Every trader must stay up to date with potential market movers
Trading technical chart patterns can be extremely profitable but one must always be aware of the fundamental story which is ultimately driving the markets. By using the calendar a trader will get a better understanding why the market is moving in a certain way, while at the same time, they will be able to anticipate these moves. As a whole, the biggest market-moving events tend to be the release of key economic data such as the GDP, and US non-farm payroll number. While not all of the reactions of the market to these announcements can be predicted they do present excellent trading opportunities.
Stay ahead of the announcements of crucial events and get into action in a respective way, so that by the time a certain announcement is made, they will have already estimated the value of the currency pair they are interested in.
The most influential events
- Interest Rate Decisions
- Non-Farm Payroll Numbers
- Changes in GDP
- Changes in CPI
- Changes in PMI
- Unemployment Rate
Interest rates and all market prices have a direct correlation with one another. Every sophisticated trader is closely monitoring the heartbeat of every major Central Bank around the world.
Changes in interest rates can have both positive and negative effects on the U.S. markets. When the Central Bank changes the rate at which banks borrow money, this has a ripple effect across the entire economy. Interest rates have an effect on the economy as a whole, the stock and bond markets, currency rates, inflation, and recessions.
Now the real question is, do you know how and why these are affected?
The Effect of Commodity Prices on Currencies
Commodities play a key role in determining Currency Exchange rates. Correlations between the world’s most heavily traded commodities and currency pairs are common. For example, the Canadian dollar (CAD) is correlated to oil prices due to exporting, while Japan is susceptible to oil prices because it imports most of its oil. Similarly, Australia (AUD) and New Zealand (NZD) have a close relationship to gold prices and oil prices.
While the correlations (positive or negative) can be significant, if forex traders want to profit from them, it’s important to time a “correlation trade” properly. There will be times when a relationship breaks down, and such times can be very costly for a trader who does not understand what is occurring.