There are two main ways to do analysis when forex trading online, which helps traders predict the future price of a security.
First, technical analysis refers to the use of charts and technical indicators to predict how the asset price will move. For this, traders use different types of indicators, which are derived from mathematical formulas to make decisions.
On the other hand, fundamental analysis refers to using economic data and news to predict the future trends. The economic data affecting major currencies is available in an economic calendar. This article will explain the top economic data you should pay close attention to.
Employment Numbers
Every month, most developed countries release employment numbers. These numbers are closely followed by the market because they help to show the strength of the economy. An economy that is creating more jobs is usually ideal. In this number, you should pay close attention to a number of things. First, you should look at the headline jobs numbers. These are the jobs that have been created within a given month. Second, you should look at the unemployment rate. A lower unemployment rate is usually a good sign for the economy. Third, you should look at the wages. This is a very important number because of its influence to inflation. When wages are growing fast, it is an indication that it could lead to increased inflation.
Inflation
Investors pay close attention to inflation numbers. This is because of the impact of inflation to interest rates. In this, a high inflation rate usually leads to higher interest rates while a lower rate of inflation results to easing of rates. The most important measures of inflation are the consumer price index (CPI), purchasers prices index (PPI), and retail sales.
Purchasing Managers Index (PMI)
PMI is an important data that measures the activity in the manufacturing and services sector. The thinking is that when their activities increase, it is an indication that the sector is doing well. This data is usually released by a number of private sector companies like IHS Markit. A number above 50 is an indication that the sector is expanding while a number below 50 is an indication of contraction.
Interest Rates
Every economic number that is released usually leads to interest rates. The base lending rate set by the central bank usually determine the purchasing ability of people and companies. For example, higher interest rates make mortgages expensive while lower interest rates usually lead to lower mortgage and loan rates. Therefore, when the central banks make interest rates decisions, it is usually a big period for the market. However, these days, the decision is highly anticipated because of the forward guidance policies that were implemented by the banks. Therefore, in addition to paying attention to the rate change, you should also focus on the accompanying monetary policy statement.
Confidence Data
The consumer and business confidence numbers are very important for you as a trader. This is because when confidence is high it leads to more purchasing power. This is important because of the role that consumer and business spending has on the economy. A rising consumer confidence is a good thing for the economy.
GDP
The Gross Domestic Product (GDP) number shows the economic growth of a country. These numbers are released every month to reflect the economic growth in the previous quarter.
WASDE Report
The World Agricultural Supply and Demand Estimates (WASDE) is an important document provided by the US department of agriculture. The report is important if you are interested in the agricultural industry. This is because it contains everything you need to know about the supply and demand of all the major agricultural crops.
Crude oil inventories
This is data released every week by the Energy Information Administration (EIA) and the American Petroleum Administration (API). The data shows the amount of crude oil that has been produced by American producers. An increase in inventories is usually bearish for crude oil while a reduction in inventories is bullish.
Other important data you should pay close attention to in the economic calendar are: auto sales, building permits, home starts, and trade balance numbers.
