Traders can utilize a forex economic calendar to learn about forthcoming news events that can influence their fundamental research. Economic calendars list the dates and potential effects of upcoming national and worldwide events that may have an impact on the price and popularity of specific markets or assets. The kind and date of each event on an economic calendar can be used as a trading signal to maximize profit potential because certain sorts of events have been known to affect trade in major, predictable ways.
Because they have predictable effects on trade sentiment and volume, recurring news events tend to form the most compelling indications. Scheduled release dates for well-respected market statistics or surveys, as well as anticipated events like federal interest rate, trade balance, and inflation decisions, are examples.
What is an Economic calendar?
An economic calendar is a tool that allows traders to keep track of key economic data about to be issued in major economies. Economic indicators like GDP, the consumer price index (CPI), and the Non-Farm Payroll (NFPs) report are examples of such events. Furthermore, in today’s climate of fiscal cliffs and central bank involvement, knowing the date of the next central bank meeting or major news announcement might be quite useful.
Benefits of forex economic calendar
The primary rationale for using economic calendars is obvious: as a forex trader, global economic news has a direct impact on both your existing portfolio and the emergence of fresh trading chances. An economic calendar helps you keep track of events and comprehend their possible impact on the global currency market by organizing them and providing context.
You can account for impending news and events while planning trades and looking forward to potential market movers when you have an easy-to-use calendar at your disposal. Traders who wish to plan and take a predictive approach to their trading strategy frequently use economic calendars.
While taking a forward-thinking approach to your trading strategy is typically good, it’s also crucial to avoid overreacting to forthcoming events or the discoveries of a recently issued news piece. Events on your economic calendar might cause rapid volatility in a currency pair or the forex market as a whole, but these overreactions can result in significant losses if you trade recklessly. Take a balanced approach to evaluate news as it breaks, and keep an eye on the larger macro-environment that is driving a currency pair’s market.
Top Forex Trading News Events
Not all news events have a big impact or are good indications. When it comes to currency trading, a few occurrences have a greater economic impact than the majority.
1) Reports on Nonfarm Payroll (NFP)
This report from the United States tracks employment rates for the bulk of the country’s workforce. The Bureau of Labor Statistics releases the reports on the first Friday of each month, detailing the previous month’s statistics.
The NFP report includes information on the number of new jobs generated in one month, the net national unemployment rate, and the national labor force participation rate—that is, the number of Americans actively looking for work or working. All three figures are seen as indicators of the country’s general economic health, and they have a considerable impact on market perception and the relative value of the US dollar.
2) Interest Rate Decisions by Central Banks
The Federal Reserve, also known as the Fed, is the central bank in the United States. The European Central Bank, Bank of England, Bank of Japan, Swiss National Bank, Bank of Canada, Reserve Bank of Australia, and Reserve Bank of New Zealand are seven other major central banks around the world, and interest rate decisions by any of these major players will affect how much forex traders profit or loss when borrowing a currency or holding a position.
Any one of these major worldwide banks’ scheduled interest rate decisions or news announcements is sure to influence trading sentiment and boost market volatility for connected currency pairs. Widespread news coverage of quarterly projections, such as this Washington Post article published just hours before the US government report was released on September 26, 2018, has an impact on market volatility leading up to an interest rate decision.
3) Durable Goods Orders
This monthly report from the United States Census Bureau provides a valuable indicator of industrial activity in the country. Based on the report’s durable goods figure, can provide a reliable measure of economic strength. A greater number, which represents overall orders in billions of dollars, indicates that the economy is recovering or strengthening, whereas a lower number indicates that the economy is stagnant or regressing.
4) Retail Sales Index
The retail sales index, like the durable goods orders report, is produced monthly by the US Census Bureau. It indicates overall retail expenditure in the United States for the previous month, and it is used to determine the purchasing power of the American people, which might reflect not only general economic strength but also consumer confidence in the economy.
5) Consumer Confidence Index
This index takes into account a variety of factors to provide a number that indicates overall consumer confidence in the US economy. Consumers with a score of 100 are neutral, while those with a score of 100 or above are more confident in the economy and are more likely to spend rather than conserve. Consumer decisions to spend less, save more, and shore up their finances ahead of probable impact are likely verified by scores below 100, which suggest higher economic fear and uncertainty.
Examine the current market trend, strength, and direction, as well as support and resistance levels, both before and after the news event. If a news event is expected to offer favourable market information, you may observe a sharp rise in price action leading up to the news release, followed by a sharp drop if the news disappoints.