Forex macroeconomic indicators
It is no secret that there are two main methods of market research - technical and fundamental analysis.
The first type of analysis, namely technical, is designed to analyze the inertia of market movement, crowd behavior, and psychological analysis of a particular category of traders.
The second type of research is based on the study of the country's economy, its potential, as well as factors that may influence changes in the national currency exchange rate.
It's worth noting that both of these types of analysis are, in one way or another, interconnected and effective.
However, it's important to understand that any significant changes in the price of a given asset always occur for economic reasons.
Fundamental analysis is impossible without basic data on the country's economy. Therefore, to inform investors, traders, and the public, governments and major rating agencies regularly publish macroeconomic statistics.
Forex macroeconomic indicators are statistics specifically published by governments and major rating agencies (institutions) to monitor the economy and its development for potential investors.
Forex macroeconomic indicators serve as the basis for decision-making by traders and investors conducting fundamental analysis, which has a significant impact on exchange rates. Statistics are published regularly and continuously.
The Impact of Macroeconomic Indicators
: Based on their impact on the market and exchange rates, all macroeconomic indicators can be divided into three groups: high, medium, and low.
To help you differentiate macroeconomic indicators by their impact on the market, we've divided them into groups and provided a brief list of each.
High Market Impact
. Macroeconomic indicators with high market impact include the following statistics: gross domestic product ( GDP ), interest rate, consumer price index, central bank governor's report (regardless of the country), unemployment benefits, balance of payments, number of new jobs, refinancing rate, and trade balance.
The publication of statistics contrary to investor expectations leads to strong exchange rate movements, which can even lead to the end of a new trend or the formation of a new one.
Medium Market Impact.
Macroeconomic statistics with medium market impact include the following: durable goods orders, business activity index, consumer confidence index, industrial production index, labor productivity, retail sales changes, and the unemployment rate. The publication of statistics with medium impact leads to market activity ranging from 20 to 100 points.
Low-impact
macroeconomic indicators include capacity utilization, personal income, initial jobless claims, factory orders, the beige book, and a number of other minor weekly and monthly macroeconomic indicators.
It's worth noting that the release of low-impact statistics may not be reflected in currency quotes , or the price movement may be limited to 20 pips.
To learn more about each macroeconomic indicator, its calculation principles, and its market impact, visit the Analytics - Fundamental Analysis - Macroeconomic Indicators and Indices section at Alpari - https://alpari.com/en/ .
The principles of applying macroeconomic indicators in Forex.
When considering the principles of applying macroeconomic indicators in Forex, they can be divided into two groups: trading based on expectations and trading after publication.
Trading based on expectations occurs by comparing investors' expected statistical data with previous data releases.
It's worth noting that this approach provides the most advantageous entry point into the market, but at the same time, it leaves the trader vulnerable at the time of publication if the statistics diverge from expectations.
Trading after the publication of statistical news is a more popular option; however, to implement it, you will need instant market execution from your broker and no slippage.
You can find information about the publication of macroeconomic Forex indicators, namely the exact time, current, previous, and expected values, in a special economic calendar .
In conclusion, it's worth noting that macroeconomic indicators are the very factors that drive market movements, and an understanding and mastery of statistics makes these market movements more predictable for traders.
