profit.

Fundamentals of Interest Rates

Interest rates are crucial for traders trading on the Forex market (especially for day traders) for one simple reason: the higher the rate of return, the higher the interest earned on the currency in which it has been invested and the higher the profit.

Of course, the greatest risk to this strategy (known as carry trading) is fluctuations in the price of currencies, which can dramatically counteract any profit derived from the interests of the currencies in which it has been invested and cause losses in positions. It is worth noting that while the investor will always want to buy the currencies with the highest interest rate (buying them with the lowest interest rate currencies), it is not always a smart decision. If trading on the Forex market were so simple, anyone with this knowledge could earn money on a constant basis, which is not the case.

This does not mean that investing in currencies to get money with interest rates is too complex for the average investor; what we want to imply is that it is a form of investment that must be made with care, especially considering that it is based on fundamental economic news that does not always produce the expected result.

How are Interest Rates Calculated?

Each board of directors of central banks controls their country’s monetary policy and the short-term interest rate at which banks have the opportunity to borrow money from other banking institutions. Typically, central banks raise interest rates in order to curb inflation or reduce them to stimulate borrowing of money and inject more capital into the economy. The latter is because in periods when interest rates are low, companies and individuals are more inclined to borrow money from banks as they have to pay less each month to repay the debt.

Generally, the investor can have a general idea about what the bank will decide, by analysing the most relevant economic indicators, such as:

  • Consumer Price Index (CPI).
  • Employment levels.
  • Housing market.
  • Level of consumer expenditure
  • Subprime mortgage market (subprime market).
  • Forecast of central bank interest rates

Based on the data from the indicators mentioned above, a trader can obtain an estimate for a possible change in the interest rate of a central bank such as the FED (Federal Reserve). Usually, if these indicators show better results, this means that the country’s economy is on the right track and therefore it is necessary to either raise interest rates or keep them the same. In the same way, a significant drop in these indicators can mean that it is necessary to lower interest rates to stimulate money lending (indebtedness).

Apart from economic indicators, it is possible to predict a decision concerning interest rates by:

  • Analysis of predictions.
  • Monitoring and analysis of economic announcements by central banks and/or other high-ranking authorities and agencies related to the country’s economy.

Major Economic Announcements

Important announcements by central bank bosses usually play a vital role in interest rate changes but are usually overlooked in response to economic indicators. Of course, this does not mean that they should be ignored. Each time the board of directors of one of the top 8 central banks makes a scheduled public statement, it usually gives an idea of how the bank views the inflation situation in the country.

In July 2008, the Chairman of the Federal Reserve, Mr. Bernanke testified on monetary policy before the House Committee. In a normal session, Bernanke reads a prepared statement about the value of the US dollar and answers questions from committee members. This meeting was no exception. In his statement and responses, Bernanke flatly stated that the dollar was good for the time being and that the government was determined to stabilize it even though fears of a recession were influencing all other markets.

The 10 am session was closely followed by traders, and because it was positive, a significant increase in interest rates by the Federal Reserve was anticipated, which led to a sharp rise in the short-term dollar in preparation for the next US interest rate decision.

This caused a fall of 44 pips in the EUR/USD in the time of 1 hour (that is to say, the dollar rose with respect to the euro). If a trader had opened a short position in the EUR/USD with a volume of 1 standard lot (100,000 base currency units), it would have made a profit of $440 for that movement in the market.

Analysis of Predictions

The second way to predict decisions regarding interest rates is through the analysis of predictions. Because changes in interest rates are usually well anticipated, banks, brokers, and professional traders usually have a consensus about the estimate of the possible change in the interest rate before the announcement occurs. And it is for this reason that it is recommended that the trader analyze 4 or 5 of these forecasts (which must be numerically close) and average them in order to obtain a more accurate prediction.

What to do when there is a surprise change in an interest rate?

No matter how good a trader is as a researcher or how many numbers he has analyzed before the announcement of a decision related to a country’s interest rates, central banks can make surprise decisions and bring down all predictions with a rise or fall in the interest rate.

When this happens, the trader must know in which direction the market will move. If there is an increase in the interest rate, the currency will appreciate, which means that investors will start buying it. If the central bank lowers the interest rate, traders will probably start selling the currency and buying currencies with higher interest rates. Once the trader has determined the most likely address, he must do the following:

Act quickly! In these periods, when a surprise occurs, the market moves very quickly, as the vast majority of traders try to buy or sell (depending on whether there was an increase or reduction in the interest rate) as soon as possible to overtake other market participants, which can generate a profit means if done correctly.

Be very careful about a possible reversal movement of the high volatility trend. The perception of the trader tends to dominate the market shortly after the announcement on the interest rate is released, however, over time the logic comes back into play and impose itself, which can cause the trend to move back in the same direction as it did before the announcement, especially if there are other fundamental factors involved that move the price of the currency in that direction. It should be remembered that the exchange rate of currencies is not determined solely by interest rates; there are also other key factors that are of the utmost importance in the long term.

Real-Life Examples

In July 2008, the Bank of New Zealand had an interest rate of 8.25%, one of the highest in the world. The NZD/USD exchange rate remained on the rise for a period of several months because NZD was a currency that investors were buying in large quantities because of the high rates of return it offered compared to other currencies with lower interest rates.

In July, against all odds, the board of directors of the Bank of New Zealand lowered the interest rate to 8% during its monthly meeting. While this 0.25% cut may seem small, Forex traders took it as a sign that there was fear in the central bank of a possible increase in inflation, and immediately began to withdraw their funds, or sold the currency (NZD) and bought others – even if these other currencies had lower interest rates.

In this case, the price of NZD/USD fell from 0.7497 to 0.7414, a total of 83 pips, in the course of 5 to 10 minutes. A trader who had sold only one lot of this currency pair would have made a net profit of $833 in just a few minutes.

However, not long after this fall, NZD/USD began to regain lost ground and continued the previous general trend, which was bullish. The reason the price did not continue to fall was that despite the cut in the interest rate, the NZD still had a higher interest rate (8%) than most other currencies.

As a separate note, it is important to carefully read and analyze press releases in which the central bank has announced a change in interest rates (after determining if there has been a surprise change), as they help to understand the bank’s view of future interest rate decisions. The information in these advertisements usually induces a new trend in the currency after the short-term effects occur.


The monitoring of news and the analysis of the shares of the central banks should be a high priority for any trader operating in the Forex market. This is because the decisions of central banks directly affect the monetary policies of countries, so they tend to cause strong movements in the foreign exchange market, mainly in the exchange rates of the currency pairs that include these currencies. As the market moves, traders have the ability to maximize their profits, not only through the interest earned through carry trading, but also through strong price fluctuations in the market.

Careful research and analysis can help the trader avoid unexpected changes in interest rates and react appropriately to them when they inevitably occur.

Forex Economic Indicators

Tips for Trading During the Coronavirus Pandemic

Anytime a global crisis happens, investors tend to panic and start selling. Although it might seem like a bad idea to invest when things are so crazy, the market actually sees growth after the dips that are caused by the actions of fear-stricken investors. Pandemics and global disasters can actually present trading opportunities, as long as one reacts properly. Below, we will provide a few tips that can help traders make it through this pandemic on top.

Tip #1: Don’t Panic!

Pandemics are generally known for causing hysteria. The COVID-19 pandemic itself has been known to cause shortages of food and other essential items due to hording. Many people might have seen the ways that this type of panic has carried over to the stock market. For example, you might see a drop in your investments and quickly sell out your assets out of fear. Remember that selling everything and being terrified of the stock market is caused by your emotions, and that making financial decisions out of fear will cause you to make mistakes. Instead, try to focus on long-term goals and watch for bearish opportunities as the market recovers.

