ADVANCE FOREX EDUCATION PART TWO: HOW ECONOMIC INDICATORS DETERMINE PRICE ACTION
You may already be aware that economic indicators determine how price action is generated.
I am going to highlight how different economic data affect prices and the way to carry out your
study in order to achieve verifiable results.
HOW INTEREST RATES AFFECT CURRENCY PRICES
The best way to think about interest rates is how much it is going to cost you to do business in a particular country and the interest likely to earn by so doing or by simply depositing such money in the bank to generate interest. You can also say, what does it cost you to borrow money whether for our mortgage or how much we will earn on our bond and money market investments. Interest rate policy is actually a key driver of currency prices.
Fundamentally speaking, if a country raises its interest rates, the currency of that country will strengthen, because the higher the interest rates, the more foreign investors are attracted to that country.
Conversely, if a country reduces interest rates, the currency will weaken and foreign investors will not show keen interest in doing business there. These are natural laws of demand and supply.
HOW RISING OR FALLING GOLD PRICES AFFECT CURRENCIES.
Historically, gold is a country’s natural alternative to the US dollar. So, given the inverse relationship between gold and the US dollar, currency traders can take advantage of the volatility in gold prices in several ways. For example, if gold price breaks an important price level, due to some events, one would expect gold to move higher or lower in the coming days or months. With this in mind, forex traders would look to sell dollars and buy Euros,and vice- versa for example, as a proxy for higher or lower gold prices.
HOW OIL PRICES CAN GIVE FOREX TRADING OPPORTUNITIES.
Higher oil prices negatively impact the stock market prices of companies that are highly dependent on oil to drive their industries, fuel automobiles, air crafts etc, since the more expensive oil is, it means higher expenses and lower profits for these establishments.
In the same way, a country’s dependency on oil determines how its currency will be impacted by a change in oil prices. The US’s massive foreign dependence on oil, makes the US dollars more sensitive to oil prices than other countries, although the US is becoming self sufficient in oil production gradually. Therefore, any sharp increases in oil prices are typically dollar-negative.
If you believe the price of oil will continue to increase for the near future, you could express that view point in the currency markets by once again favoring commodity-based economies like Australia and Canada or selling other energy-dependent countries like Japan.In the recent past, when the Organization of Oil Exporting Countries ( OPEC ) could not cut down on the monthly oil quota production as a result of falling oil prices, we witnessed the further collapse of oil prices and I was able to predict the "selling off " of the Canadian Dollar. That is the effect of fundamentals which no known or unknown technical analysis cannot do.
The general rules governing indicators are:
1.Knowing exactly when each economic indicator is due to be released,because, economic indicators have the potential to generate volume and move prices in the market.
2. Keeping track of the calendar of economic indicators will also help you make sense out of otherwise the unanticipated price actions in the market? Therefore, I would recommend you use the Forex peace army and Cashbackforex calendars.
In as much as I don’t want to bore you with too much theory –based analysis, I only want to acquaint you with the factors that informed my research work.
The Gross Domestic Product [GDP]
This is the measure of the total number of all goods and services produced, either by domestic or foreign companies. GDP is the indicator of economic output and growth and simply put: The health of the country. The manufacturing sector accounts for about one quarter of the economy. The capacity utilization rate provides an estimate of how much factory capacity is in use. The Manufacturing PMI,
and the Services PMI, with Industrial production are all components that determine the GDP of a country including the following:
Producer price index [PPI] –the producer price index [PPI] is a measure of price change in the manufacturing sector. It measures the average change in selling prices received by domestic producers in the manufacturing, mining, agriculture and electricity utility industries for their output. The PPIs is most often used for economic analysis and those for finished goods, intermediate goods and crude goods.
Consumer Price Index [CPI]- The consumer price index[CPI] is a measure of the average price level paid by urban consumers [80% of population] for a fixed basket of goods and services. The report is based on price change in over 200 categories. The CPI also includes various user fees and taxes directly associated with the prices of specific goods.
