All of us know that forex is a market that has high volatility. The reason why this happens is the action of different economic factors. They happen because of changes that are done by governments and different organizations. The changes will influence the market and will force currency movements. Economic indicators can be used in order to see how a nation performs when talking about economy.
Watch this video and learn about Economic Indicators and Forex Fundamental analysis :
Let us take a look at the most important economic indicators and see how they impact the market.
State of Affairs – Here we will find stats linked with housing and unemployment. When this is good the effect on the currency will be good. If the state of affairs is not good then this will surely have a negative impact on the forex prices.
Retail Sales Reports – Such an economic indicator is used a lot in order to analyze Forex. These reports will compromise total retail stores receipts in a country. Basically divers store samples are measured. You will look at this economic indicator in order to see consumer spending patterns.
GDP (Gross Domestic Product) – A country’s economy strength can easily be analyzed thanks to this indicator. When the total market value of the services and goods that one country produces in one year is analyzed we say that we look at GDP. This economic indicator is used in a combination with other indicators in order to forecast rate changes in currency value. The measured factor will not stay the same and will change even if we see that the economy is currently following a different economic trend.
Industrial Production Report – This economic indicator stands out as one of the really reliable ones. It is a report that also includes present volatility in factory, utility, mine and basically industry production. When analyzing this indicator there will be a comparison with production capacity that is possible in a given period of time. When the production is near the same level as the maximum capacity then Forex rises. This is a very good sign for a trader.
CPI (Consumer Price Index) – This indicator will measure price level changes when talking about services and consumer goods. There are 200 categories that are covered. It will basically show you if a country makes money or loses money in those categories. Export amounts will also have an impact on CPI as currency strength can easily be judged by how much it exports.
All factors that influence forex will usually follow a trend. If we understand how all the factors impact it then we can follow the trades and make money.