Tip #2: Take Advantage of the Market

During times like these, the value of stocks will go down. This makes it a good time to invest in stock for good companies while the price is down before the price goes back up. You won’t see many opportunities like these, and prices will eventually go back to normal. Just be careful, as shares in bad companies might stay down, so you’ll need to be mindful of the companies you’re investing in. Think about the fact that others are thinking from fear and anxiety and anticipate the way the market will move.

Tip #3: Consider Diversifying your Portfolio

You should be mindful of what you invest in during times of global pandemic, but it might be a worthwhile idea to invest in different resources. If you typically invest in currency pairs, consider adding commodities to the list. Having your money in different places can help to cushion the blow if one of those investments goes bad, so it’s better to have different options.

Tip #4: Be Mindful of Risks

Traders should always take precautions to limit their losses, especially during times of pandemic and hysteria. Of course, you will need to be even more careful right now. Make sure you’re using a stop loss and consider setting take profit levels or other measures to ensure that you don’t blow your account. Take another look at your trading strategy as well and look for any needed changes. You don’t need to change everything out of fear, just simply look at the way the pandemic has affected your profits thus far and see if there is anything that needs to be changed. If you don’t already keep a trading journal, consider keeping a special one until the pandemic passes so that you can keep a close eye on the ways that it is affecting your outcomes.

Tip #5: Look Towards the Future

There are a lot of reasons why COVID-19 has inspired panic, not only in traders but in all of us because of how dangerous it is and how it can affect our lives. If you haven’t found yourself doing much trading because you have too much on your mind, or if you’re feeling too anxious to trade, remember that this will pass. All of the previous pandemics have ended at some point. Try to profit from it by anticipating what the market will do but understand that it is ok to take a break from trading if your head isn’t in the game. Things will eventually go back to normal.

Final Thoughts

The COVID-19 has caused many investors to sell and take profits out of fear and anxiety. Good investors need to understand how times of crisis affect the market and make smart trading moves while practicing risk-management techniques to limit their losses. To make effective trading decisions during any times of market uncertainty, one needs to be able to handle their emotions, otherwise, they are bound to make bad trading decisions. Don’t panic and remember that this pandemic will pass, and the market will go back to normal before we know it.

Forex Basic Strategies Forex Economic Indicators

Trading Forex News: Why Risk Assessment Calls for a Different Approach

We know how certain markets, such as the crypto market, foster the culture of sharing news and exchanging information. The spot forex market, however, appears to be calling for a different approach for traders to truly master the skill of trading currencies, building the very needed psychological resilience along with one’s trading account. Some of the market’s most prominent traders even fervently support the idea that trading news is one of the least effective strategies forex traders could ever implement. While a number of traders keep striving to find a way to trade news, a portion of successful traders insists on employing another method. Today, we are trying to understand whether traders should necessarily avoid every type of news, and how reliance on such information affects trading, analyzing claims against incorporating news events in trading currencies.

When we think of news, we should first differentiate between the types of information which can have an impact on forex traders and the second type that has no influence on their trading. The forex community consists of traders, which is distinctly different from investors, which why a number of news announcements on websites such as Bloomberg or CNBC simply do not apply to the currency market. Various sources entirely disregard the forex-related news, whereas other media provides information that is simply not very useful and thus should not constitute a part of traders’ daily routine. In comparison to the previous group, news that forex traders should concern themselves with is economic indicators, which are scheduled news events. These pieces of information always come in advance several times a year (e.g. every two or three months, each quarter, etc.). Of course, traders may suddenly receive some unexpected news at times, but such cases are exceptionally rare and seldom. The benefit of having such transparent information ahead of time is to know factors that can actually affect the market in some way and along with the time of these events’ occurrences.

For traders to be able to make use of such pieces of information, they should first access news calendars, which are available online (e.g. and These calendars are an excellent source of information because they offer traders the possibility to protect themselves against any potential pip falls in advance. Nonetheless, even if some of the existing economic indicators or news events lack to provide any information a trader may find relevant, they still have a great impact on trading overall. What often happens is that certain pieces of news alarms people and, as you may already know, the more traders react, the faster will the banks get involved. When the big banks overreact, it usually entails some important market activity ending with the price changing direction. Therefore, consulting news calendars before entering a trade is a crucial part of trading in the spot forex market because traders need to have any available information at their disposal as early as possible.

Some traders assume that managing news events is possible, believing that by possessing these information items gives them control over the market, to the extent that they deem generating a great number of pips in little time possible. Their viewpoint on news events boils down to the idea that the moment such news comes out, they will take specific action accordingly. Should the news be strong, they will go long on their chosen currency and vice versa. They believe that any timely reaction will easily bring them many pips, and we cannot but confirm that such a belief is based on solid grounds. Nonetheless, the fact that some traders managed to achieve this does not prove its quality. Not only does it happen occasionally, which immediately introduces a higher than necessary risk, but it also leads to false conclusions. Wanting to stay on top of news events is equal to trying to beat the traders’ main opponent, the big banks, and attempting to fight the one who decides how the prices will move is a very bad idea in the long run. Failure is inevitable when your adversary is unbeatable, so any attempt to control the news already implies more risk than anyone should have to take on.

Since traders already have no power over the price, they may need to consider the role of the big banks on a deeper level. These banks can choose to redirect the market in any desired way and, even if they ever get fined for manipulating prices, which does happen from time to time, they have enough financial support to withstand and last. You may have already noticed how certain decisions they have made in the past have always been justified in the media, regardless of how incomprehensible or unreasonable those may be. Often when traders receive some positive news regarding a particular currency, a pair involving the currency will suddenly go short and keep the same direction for a long period of time. The forex news media (for example Twitter and Bloomberg, among others) always appears to be prepared under any circumstances, providing some vague explanations such as claiming how the news has already been priced in. Traders, unfortunately, do not possess this information beforehand and each time a price moves in an unusual fashion, traders are made to believe it was them who failed to read through the news or take the right steps. Therefore, going against this powerful opponent is sheer luxury traders need not indulge in for the sake of keeping their accounts.

While the price may at times take a strange direction, there are times when they move in an expected manner. Traders may have witnessed how, when some positive news came out on a particular currency, it become more expensive as a result. News events have the power to dictate whether a price will become higher or lower, but you should know that it is the big banks pulling the strings from the shadow. The news may say where the price will go, but these banks alone will ultimately decide when such action will take place and what will happen with the price before it gets there, moving it up and down to their liking. Apart from special permissions, the big banks also have access to exclusive tools that allow them to see orders, stop losses, and whether traders are going long or short. As they have the ultimate power, they can trigger traders’ stop losses and manage the market as they like. What the big banks especially look forward to is seeing where the majority of traders are going because it is the moment that is the most rewarding for them. The ability to see retail money only helps them earn more by moving the prices against the majority. Therefore, when any big news comes out, they immediately know where the price will have to end up for them to reap the benefits, leaving most traders on the other end of the spectrum.

Some traders may still want to make money trading while the big banks are busy, but this approach will only bring random wins. Unfortunately, this game was designed so that there is always only one winner and traders are not meant to be the ones taking the prize home. You should not, therefore, feel confused or surprised if you realize that the price did not act the way you imagined it would, as this market will never let you build your account this way. While you may have previous success with handling news, you should know that the likelihood of maintaining the same approach long term is rather low. Because many successful traders have already failed to try to play these games in the past, they understand that the best solution is to not get involved. Traders need to seek actions that will grant them control and they definitely cannot control the big banks’ decisions, the news events, or the manner in which the masses are going to reach them. By willfully taking part in the attempt to manipulate news events, you are in fact giving u control over your own money.

