Factors that Move FOREX Market
There are essentially five factors which cause the Forex Market to move:
Let’s explore them in detail.
1. Economic Data
Countries release important economic data almost on a daily basis. Some data are more closely watched than others. Suffice to say, markets tend to move a lot during the news announcements, especially when the actual data does not coincide with economists’ expectations. Let’s take a look at the top 10 news announcements that tend to cause the biggest movements in the Forex Market:
Central banks usually raise or lower interest rates to achieve a particular inflation target. If the current inflation is below their target, the bank may cut the rate to entice consumers to spend more (given the cheaper borrowing rate), thus increasing the demand for goods and services.
The central bank is the entity, which is responsible for implementing monetary policies for a nation (or in the case of the European Central Bank, a group of nations).
These policies include but are not limited to currency stability, stable inflation and full employment. Central banks also generally issue currency, function as the bank of the government, regulate the credit system, oversee commercial banks, manage exchange reserves and act as a lender of last resort.
These policies include but are not limited to currency stability, stable inflation and full employment.
This is another piece of data that is highly sought after by retail traders. In the US, this news is termed the “Non-Farm Payrolls” (NFP) and it accounts for about 80 percent of the workers who contribute to the Gross Domestic Product (GDP). The NFP is released on the first Friday of every month, and is arguably the most traded piece of news worldwide.
The NFP report is a statistical data of the US Bureau of Labour Statistics. It is intended to represent the total number of paid US workers of any business, excluding the following:
Retail sales is an aggregated measure of the sales of retail goods over a stated time period, typically based on a data sampling that is extrapolated to model an entire country. In the US, the retail sales report is a monthly economic indicator that is compiled and released by the Census Bureau and the Department of Commerce.
In the US, the Institute for Supply Management (ISM) is responsible for maintaining the Purchasing Managers Index (PMI), which is an indicator of the economic health of the manufacturing sector.
The PMI index is based on five major indicators, which are extracted through surveys to more than 400 purchasing manager from around the country.
Business and Consumer Confident
Trade balance is derived primarily from three factors:
2. Central Bank Intervention
Central Bank Intervention usually happens when a nation’s currency is undergoing excessive downward or upward pressure from market players – usually speculators.
There are four types of Bank Intervention:
3. Natural Disasters
Natural disasters can impact the currency market substantially. Here’s a list of the top 10 natural disasters:
In Forex, speculation involves the buying and selling of currencies by anticipating profits from market fluctuations.
There are two categories of speculators in the market:
5. Political Factors
This can include wars and even elections. Inmost cases, the currency tends to fall in times of political turmoil as traders sell off and move their assets to a more stable environment. In times of political turmoil, money rushes to safe haven assets such as the US dollar, Japanese yen, Swiss franc and gold, causing their prices to rise.
How to Trade in FOREX Market
There are two types of market BULL and BEAR. The terms bull and bear created by traders in the global financial market. The term bull was derived from the way in which bulls’ attack or charge, moving upward or pushes the price going up. In contrast, bears move downward when they attack or push price going down.