Durable Goods Orders- Durable Goods Orders is the measure of new orders placed with domestic manufacturers for immediate and future delivery of factory hard goods. Durable goods are defined as goods that last an extended period of time (over three years ) during which its services are extended .
Employment Change Index. The Employment Change is the measure of the number of jobs created in the past one month in a given economy.
Retail sales – The retails sales report is a measure of the total receipts of retail stores from samples representing all sizes and kinds of businesses in retail trade throughout the nation. It is an indicator of broad consumer spending patterns and is adjusted for normal season variation, holidays and trading day differences. Retail sales include durable and non – durable merchandise sold, and services, including taxes incidental to the sales of merchandise, only excluded are sales taxes collected directly from the consumers.
I will not be able to list all the economic indicators available. I want you to do a quick study.
When you have the list of all the economic events for the week handy, note the time for each release and make sure you observe the price action of the currency of the country whose indicator you are studying. You will begin to understand why fundamentalists are dreaded and feared by some forex brokers, mainly the market makers, who operate Dealing- Desk Platforms.
In conclusion therefore, and in view of these fundamentals, I have evolved a revolutionary trading strategy that does not only make us successful forex traders but give us the absolute peace of mind to put the strategy into use by trading the foreign exchange market (forex) in the best way possible. As you are all aware, these fundamental indicators are released every single minute, 24hours a day , five days a week by over 200 economies all over the world . Whether in Sweden or Denmark, China or Hong Kong, New Zealand or Mexico, Poland or South Africa – infect, all countries of the world. We have the mechanism to track all the economic indicators from the advanced countries –G7, to the developing countries, and to the third world countries. Based on these scenarios, what I do is to identify the leading indicators ‘that move the market and capitalize on them and make members of public smile to the banks. THIS IS EXACTLY WHAT TECHNICAL ANALYSIS CANNOT DO. TECHNICAL ANALYSIS CANNOT MAKE
PRICES TO RISE OR FALL.
http://comprehensivenewstrading.blogspot.com/
You may already be aware that economic indicators determine how price action is generated.
I am going to highlight how different economic data affect prices and the way to carry out your
study in order to achieve verifiable results.
HOW INTEREST RATES AFFECT CURRENCY PRICES
The best way to think about interest rates is how much it is going to cost you to do business in a particular country and the interest likely to earn by so doing or by simply depositing such money in the bank to generate interest. You can also say, what does it cost you to borrow money whether for our mortgage or how much we will earn on our bond and money market investments. Interest rate policy is actually a key driver of currency prices.
Fundamentally speaking, if a country raises its interest rates, the currency of that country will strengthen, because the higher the interest rates, the more foreign investors are attracted to that country.
Conversely, if a country reduces interest rates, the currency will weaken and foreign investors will not show keen interest in doing business there. These are natural laws of demand and supply.
HOW RISING OR FALLING GOLD PRICES AFFECT CURRENCIES.
Historically, gold is a country’s natural alternative to the US dollar. So, given the inverse relationship between gold and the US dollar, currency traders can take advantage of the volatility in gold prices in several ways. For example, if gold price breaks an important price level, due to some events, one would expect gold to move higher or lower in the coming days or months. With this in mind, forex traders would look to sell dollars and buy Euros,and vice- versa for example, as a proxy for higher or lower gold prices.
HOW OIL PRICES CAN GIVE FOREX TRADING OPPORTUNITIES.
Higher oil prices negatively impact the stock market prices of companies that are highly dependent on oil to drive their industries, fuel automobiles, air crafts etc, since the more expensive oil is, it means higher expenses and lower profits for these establishments.
In the same way, a country’s dependency on oil determines how its currency will be impacted by a change in oil prices. The US’s massive foreign dependence on oil, makes the US dollars more sensitive to oil prices than other countries, although the US is becoming self sufficient in oil production gradually. Therefore, any sharp increases in oil prices are typically dollar-negative.