The reason why so many traders get involved in such activities is the rush of instant gratification, which practically boils down to the urge to satisfy the greed for becoming rich fast. The best strategy for any trader dealing with such compulsive need is to learn how to properly address the news, and to be able to do that will then require them to have a set plan in place. You do not have to go to great lengths to be able to secure financial stability. Trading five-minute charts, managing numerous screens, and making rash decisions upon entry and exit will not necessarily lead to any lucrative outcomes. By trading the daily chart, for example, you can successfully evade the impact of news events. Just by looking at the news calendars, you can develop insight into the substantial quantity of news happening on a daily basis. You can also, therefore, grasp how many pieces of information the traders using the five-minute chart, which is a stressful endeavor alone, need to manage at the same time. Trading smaller timeframes, hence, does not necessarily imply having more benefits, but quite the contrary.

Traders have probably seen cases of important news going against the majority of people trading smaller time frames that inevitably produce disastrous outcomes for the group in question. Forex traders using the daily chart, however, may occasionally experience some drawdown, but with the right approach and direction as well as technical skills and tools, it is more often than not only going to be a temporary setback until the price eventually returns to its previous course. Even in the case of some unfavorable news, daily chart traders only need to patiently wait out the interim periods and have a ready plan they will see through until the transition is complete. This further entails that traders are required to be prepared in advance in order to protect their trades from any major events by knowing how they will address any type of news they come across. Luckily, traders have such information at their disposal well in advance in most cases and, what is more, these events often concern only one or two currencies, further reducing their impact.

Although these events rarely affect daily chart traders, as described above, they still need to be wary of going in blindly or unprepared. By being cautious and attentive, traders will establish a firm foothold and withstand any alternating circumstances. Furthermore, they may escape a series of unnecessary yet painful losses and build on the momentum of accumulating wins rather than the opposite. To grow an account, you need to think of potential failure ahead of time because in the world of trading currencies you essentially win by not losing. If you drag your account down by taking unwise steps, allowing yourself to be compelled by any upcoming news event, you willfully and consciously engage in activities that will ultimately cost you your account and financial stability. The main benefit of adopting an observant and focused mindset, you prime yourself for success and give your account the opportunity to be much bigger at the end of the year.

An excellent example of the events requiring such a regimented approach is the times of elections when the market behaves in an unusual and uncontrollable manner. Whenever traders attempt to stay on top of those events, they eventually help banks gloat over the results. The U.S. presidential elections and Brexit are the very proof of how external circumstances and unexpected turns of events affect trading because not only did traders witness exceptional turmoil in the market but they also often had their stop losses passed. The market is not intended to act according to traders’ needs and desires, especially under such circumstances, so if you aspire to trade during the times of utter commotion, you are entering a game you cannot control. Some traders may have had some success while trading during elections, but such wins can hardly be more than exceptionally random and rare instances of gaining the upper hand. If you are ready to commit to a disciplined approach, you may need to reconsider trading elections and thus substantially reduce the risk levels.

Certain news events affect the market long term, leading to more lasting changes. When Greece was undergoing major challenges with the overdue debt burden, the European Union was weighing a decision whether to provide further assistance or refrain from lending any more money to such a greatly weakened economy. Through the course of this long period, a plethora of varying news events would suddenly come out, rendering traders confused and lost. They could not know what the news would indicate, how the market would react, or the direction EUR would take. The same scenario repeats itself every time we face any major transformation, directly affecting the market and the related currency. Therefore, the best strategy any trader could adopt in these long and unpredictable periods is to avoid trading the currencies in question. Eliminating additional risk and ignoring all pop-up news for as long as it takes for the dust to settle provides traders with real control in tumultuous times. Fortunately, with having the option of trading eight major currencies, you still have enough room to keep your account active and earn a profit in a safe and sustainable manner.

With regard to short-term events, it is always best to consult a news calendar prior to entering a trade, making it an essential part of one’s daily routine. There is a great number of events traders can ignore; however, a portion of news events has proved to trigger trading by knocking individual stop losses., for example, is an excellent resource offering a historical overview of how prices moved when news came out in previous years. It provides into how an event that occurred two years ago may not have the same effect at present and vice versa. The impact of events can change substantially, where something traders found to be entirely unimportant before can gain importance in time. Nonetheless, what we can control and use as a relevant piece of information is the knowledge of events that historically elevated risk levels for traders, which is why understanding how each currency is particularly susceptible in a specific situation is crucial for both avoiding volatile market activity and maintaining control over one’s trades.


The correlation between nonfarm payroll (NFP) data and the strength of USD proves how trading during this biggest news event of each month is an unwise decision, especially due to its tendency to bring about quick and erratic market activity. The circumstances involving interest rates and The Federal Open Market Committee (FOMC) also require special attention because each time interest rates rise or fall, so does the people’s interest in those currencies. Whenever there is an increase in interest rates, traders look forward to investing their money in the currencies in question owing to the potential of getting a bigger return. Likewise, in the scenario where interest rates decline, traders will inevitably search for better places to direct their money.

Furthermore, each time certain prominent figures decide to speak publicly, their words appear to have a bigger impact on the market. Jerome Hayden “Jay” Powell, the current Fed Chair, is an epitome of a public persona whose apparent disagreements with President Trump may be the source of additional concern because of the number of different interpretations people can derive. When we are assessing words, we are not dealing with any quantitative data, so the result of the manner in which the majority of people conceptualize what was said may lead to some unexpected changes the markets will undergo. From the side of quantitative factors, traders should pay attention to the Consumer Price Index (CPI), which measures price level changes, and these numbers have only recently started to have an impact on USD. As said before, the news impacting this currency may vary and change in relevance over time, but their current impact should not be disregarded.


Due to the fact that this currency spans across several countries, the impact of the news is of a lesser degree than it would be in case of a currency dominating a single country. Apart from interest rates, which prove to be a common factor among all currencies, people trading EUR should pay additional attention to the news coming from the European Central Bank (ECB) because the previous President Mario Draghi’s seldom statements often caused quite a commotion with regard to EUR.


One would expect economic indicators to have a stronger impact on a country that is as small as the United Kingdom but appears to be irrelevant in this case. Interest rates in this country depend on the Monetary Policy Committee or MPC whose nine members’ vote determines the timing and the direction of interest rates. News calendars will typically disclose information of a uniform nature, where all nine members agree on the same decision. Nonetheless, should this ever change, it may cause GBP to act strangely causing traders to feel alarmed. Another important news concerning the currency is GDP owing to the fact that a country smaller in size is naturally more affected by its gross domestic product than in the case of larger countries.


Aside from interest rates, the Canadian market has proved to be vulnerable when it comes to the employment rate, with these numbers often oscillating at the same time as nonfarm payroll which allows traders to tackle two factors simultaneously. Retail sales should be included in the traders’ assessment of the market’s stability and their next move. The last factor in terms of news events relevant for this currency revolves around CPI, whose significance has grown as of recently.


Interest rates and employment numbers also affect this currency as they do some of the previous ones. Yet, what is different about AUD as opposed to other currencies is the impact of the news coming from China. As Australia’s favored trade partner, events occurring in China would naturally impact AUD. Nowadays, however, due to the fact that the Chinese economy has subsided in the recent years, they are not going to buy as many minerals and materials from Australia as before when the country was in the building stage, which lessens the overall impact of news events originating from China on AUD.


