economic activity by studying and interpreting economic
reports and readings released by companies and government
agencies. These news releases are available at a number of
online sites. We use www.ForexFactory.com, which is one of
the leading sites in the forex industry for news. On the front
page of its Web site there is a tab for “Calendar.” If you click
on that tab, it will show an extended list of economic releases
for the week and their expected impact. Releases with a red
icon have the highest expected level of impact. Another great
resource is www.munibondadvisor.com/EconomicIndicators.
htm, which links readers directly to the source for every
news release.
Figure 2-1 shows a summary spreadsheet of the most influential
news releases for the United States, including the typical
release dates and the net effect a release may have on the
U.S. dollar. Note that these are generalizations and cover only
one factor affecting currency prices. We do not recommend that
anyone trade ahead of a major news release, as the results can
be extreme and unpredictable.
The way traders react to these economic reports and releases
is always dynamic, and that is why they are covered extensively
on the financial news shows. Economic reports can reinforce
the existing trend as related releases confirm one another,
or the reports can contradict one another, which could indicate
a possible change in underlying business conditions. The way
traders react to the reports in their positioning in the marketplace—
their buying and selling—is also a very dynamic process.
Areport came out that is indisputably market-friendly in
a mature up move, and traders may take this as a reason to take
a profit and sell. The traders’ reasoning may be “We were long
this market because of existing favorable conditions, and this
report proves our thesis was correct, so let’s take some money
off the table and put it in our pockets now because we don’t
know if things can get much better than this.” “A bird in the
hand is better than two in the bush” is standard operating
procedure for many who make a living risking their earnings
in the marketplace.
The way traders and markets react to the different fundamental
news releases and events is a study in chaos. How many
contracts players trade and the direction in which they execute
their trades immediately after a fundamental news release may
have as much to do with the way they were positioned before
the news release as it does with what the actual news told them.
Herd mentality also plays a role as influential players may opt
to adjust or exit a position more because of the level at which
the market is trading than because of the actual fundamental
news. A large player making an adjustment to its long-term
position can have an outsized effect on a market that may trigger
price signals for other traders who operate on shorter-term
time frames. Also, there are always times when traders get
caught flat-footed after a surprising influential news release and
markets make sharp sustained moves, forcing even longer-term
traders into exiting positions without as much consideration
and time as they would like. Do not expect that after reading
a chapter in a book or even reading a series of books you will
understand all the factors that affect releases of economic numbers.
Over time and through experience, however, you will start
to understand these pieces of the puzzle and the way they
relate, if at all, to your trading plan. Let’s define some significant
fundamental releases and see the effects they have on the
different markets. List ;
- Nonfarm Payroll
- The Federal Open Market Committee (FOMC)
- Durable Goods
- Retail Sales
- Gross Domestic Product
- The Producer Price Index
- The consumer price index (CPI)
- Consumer Confidence
Source: Mastering the Currency Market: Forex Strategies for High and Low Volatility Markets
