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What Is the Forex Economic Calendar and How to Use It?
One of the key skills of a Forex trader is the ability to conduct fundamental analysis. Dealers use this method to look for assets when they are perceived as too high or too low a value relative to specific indicators. They deduce this by fulfilling the fundamental analysis; the inflation level, the pace of industrial production development, etc., are taken into account.
Also, it's important to obtain up-to-date information about any changes in indicators that affect this asset valuation method. Therefore, traders who use fundamental analysis apply the Forex economic calendar. The latter provides the dealers with breaking news.
A well-organised Forex calendar helps traders analyse asset value by publishing different national reports, government resolutions, forecasts from reputable experts, and so on. Of course, all the information within such a list of upcoming events should be checked. Otherwise, dealers risk losing their money.
That's why experts recommend using economic calendars only on the platforms of authoritative online brokers (for example, FBS).
Main features of forex economic calendar
Currency is a state's reflection of economic, political, and social stability. Changes in these areas can affect the exchange rate of currencies. Thus, traders may predict the behaviour of Forex assets by studying the various countries' news from the economic calendar. And the latter includes only tidings that may help the dealers.
Features of using an economic calendar
Such a trading tool has specific filters that facilitate analysis. For example, dealers may sort all the published information by the following:
- type of assets (currencies) affected by the news;
- time the events take place (e.g., for today, yesterday, or within the next month);
- expected impact (usually, calendars have three effect degrees).
Commonly, the feed of the described schedule indicates the date and exact time of publication, as well as a short name of each event. Users may read the offered publications in full by clicking on the news headlines. Reputable online brokers commonly offer economic calendars with comprehensive FAQ sections.
The latter is incredibly important for novice dealers. The economic calendar giving such an option may be found, e.g., on fbs.com.
Trading approaches using the economic calendar.
Dealers usually sell and buy Forex assets before or after a certain event occurs. For example, the state announced the beginning of the currency emission on a certain date. The corresponding news appeared in the economic calendar.
Accordingly, traders have started to change the currency to a more stable one (e.g., USD). Thus, dealers reacted to the news before an essential economic event took place in the country.
There is a range of news that could affect the trading of currency; this could be changed to fiscal and monetary policy coming out of government offices or central bank changes. It could be due to the performance due to geopolitical tensions.
It could be due to a release of trade deficits or surpluses, tax revenues by the government or new trade deals with different countries.
While forex traders do focus on regular news updates like announcements from governments and central banks, there will always be economic shifts that aren't planned for each year.
And here is another case. The state government has announced a possible tightening of conditions for mortgage loans. In this case, traders are likely to wait for the announcement of a decision on this issue. Only then would they start taking action.
So, it's an example of when traders react after a specific event has happened. In this example, dollar strength could rise as the price of money increases due to the interest rates, so you might want to trade on the rally of the dollar.
Features of various currencies trading
There're a few countries that have quite stable economies. So, it's pretty easy to predict the behaviour of these states' currencies on Forex. For USD, traders should consider, e.g. the following news topics in the economic calendar:
- creation of new jobs (including those outside the agricultural sector) in the USA;
- American overall unemployment rate;
American retail sales figure.
- Interest rates
- Sentiment from fed meetings
- Repo rate
- Tax revenues
When trading EUR, dealers should consider, e.g.:
- IFO and ZEW indicators;
- Number of factory orders in Germany;
- Italian and French consumer price indexes;
- employment rate in Germany.
- Interest rates
- Sentiment from ECB meetings
- Repo rate
- Performance of PIGS nations
- Tax revenues
Considering nuance in the currency, you trade.
For the pound sterling, it's important to take into account the UK consumer price index and manufacturing PMI in construction. In Japan, the economy is closely linked to the National Bank policies. So, dealers should consider, for example, publications on the monetary policy of the Bank of Japan.
If you are trading in developing market currencies, an important factor to consider is the debt to GDP ratio, the interest rates on sovereign bonds and, of course, the pricing of credit default swaps on those bonds. These can all be additional indicators you can overlay with bullish or bearish news to make your call on the direction of the currency.
Fill your calendar
If you do plan to trade Forex in the coming months for the long term and hold certain positions, it might be wise to start shaping up your own forex calendar. Mark down important dates for announcements from central banks and governments, important political conferences and meetings, world bank and IMF meetings, and follow analysts on central bank policy.
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