New Zealand’s currency is affected by a number of factors discussed above, such as the employment rate and GDP. However, we also need to introduce GDT, global dairy trade, as dairy does constitute an important part of the country’s economy. Therefore, whenever the news of GDT comes out, it naturally makes a difference in the market of the Kiwi dollar. It is important to remember that some news calendars may not detect or disclose this, or any other piece of information for that matter, which further entails that you may need to consult several news calendars (consider the previously-mentioned options) in order to put together the complete picture. Interestingly enough, interest rate appears to not have had a major impact on the currency in question in years, which certainly does not indicate that it will not become an important factor once again in the future.


One of the last two currencies which seem to undergo little impact of news events is JPY. As with NYD, the Japanese currency has also not seen any activity worth mentioning in terms of interest rates since they seldom change, but they may pose a threat in the future when they do. Luckily, it a single piece of news that comes out only once each month, which does make it easy for traders to monitor and detect any news-worthy changes.


The Swiss currency, similar to the ones before, may one day start depending on the fluctuations of interest rates, named the London Interbank Offered Rate or LIBOR in Switzerland when traders are advised to sit out and patiently wait for the currency to stabilize.

While we have analyzed the main news which may have an impact on the major eight currencies at present time, you may come across other news events as the nature of the market is to always grow and change is naturally an inherent part of such growth. We also need to mention that both banks and people trading in the currency market can choose how they will react regardless of individual expectations and/or needs. The example of the 2019 flash crash should serve to teach traders a lesson that even if we know some information in advance like we knew how Apple sent out a warning concerning the Chinese economy, big banks still allowed the market to go into a craze. News, be it small such as this one or a more sizeable piece of news, can at times stop traders. However, we need to accept it as an integral part of the forex market and decide to move on. While there is a vast number of aspects to trading currencies traders cannot control, what they can in fact do is devise a plan that will serve to protect and support them on their path of growing accounts and finances.

For every news event coming out, each trader should be mindful of the available steps he/she can take so as the secure the best possible position at the time. If, for example, traders are not trading a specific currency pair while receiving some important news, they are advised to refrain from entering any trade involving the currency in question should the news event be occurring within the following 24 hours. If there is a possibility of securing any candles prior to the time frame we have just mentioned, you may freely do so. As long as the trade falls under the period of one day, you are entering the market at the risk of endangering your finances and your account at the same time. This rule will surely introduce more control over news events and limit the urge to trade recklessly, thus providing the necessary stability all people trading in the spot forex market should strive to ensure.

If the news event, however, involves the currency you are trading at the time, you will be able to apply a few different strategies depending on the stage of the trade you are in. In case you are in a trade where you are slightly losing (e.g. 50 pips), but your stop loss has still not been hit, and a big news event is about to take place within the 24-hour period, you will need to exit the trade so as to protect yourself. Taking such loss may be difficult, but considering the fact that by staying you would in fact be open to facing an even bigger loss, this option is the safest it can possibly be. While it may not happen very often, you do not have to get yourself to the stage where the price passes your stop loss without having been triggered. Hoping that the price will go back your way immediately involves too much risk and the cons are simply incomparably higher than the pros. The only way to eliminate a risk this big is to close these trade because the likelihood of your account recovering afterward could be highly questionable otherwise.

If you have entered a trade that is now winning, there are several important facts you should take into consideration. Firstly, regardless of the fact whether you have already taken any profit, using the ATR indicator as your take-profit point is always advised. We can typically see two scenarios unfolding in this case: either a trader has entered a trade but no profit has been collected yet or they have already taken some profit off the table but the price is now falling. In either case, there is only one solution that will mitigate the risk that comes from trading under the impact of an upcoming (or very happening) news event. The only solution here is to take whatever profit you have made so far and exit the trade at peace. There will surely be people who earned a big profit during the time of an important news event, but what this approach is about is limiting the losses. If a trader was lucky enough to go unharmed once, the same circumstance may not play out again which is why this risky approach is then not your best long-term strategy. Even if a trader chooses to move their stop-loss to the break-even point, the odds of a stop-loss being taken out under such circumstances are higher than they may realize. Whatever preventative measure you think you have included in your trade does not truly mitigate the risk, which is why exiting such trades is the only logical and safe solution.

The very last context we will be analyzing today concerns trades that have already scaled out and are still winning. If you have taken your profit at the ATR value, for example, and you are satisfied with how the trade is progressing, you should carry on as if it were any other normal circumstance despite the big news event approaching. You have probably moved your stop-loss point to the break-even or you are relying on a trailing stop, so there is no need to include any other measure at this point. This scenario has several benefits starting with dealing more pips due to trading the daily chart. Moreover, there is a chance that the price does not hit your trailing stop, but keeps moving in the desired direction even further instead. Be it this best-case scenario or a somewhat different one, your trailing stop will always provide the protection you need under these circumstances. Regardless of which scenario you get to experience among the ones discussed in this article, you should always assess the risk levels and take any preventative measure you can so as not to end up where the majority of traders do.

Finally, the notion of going against the big banks is a losing game and the game which will inevitably, sooner or later bring about massive failure. Your job is not to play the game where everyone is meant to lose, but to navigate around the challenging circumstances the best you can. Recognize the repetitive cycles and acknowledge the news events in a rational, non-compulsive fashion. Learn how to read through the news and understand how some events will take months to fully play out, along with taking a number of traders off the trading scene. Whenever you notice the tension building up in the market, the best strategy is to simply be patient and wait for the turmoil to pass. You cannot predict how any participant in the market is going to react, which is why getting involved in any of the events you cannot control is a risky decision. Use wisely the knowledge on the events you should consistently avoid and keep researching the market and the currencies in the context of the states they govern.

Include news calendars in your daily routine and adopt a healthy, sustainable action plan which you can call upon at every trade stage or in any circumstance. Whatever action you are planning to take, you should always rely on the system you developed because it will provide you with technical support this line of business heavily requires. Lastly, while the effect of having such a comprehensive approach to trading may not help you see any immediate results, by the end of the year your account will provide transparent and tangible proof of how having a structured plan supported by technical tools and factual knowledge always leads to success.

Beginners Forex Education Forex Economic Indicators

Does a Recession Have an Impact on Forex?

Times change, politics change, economics change, and how do deal with those changes means everything. This phenomenon is not related directly to forex trading but it might be crucial for our long-term success and overall development as forex traders. We need to set us up to succeed and be far more prepared for the problems than anybody else. We want to be equipped if and when the next economic collapse comes. The longer we wait the worse is going to get, and we simply need to have some kind of a plan, we need to know what very next step we are going to take. Good thing is that there is always a way to overcome obstacles but surely there’s a lot more to this.

Trading experts agreed on one, forex is recession-proof far more than any other investment we know. No one can truly forecast of how the economic landscape is going to look like but if everything goes south we need to play defense based on our trading knowledge. Especially nowadays when almost everybody is playing offense because we are in the biggest economic rally in recorded history. Our goal is to change our mindset and start to be proactive now instead of being reactive when the problem is already on our doorstep. So how are we going to play defense? The first thing we can do is not to overpay our taxes, we want to keep them legally as low as possible, secondly, keep your precious metals close to you, make sure your money is disposed to a different place.

These are some of the ways of how we can stay solvent, this is how we might stay alive where everything goes south because the next economic collapse will come, don’t doubt it, it would be a miracle not to happen. From this perspective, we can put ourselves in a position where we can play offense and investing when everything out here is super cheap, like real estate, stocks, etc. These are all good things to do in general but they might be great if the next crisis comes. It could be a perfect way to stay protected and take advantage of the economic downturns when the time comes. The last thing we want to be is a helpless person who complains because they lost their job due to the recession, and how the costs of living are high.

