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The output data and expectations.
Let’s face the question of the news expectations for Forex traders. This concept may include such events as the output economic indicators of currencies, reported changes in interest rates in different countries, reviews of the economy and other events that have significant influence on the foreign exchange market. Waiting for an event and the onset of this event are strong drivers of exchange rates. As for me it’s hard to say what has a stronger influence on the market for example the event itself or its expectation but I can say with confidence that the yield of major data can lead to significant and prolonged movements in exchange rates. These are important events published regularly GDP, industrial production, CPI, PPI and some others.
The date and time of release of an indicator is known in advance. There is a so-called calendar of economic indicators. So it’s possible to track the most important events in the life of individual states with specific dates or approximate time of their release in such a way. For these events the market is ready. Expectations and forecasts of the value of a particular indicator can be interpreted by experienced traders and analysts.
The output data can lead to considerable sudden fluctuations in exchange rates. Depending on how market participants interpret one or another indicator, the rate can go anywhere. This movement rate may lead to the increase of the existing trend or cause a correction of the trend. A particular outcome depends on several factors such as the market situation, preliminary expectations and attitudes and finally the values of a particular indicator.
For example, after a series of increasing values of indicators such as GDP, CPI, PPI in the market one can talk of a possible increase in interest rates in the USA. Even if this change happens within a few months traders can actively start buying US dollars against other currencies. Thus begins an up - trend for the dollar. It’s a steady strengthening of the dollar against other currencies. After reports of changes in rates a certain correction in this movement can occur.
Even before the release of information about an event there is a movement of the rate in a certain direction. Of course this movement is headed towards the interpretation of future events. In other words concentrates. And very often after the data release if the information meets expectations the exchange rate can move in the opposite direction. There is a so-called profit taking in this case. The situations where such events occur can be characterized by the expectation that this event is already built into the price. In such a way this situation can be successfully interpreted. You need some practice to learn use this data for your beneficial trading.
As in any other niche of our life foreign exchange market needs some knowledge.
Surely, you can start forex trading and be quite successful about it. But sooner or later the losses will come. This is when you might think “Why didn’t I start with a good forex book?”
That does not mean that after reading even the greatest forex book you will start making money, but this info will save you from lots of troubles.
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