If you believe the price of oil will continue to increase for the near future, you could express that view point in the currency markets by once again favoring commodity-based economies like Australia and Canada or selling other energy-dependent countries like Japan.In the recent past, when the Organization of Oil Exporting Countries ( OPEC ) could not cut down on the monthly oil quota production as a result of falling oil prices, we witnessed the further collapse of oil prices and I was able to predict the "selling off " of the Canadian Dollar. That is the effect of fundamentals which no known or unknown technical analysis cannot do.
The general rules governing indicators are:
1.Knowing exactly when each economic indicator is due to be released,because, economic indicators have the potential to generate volume and move prices in the market.
2. Keeping track of the calendar of economic indicators will also help you make sense out of otherwise the unanticipated price actions in the market? Therefore, I would recommend you use the Forex peace army and Cashbackforex calendars.
In as much as I don’t want to bore you with too much theory –based analysis, I only want to acquaint you with the factors that informed my research work.
The Gross Domestic Product [GDP]
This is the measure of the total number of all goods and services produced, either by domestic or foreign companies. GDP is the indicator of economic output and growth and simply put: The health of the country. The manufacturing sector accounts for about one quarter of the economy. The capacity utilization rate provides an estimate of how much factory capacity is in use. The Manufacturing PMI,
and the Services PMI, with Industrial production are all components that determine the GDP of a country including the following:
Producer price index [PPI] –the producer price index [PPI] is a measure of price change in the manufacturing sector. It measures the average change in selling prices received by domestic producers in the manufacturing, mining, agriculture and electricity utility industries for their output. The PPIs is most often used for economic analysis and those for finished goods, intermediate goods and crude goods.
Consumer Price Index [CPI]- The consumer price index[CPI] is a measure of the average price level paid by urban consumers [80% of population] for a fixed basket of goods and services. The report is based on price change in over 200 categories. The CPI also includes various user fees and taxes directly associated with the prices of specific goods.
Durable Goods Orders- Durable Goods Orders is the measure of new orders placed with domestic manufacturers for immediate and future delivery of factory hard goods. Durable goods are defined as goods that last an extended period of time (over three years ) during which its services are extended .
Employment Change Index. The Employment Change is the measure of the number of jobs created in the past one month in a given economy.
Retail sales – The retails sales report is a measure of the total receipts of retail stores from samples representing all sizes and kinds of businesses in retail trade throughout the nation. It is an indicator of broad consumer spending patterns and is adjusted for normal season variation, holidays and trading day differences. Retail sales include durable and non – durable merchandise sold, and services, including taxes incidental to the sales of merchandise, only excluded are sales taxes collected directly from the consumers.
I will not be able to list all the economic indicators available. I want you to do a quick study.
When you have the list of all the economic events for the week handy, note the time for each release and make sure you observe the price action of the currency of the country whose indicator you are studying. You will begin to understand why fundamentalists are dreaded and feared by some forex brokers, mainly the market makers, who operate Dealing- Desk Platforms.
In conclusion therefore, and in view of these fundamentals, I have evolved a revolutionary trading strategy that does not only make us successful forex traders but give us the absolute peace of mind to put the strategy into use by trading the foreign exchange market (forex) in the best way possible. As you are all aware, these fundamental indicators are released every single minute, 24hours a day , five days a week by over 200 economies all over the world . Whether in Sweden or Denmark, China or Hong Kong, New Zealand or Mexico, Poland or South Africa – infect, all countries of the world. We have the mechanism to track all the economic indicators from the advanced countries –G7, to the developing countries, and to the third world countries. Based on these scenarios, what I do is to identify the leading indicators ‘that move the market and capitalize on them and make members of public smile to the banks. THIS IS EXACTLY WHAT TECHNICAL ANALYSIS CANNOT DO. TECHNICAL ANALYSIS CANNOT MAKE
PRICES TO RISE OR FALL.
http://comprehensivenewstrading.blogspot.com/
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