The better option is to try to be in control of our destiny. Educate yourself on economics, be dedicated, and focus on details. One of the better economic minds from which we can learn a lot is Ray Dalio, he was explaining how recessions are cyclical, how we actually need them, and how they are supposed to happen every so often. Because we borrow money through credits, we have cycles.

This isn’t any due to law or regulation, it’s simply in human nature and the way the credit works. If we want to buy something we can’t afford, we need to spend more than we make, we do that through credit. Basically any time we borrow we create a cycle. We can explain cycles through debt. ‘Debt allows us to consume more than we produce when we acquire it, and it forces us to consume less than we produce when we pay it back’. All of you people out there, try to remember the sentence above. Debt swings occur in two big cycles. Statistically, we need about five to eight years for the first cycle and about seventy-five to one hundred years for the second cycle. While most people feel the swings, they typically don’t see them as cycles. Day by day, week by week life goes on, and big wheels of the economy are shifting gears.

The reality is that most of what people call money is, guess what, credit. For example, the total amount of credit in the United States is about seventy trillion dollars, and the total amount of money is about five trillion dollars. As a result, an economy with significant potential in credit makes us spending more, which can cause over-consumption that can’t be paid back. So if the cycle goes up, it eventually needs to come down. It is important for us not to forget these fundamentals because they can help us in making the right decisions. So don’t have your debts rise any faster than income because your debt burdens will eventually crush you, don’t let income rise faster than productivity because you will become uncompetitive, and most importantly do all that you can to raise your productivity because that is what matters the most.

Trading one currency against others we need to be careful, because The United States dollar may not be the safest place to be during the next economic breakdown like it was back in 2008. Peter Schiff said as well that The United States dollar is not the safest currency like before and that it might collapse, so we all need to take a serious precaution to protect ourselves and our accounts. No matter how bright the situation is or no matter how bad it gets, we need to gain the comfort of not having to worry about losing our jobs and incomes just because the economy is falling apart. We don’t want to be dependant on what markets say about the values of some goods. Forex trading is different, that is why we are in advantage. We are trading one currency against others, it is unique and different. So is it forex trading recession-prof? Probably yes. Are we recession-prof? Certainly not.

Here’s what we can do, if we have all our physical money in Canadian dollars or Australian dollars we should consider turning some of those dollars in other currencies, like Euro, Swiss francs, Chinese yuan, or The United States dollar. Apart from bank accounts, most financial experts and traders are keeping their wealth in precious metals as we mentioned. Hopefully, if things were to ever go pretty bad, we would have a chance to stay protected, and we will be ok.

Note that this also means if your forex trading account is in the USD, for example, consider diversifying into other currencies, or even better mix asset categories. Your portfolio should consist of several layers of diversification, by type and category. Pay attention when is the best time to invest in Gold, Oil, various currencies that escalate, or that have stable economies behind. You should also pay attention to the risks each asset carries, for example, crypto and new company stocks might be the least present in your portfolio and Gold the most. This structure is common with the most successful investors such as Warren Buffet, they have risky assets in case they skyrocket, but also have assets that do not have high probabilities of dropping too much in value.

Forex Daily Topic Forex Economic Indicators

What Moves the Forex Markets?

Analyzing the Forex Market

There are three ways to interpret the Forex markets: Fundamental Analysis, Technical Analysis, and Sentiment Analysis. But the markets move for just one reason: Supply and demand.
Supply and demand changes slowly or fast, depending on the current economic events, but that change is due to the Sentiment or beliefs of the major operators about what they think are imbalances of the market. That happens when institutional traders believe the current price is not a fair price, and it is due to change in the near or far future. The best strategies combine the tree methods to make the trading decisions, but a trader must always keep in mind the fundamental forces that move the Forex markets.

Fundamental Analysis

Fundamental Analysis deals with the economic and political events and situations that change supply and demand. Among the most important indicators are economic Growth Rates, Inflation, Interest Rates, Government Debt and Spending, Gross Domestic Product, and Unemployment. Fundamental Analysis combines all this information to determine the possible sentiment of the market participants and ultimately forecast the future performance of an asset.

Supply and Demand

Currencies’ prices change primarily driven by supply and demand. If the supply is larger than the demand, the price drops, and if the opposite happens, it goes up. We, as traders, cannot determine if the imbalance of the supply-demand forces is due to hedging, speculation, or monetary conversion. For example, the US dollar moved with strength from 1998 to 2001 when the Internet as the NASDAQ boom drove international investors to participate in the US financial markets in search of high returns. Investors had to buy dollars and sell their local currency, so the Dollar gained strength. At the end of 2001, the political climate changed after the 9/11 event, the stock market fell hard, and the FED started to cut interest rates. Therefore, stock investors moved their capital elsewhere, so they sold the Dollar, and its price dropped.

Capital Flows and Trade Flows

The flows of capital and trade are two major factors in the balance of payments. These two factors quantify the amount of demand for a currency. Common sense tells us that a balance of zero is needed for a currency to hold its value.
A negative number in the balance of payments will indicate that capital is leaving the domestic economy more rapidly than it is entering. Under these circumstances, the currency should move down. The opposite should happen if the balance of payments is positive.
An example of this is the Japanese Yen. Despite the fact of negative interest rates, the Japanese yen has managed to trade mostly moved by its high trade surplus; thus, this currency tends to increase in value. The Japanese government uses a negative interest rate policy and increases the money supply (by printing new money), counteract the inflows of currency coming from the export business to hold the currency’s value to a level not endangering its export business.

The capital flows show a measure of the net amount of currency bought and sold due to capital investments. A positive figure implies that the inflows originated from international investors entering the country exceded those bought by domestic investors abroad.

Physical Flows

Physical flows are originated by foreign investments, directly purchasing real estate, manufacturing facilities, and acquisitions of local firms. These operations require that foreign investors buy dollars and sell their local currency.
Physical flows data are essential, as they show the underlying changes in the physical investment activity. A change in the local laws encouraging foreign investments would boost Physical inflows. That happened in China when it relaxed the laws for foreign investment due to its entry into the World Trade organization in 2001.

Portfolio Inflows

Portfolio inflows measure the capital inflows in the equity and fixed-income markets.

Equity Markets

The Internet and computer technology enabled a greater easy to move fast and easily capitals from one market to another one in the search for profit maximization. A rally in the stock market can be an opportunity for any investor no matter where he lives. If the equity market rises, the money will flow in and drive the local currency up. If it moves down, investors would quit and move their money away.

Fig 1 – US Yields versus Stock Market Cycles


The attraction of the equity markets compared to fixed-income markets ( bonds and monetary investments) is growing since the early 90ies. For example, the foreign transactions of US government bods dropped from 10-1 to 2-1.
That can also be verified when we see that the Dow Jones has over 80 percent correlation with the US Dollar Index.

Fig 2 – US Dollar Index and the DOW-30 correlation  (Created using Tradingview)

Fixed Income Markets

Fixed income markets start being appealing in times of global uncertainty due to the perceived safe-haven nature of this type of investment. As a result, countries offering the best returns in fixed income products are more appealing and attract foreign money, which would need to be converted to the country’s money, boosting the demand for this particular currency.
A useful metric to analyze fixed-income flows is the short and long-term yields of the different government bonds. For example, comparing the 10-year US Treasury note yield against the yields on foreign bonds. The reason is that investors tend to move their money to countries offering the highest-yields. Thus, for instance, a rise in yields would signify a boost in the inflow of fixed-income capital, which would push the currency up.
Aside from the US Treasury notes, the Euribor futures or the futures on the Interbank Rate is a good gauge for the expected interest rate in the Eurozone.

Fig 3 – 10-year note yield curves on Industrialized Countries


Trade Flows

Trade flows are needed for import and export transactions. The Trade flows figure is a measure of the country’s trade balance. Countries that are net exporters will show a net surplus. Also, they will experience a rise in the value of their currencies as the result of the exchange transactions, when exporting companies trade the foreign currency for local money, as the local currency is bought more than sold.
Net importer countries will show a negative figure in its trad flow metric, and, since its currency is more often sold than bought will experience a push to the downside.

Economic Surprises

It seems logical that changes in any of the discussed flows would affect the involved currency pair. Traders, though, should focus on economic surprises. That is, data releases that are considerably different from the consensus forecasts. An unexpected figure would shatter the market and likely produce a long-term trend change. The trader should not trade the event itself, but use it to forecast future price trends and plan his short-term trading strategies with the long-term figure in mind.

Reference: Day Trading and Swing Trading the Currency Market, Kathy Lien


Forex Economic Indicators

Let’s Understand The ‘Current Account’ Economic Indicator

Current Account vs. Capital Account

The Current Account and Capital Account make up the two components of the Balance of Payments in international trade. The Capital Account represents the changes in asset value through investments, loans, banking balances, and real property value and is less immediate and more invisible than the current account.

The Current Account

The Current Account is a record of a country’s transactions with the rest of the world. It records the net trade in goods and services, the net earnings on cross-border investments, and the net transfer of payments over a defined period of time. The ratio of the current account balance to the Gross Domestic Product provides the trader with an indication of the country’s level of international competitiveness in world markets.

What makes up the Current Account?

Trade balance: which is the difference between the total value of exports of goods and services and the total value of imports of goods and services.

The net factor income: being the difference between the return on investment generated by citizens abroad and payments made to foreign investors domestically and,

Net cash transfers: where all these elements are measured in the local currency.

What affects the current account balance

The current account of a nation is influenced by numerous factors from its trade policies, exchange rates, international competitiveness, foreign exchange reserves, inflation rate, and other factors. The trade balance, which is the result of exports minus imports, is generally the most significant determining factor of the current account surplus or deficit.

When a country’s current account balance is positive, the country is considered a net lender to the rest of the world, and this is also known as incurring a surplus. When a country’s current account balance is in the negative, known as running a deficit, the country is a net borrower from the rest of the world.

A Current Account Deficit

A Current Account Deficit occurs when a country spends more on what it imports than what it receives on goods and services it exports. This term should not be confused with a trade deficit, which happens when a country’s imports exceed its exports.

When a country is experiencing a strong economic expansion, import volumes may surge as a result. However, if a country’s exports are unable to grow at the same rate, the current account deficit will widen. During a recession, the current account deficit will shrink if the imports decline and exports increase to countries with stronger economies.

Influence on the currency

The currency exchange rate has a huge impact on the trade balance, and as a result, on the current account. A currency that is overvalued leads to imports being cheaper and thus making exports less competitive and widening the current account deficit.  An undervalued currency can boost exports and make imports more expensive, thus increasing the current account surplus.  Countries with a chronic current account deficit will be subjected to investor scrutiny during these periods of heightened uncertainty.  This situation creates volatility in the markets as precious foreign exchange reserves are depleted to support the domestic currency. The forex reserve depletion, in combination with a deteriorating trade balance, puts further pressure on the currency in question. This leads countries to take stringent measures to support the currency, such as raising interest rates and curbing currency outflows.


The Data

The Organisation for Economic Co-operation and Development (OECD) was founded in 1961 “[…] to promote policies that will improve the economic and social well-being of people around the world” (Source: OECD) and is comprised of 34 countries. The OECD publishes quarterly reports comparing figures on the balance of payments and international trade of its 34 members.

Here you can get detailed information on the 34 listed countries Current Account Balance


Forex Economic Indicators

What Is Gross Domestic Product (GDP) & How Is It Useful For The Forex Traders?


Gross Domestic Product, also known as GDP, is one of the main Microeconomic Indicator in Forex. It is the total amount of money spent on final goods and services. GDP is expressed in percentage terms and is calculated across different time periods. The time period is usually from one quarter to another.

It is a standard measure for the value added to the country’s economy through the production of goods and services during a specific time period. GDP is published by the International Monetary Fund (IMF), and information on the same can be found on their official website.

What does GDP measure?

Just as explained in the beginning, GDP measures the health of an economy. If the GDP of a country is high, it means it is receiving capital flows from central banks and institutions, which is a big positive for that country. However, if the GDP numbers are declining quarter on quarter, it means the economic growth of the country is shrinking. When GDP falls, unemployment in the country rises, and output in production drops.

GDP is important because it gives a birds-eye view of how the economy is doing. It is a sign of people getting more jobs, getting better pay, and businesses feeling confident about investing more.

Calculation of GDP

The GDP of a country can be calculated by using the below-mentioned formula

GDP = C + I + G + (X-M)

Where C is the spending made by consumers

I is the investment by businesses

G is the government spending

(X-M) is the net exports

How do Forex traders use GDP?

GDP is an indicator that is used by both technical and fundamental traders. It is one of the most critical drivers of the economy and is closely monitored by all. GDP is important because it can affect how the financial markets can behave, both positively and negatively. Strong GDP growth translates into higher corporate earnings, which directly appreciates the currency value. Conversely, falling GDP means the economy is weakening, which is negative for the currency and, therefore, stock prices. According to economists, a recession is said to occur when there are two consecutive quarters of negative GDP growth.

One should not forget that GDP is a lagging indicator, meaning it shows what the economy did in the past. It does not predict the state of the economy in the near future. Hence, if the GDP data of a country is not good, traders view this as an opportunity to buy the currency and make a profit in the long term.


Understanding the Gross Domestic Product and its growth rate is essential for investors and traders as it affects the decision-making process of policymakers of the country. When the GDP growth rate is high, the central banks raise interest rates and encourage investment. High-interest rate is said to attract foreign investors and financial institutions. With the improvement in research and quality of data, statisticians and governments are trying to find measures to strengthen GDP and make it a comprehensive indicator of national income.

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How the Trade Balance Affects the Forex Market


We can define Trade Balance as the difference in value between exported and imported goods and services for a designated time period. It can also be referred to as trade deficit/surplus. A trade deficit occurs if more products and services are imported than exported. A trade surplus happens if there are more goods and services which are exported than imported.

Every country produces goods and services. These can be consumed locally or exported to other countries for foreign exchange earnings. No country is entirely self-sufficient. Therefore it will also import goods and services that are beneficial to their economy from other countries, thus, paying the cost using foreign exchange. That is is the trade process that countries engage in. The Trade Balance is the comparison between the amount earned from the exports and the amount spent on foreign exchange for its imports. This can also be referred to as the balance of trade.


What factors affect the Trade Balance

Factors affecting the balance of trade include:

  1. a) Production costs, which includes land, labor, capital, taxes, incentives, etc. in the exporting country and the same applies to those in the importing economy;
  2. b) The cost and availability of resources which include raw materials, intermediate goods, and other inputs;
  3. c) Fluctuations in the exchange rate;
  4. d) Taxes and limitations on trade;
  5. e) Non-tariff barriers such as health, safety standards and environmental;
  6. f) The availability (or lack of it) of foreign currency to pay for imports; and
  7. g) Prices of domestic manufactured goods.


Why are Trade Balance Figures Relevant to Forex Traders?

Manufacturing, employment, and consumption are what make up international commerce and trade. Imports and exports attract demand and, as a result, are directly linked to the need for both local or foreign currencies. A country should use international currency reserves when they conduct international trade, and the dynamics between imports and exports will dictate which side employment will be generated. Consumer spending and habits will be affected by the kind of goods imported into a country and which are manufactured in a country for local consumption or export.

The Trade Balance report carries a high market impact as manufacturing, employment, and consumer spending/consumption are factors that significantly affect the state of a countries economy. Also, the trade balance has a direct impact on a country’s Gross Domestic Product (GDP).


How does a Trade Balance report influence the respective currencies?

Net Importers – A net importer country has more imports than exports. Therefore it will need access to a large amount of foreign currency to fund the cost of its imports. An increased supply of the local currency coupled with a growing demand for foreign money will lead to a depreciation of the local currency.

An imbalance in the Balance of Trade which sways towards importation will lead to layoffs in

the manufacturing sector and thus increase unemployment and will cause a depreciation in the value of the local currency.

Net Exporters – A country that is a net exporter will export more goods than they import and have a demand from foreign sources for the cost into the local currency. Increased demand in export will also lead to increased manufacturing, which creates jobs and drives consumer spending and consumption and will cause the value of the local currency to appreciate.


  • Increased deficit, when imports exceed exports, is bad for the local currency.
  • Increased surplus, when exports exceed imports, is good for the local currency.

The Trade Balance report

The Trade Balance report is issued on a monthly basis, and covers the period of the previous month, which is under review. The most important reports are released from the US, Canada, Australia, New Zealand, United Kingdom, European Union countries, and China. Below you can peruse the various data from the major players.


GBP (Sterling) –









In conclusion

It is important to keep an eye o Trade Balance reports, as they show the overall health of the respective country. A country that is facing a high rate of unemployment and falling into a bad state of affairs in manufacturing will benefit from a positive trade balance report more than a country where these are not huge concerns. The trade balance report is a crucial piece of fundamental analysis for a trader to use in order to maximise the effectiveness of his trades.


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What you should know about Government Debt to GDP

What is the Government Debt to GDP?

The government Debt-to-GDP ratio is simply the ratio between the country’s total GDP (Gross Domestic Product) to its total debt. It is computed by dividing the total debt the nation has in a particular year to that of the GDP figure for that year.

As it is a ratio, this indicator is represented in percentage. The debt-to-GDP ratio indicates the country’s capability to repay its debts. If the debt-to-GDP ratio of a country is high, it means that the country might struggle to pay back the debt it has incurred. If this ratio is nominally high, then there is a high likelihood that the country is more likely to default on payments and fail to repay the debt. If the debt-to-GDP ratio is low, then the country is in a stable financial position to repay the debt.

This ratio is also useful to help determine the number of years that a country would need in order to pay back the debt if the total GDP is solely dedicated to the repayment. The debt-to-GDP ratio also measures the financial leverage of an economy.


What Does the Debt-to-GDP Ratio Tell You?

A financial panic in domestic and international markets is triggered when a country is unable to repay its debt. Governments will strive to lower their debt-to-GDP ratios. However, this can be difficult during periods of unrest or when the country is in an economic recession. When this occurs, governments like to increase borrowing in an attempt to stimulate economic growth.

Some economists adhere to the modern monetary theory (MMT), which argues that sovereign nations that are capable of printing their own money can’t go bankrupt as they can simply print more fiat currency to cover their debts. However, the nations of European Union (EU), who have to rely on the European Central Bank (ECB) to issue euros, do not apply to this rule because they do not control their own monetary policies.

A  recent study by the World Bank found that countries whose debt-to-GDP ratios exceed 77% for extended periods will experience a slowdown in economic growth. It is important to note that every percentage point of debt above this level costs countries 1.7% in economic growth and is even more pronounced in the emerging markets, where each additional percentage point of debt over 64%, annually slows growth by 2%.

Sources of information on ‘Debt to GDP Ratio’ for Major currencies:

In the sources below, there is a lot of information with respect to the Debt to GDP ratio. You can acquaint yourself with the Debt to GDP ratio for the respective country in addition to the historical data related to that country’s Debt to GDP ratio. This graphical representation of the historical Debt to GDP ratio data will leave you with a clearer understanding of how these ratios can change over time.

World Bank –

GBP (Sterling) –









Frequency of release

Public Debt figures are released quarterly by the World Bank and the International Monetary Fund (IMF), therefore, investors and agency ratings are able to compute this ratio on a quarterly basis.

What do traders care about the Debt to GDP ratio and its impact on the currency?

As we already know, the government debt to GDP ratio indicates the ability of a country to repay its debt, and a higher Debt to GDP ratio for an extended period of time means that the country is more likely to get default on its debt. This leads the foreign banks and governments to lend more money to these countries, and they increase their interest rates to mitigate the high risk involved. Aa a result, the economy of the country will slow down when there is a high debt to GDP ratio. A weak economy can indicate that there may be depreciation of that currency. This is why this ratio will be an essential factor for forex traders to consider when they trade on the Forex market.

The bottom line

If a country has a high debt-to-GDP ratio for an extended amount of time, it can indicate a recession as a country’s GDP will go down in a recession. This will also affect the people living in that country as governments tend to increase taxes to keep up the revenue. The lending governments will have more faith in the county to repay their debts if there is a high return on the debt that is borrowed. If there is a high risk involved due to less return on the debt that is acquired, this will question the lenders. Another important factor to consider is that the lending institutions earn a high rate of interest on the debt that is provided, So they won’t mind the country in question not paying back their debt, as the lending country can earn high interest from the debts they have provided.

From a traders’ point of view, it is better to have an overall view on what the country’s debt to GDP ratio is and to forecast if the specific country is likely to repay their debts or default on payments. If this fundamental analysis indicator factor is ignored when doing your due diligence for long term trades, then there is a high probability of the specific currency to depreciate in the long run, if that country defaults on its debt.



Forex Economic Indicators Forex Fundamental Analysis

Forex Fundamental Indicator – What you need to know about the GDP & GDP Growth

There are several components that make up fundamental analysis, but one of the most influential indicators is The Gross Domestic Product and the GDP growth rate. GDP is a well-known metric of economics and is one of the most important components when doing your fundamental analysis due diligence of a currency pair.

What is GDP

The Gross Domestic Product is defined as a monetary measure of the market value of all the final goods and services produced in a specific time period, often annually”- Wikipedia

This is the total economic activity generated by both private and public companies within a country in a specific time period.

Nominal GDP vs. Real GDP

Nominal GDP is the market value of all goods and services produced in an economy with inflation adjustments. Real GDP is the Nominal GDP, which has been adjusted for inflation.

Components of the GDP

The GDP is broken down into four components and is an indication of what a country is good at producing: Personal consumption expenditures of goods and services, business investments, government expending, and net exports of goods and services.

Personal Consumption expenditures

Consumer spending is one of the main contributors to production and is the best way to compare using data from different years. This is subdivided by the BEA into goods and services.

Goods are further subdivided into durable and non-durable goods. Durable goods are cars and furniture, for example, and have a lifespan of three or more years. Non-durable goods are fuel, clothing, food, etc.

Services include commodities that cannot be stored are consumed when purchased.

Business investments

This includes purchases that companies make to produce consumer goods, and not every purchase is counted as purchases must go to creating new consumer products. Again the BEA divides this component into two subcomponents;

Fixed Investment – It is a non-residential investment that consists of business equipment like software, capital goods, and manufacturing equipment, and this also includes commercial real estate construction and residential construction. This component is based on monthly shipment data from the BEA durable goods order report.

Change in private inventory – this is how many companies will add to their inventories of goods they plan to sell. As orders increase, companies may not have enough goods in stock and therefore order more to ensure supply and the increase in private inventories contributes to GDP. If there is a decrease in inventory orders, then companies will halt manufacturing, and if it persists, then staff reductions are next.

Government spending

This is an indication of the size of government across countries. There is a large variation in this indicator and highlights the countries’ approach to delivering public goods and services.

Net exports of goods and services

Imports and exports have an opposite effect on GDP as exports add to the GDP and imports subtract from the GDP data.


The economic reports

The economic reports of the GDP cover quarter or annual data periods, and this data is reviewed periodically until the final GDP data is released. There are some countries that release this data on a monthly basis, like the USA. However, the majority opt to release this data quarterly and annually.

Analyzing the DATA

The economic reports of the Gross Domestic Product are such an integral measure of economic activity that it is a vital component of fundamental analysis in a currency pair. The GDP data is a key measure in determining the strength of a country’s economy and hence the strength of its currency. By comparing the two sets of data on both currencies and comparing each set of GDP data to that of previous releases. This comparison helps to determine which of the two currencies is stronger, and enjoying a strong economy.

When analyzing this data, it is necessary to compare like for like economies as each country is at a different level of development. When we look at developing economies, we can anticipate seeing annual growth rates that exceed the norm, and for the emerging economies, annual growth rates can climb to double digits.

What is the GDP Growth Rate

The GDP growth rate measures how fast an economy is growing and is the next comparison, which is necessary in order to evaluate the previous years’ data is in line with the previous years for the same period. This collection of data shows the expansion or contraction of economic activity within a country.

What determines growth

A nation’s GDP growth rate determines its economic health. If the growth rate is positive, it indicates that the wealth of the nation is improving, and the economy is doing well. If the GDP growth rate is negative, meaning it has fallen below the previous period, it is a clear indication that the economy is declining. This decline in the GDP growth rate has serious ramifications as unemployment rises with the downturn of production.

Economic reports

The GDP economic reports are a vital measure of economic activity and integral to the fundamental analysis for any currency pair you wish to trade. This data is vital in determining the benefits of a particular economy and the strength of its currency. By comparing this data to previous years or periods, one is able to ascertain the progression of the expansion or contraction of the economic activity and thus evaluate if it is equivalent to the same period of previous years.

Impact on currency

The GDP growth rates are a massive driving factor in a currency’s performance because of the results that economic activity has on a currency. This means that higher levels of economic activity will generate a higher demand for a specific currency, and an increase in economic activity will also generate an increase in the total value of that economy.  The more value that a specific country’s economy has, the higher the value of its currency. What traders are looking at when analyzing this data is the difference found between the two currencies’ growth rates. As a rule of thumb, the currency which has a higher growth rate will generally experience an appreciation of its currency.


Sources of information on GDP

Most nations release their GDP data on a monthly, quarterly, and annual basis, and in the U.S., it is the Bureau of Economic Analysis (BEA) that publishes an advanced release of this data.

When one is contemplating doing their own fundamental analysis, it is imperative to take into account the effect that a country’s GDP will have on its currency strength and the importance of measuring the data rate from previous periods. The GDP data is closely monitored as it defines the movements of an economy is a straightforward way.

Links to GDP information resources:









Australia[email protected]/mf/5206.0

New Zealan­­­­d


Forex Economic Indicators Forex Fundamental Analysis

Fundamental Analysis – A Brief Introduction

Most traders just focus and use technical analysis (TA) to make trade decisions, but they forget that trading is connected with value. The perceived value of an asset is what makes the market move up and down. And the perception of that value by the market is directly related to the fundamental information available.

Fundamental Analysis is simply a type of market analysis which involves studying the economic or political position of a country in order to be able to assess the relative value of currencies more effectively. In a nutshell, Fundamental analysis is the study of economic factors that influence foreign exchange rates to predict future prices.

Traders studying macroeconomic data of the major economies and try to interpret the economic events, news, and press releases with the aim of predicting future moves a currency can make. Traders must also take into account the microeconomics of a country, such as supply and demand, consumer expending, and unemployment to assess the macro trends in the currency markets and always be on the right side when trading.

Also, the different scheduled news releases that are the benchmark for fundamental analysis can create price shocks in the market when the figures do not match the analysts’ consensus. Therefore, it is critical, also, to keep track of the Economic Calendar to avoid the potential volatility the news event can produce.

So when embarking on doing your own fundamental analysis, there are a few economic indicators considered key underlying drivers. Let’s have a short glance at these basic economic indicators.

The Gross Domestic Product (GDP)

The GDP data is used primarily to gain insight into a country’s economic strength, is calculated annually, and the broadest measure of a country’s economy. It is a representation of the value of all goods and services produced within that country over a defined period of time. The GDP data is one of the Economic Indicators which is closely monitored as it represents a countries contraction or expansion in a straightforward way, allowing the Trader to see whether a country is experiencing rapid growth or going into recession. The GDP growth rates from quarter to quarter can be the driving factors in the performance of a given currency.

Interest rates

The interest rate is one of the most critical factors that drive the Forex market. The interest rate of a country helps us to determine how the central bank is responding to the economic factors present in that country at the time. When a country is experiencing consumer inflation, the central bank will increase interest rates to curb inflation. When a country’s growth weakens, it will reduce the interest rates to spur economic growth. When a central bank changes interest rates, it creates movement in the market. It causes volatility, and if you are armed with an accurate prediction can lead to a beneficial outcome on a specific trade.

Inflation rate

Another piece of fundamental analysis data that one needs to look at is the inflation rate. This is the rate at which goods and services are valued, which changes over time. We measure inflation at both the consumer level and producer level. The producer level is defined as wholesale companies, and the consumer level is defined as households and consumers. A high rate of inflation can cause a currency value to rise as traders anticipate a rise in interest rates. The central bank, to protect consumers from excessive inflation, tends to increase the interest rates. This reduces the spending power that consumers have and thus reducing the price of goods and services.

Unemployment Rate

The unemployment rate is an indication of that country’s workforce that is actively seeking employment or are currently unemployed. If a country has a high unemployment rate, then it would be considered a weakening economy and lead to the currency deprecating. Low unemployment rates indicate a strong economy and increase the demand for the currency.

The Debt-to-GDP Ratio

The debt to GDP ratio is the ratio of the public debt that a country has compared to its Gross domestic product. If a country is unable to pay back its debt, it will default, and a financial panic may erupt. The usual bar set for GDP growth is 77% if it exceeds this amount over an

Balance of trade (BOT).

The balance of trade is defined as the difference between the value of a country’s imports and exports over a set period of time. The BOT is used by economists to measure the strength of a country’s economy. A Sustained trade deficit is considered bad for the economy. Therefore, it will also hurt the valuation of its currency, whereas a strong surplus on the BOT will drive the price of the country’s currency higher.

Current account to GDP

Two components make up a country’s Balance of Payments, the current account, and capital account. The current account consists of the trade balance, the net factor income, and net cash transfers, which are all measured in the domestic currency.
When the account balance of a country is positive, that country is referred to as a net lender to the rest of the world. When the account balance is in the negative, then the country becomes a net borrower to the rest of the world. This ratio of the current account balance to the Gross Domestic Product (or % of GDP) provides the country’s ability to pay back its debt and is an indication of the country’s competitiveness in world markets.

In conclusion, when fundamental analysis data is used correctly, it is an invaluable resource for any forex trader. By looking at the bigger picture of how a country is performing, it gives an insight into how the market will move, allowing you to profit from your trades.