Key Factors Influencing Forex Market

Gross domestic product (GDP) can be determined in three ways, all which should, in principle, give the same result. They are the production (or output or value added) approach, the income approach, or the speculated expenditure approach.

Mentioned a list of some important countries and dependent territories sorted by their real gross domestic product growth rate; the rate of growth of the value of all final goods and services produced within a state in 2018.

Country GDP Rate

USA 3.5%
UK 1.2%
Australia 2.2%
Japan 1.5%
Canada 3.0%
Germany 2.1%

                                   Why USD is the KING of All Currency ?

The Purchasing Managers’ Index (PMI) is an indicator of economic health for manufacturing and service sectors. The purpose of the PMI is to provide information about current business conditions to company decision makers, analysts and purchasing managers.

The PMI is made up of several different surveys that include a number of elements such as:

  •  New orders
  •  Factory orders
  •  Employment levels
  •  Supplier’s delivery times
  •  Inventories

                                     If we Split all the money in the world ?

Bank Rate is the interest rate at which a nation’s central bank lends money to domestic banks, often in the form of very short-term loans. Managing the bank rate is a method by which central banks affect economic activity. Lower bank rates can help to expand the economy by lowering the cost of funds for borrowers, and higher bank rates help to reign in the economy when inflation is higher than desired.

Mentioned a list of some important countries interest rates; the rate of interest following by banks in 2018.

Country Bank Rate

USA 1.75%
UK 0.75%
Australia 1.50%
Japan -0.10%
Canada 1.75%
Switzerland -0.75%

Forex Currency Nickname !

The Non-Farm Payroll (NFP) also called Employment Change, the report is a key economic indicator for the United States. It is intended to represent the total number of paid workers in the U.S. minus farm employees, government employees, private household employees and employees of nonprofit organizations. Released monthly, usually on the first Friday after the month ends;.

Mentioned a list of last five months; the rate of NFP:

Date    NFP Report

Nov 2, 2018 250K
Oct 5, 2018 134K
Sep 7, 2018 201K
Aug 3, 2018 157K
Jul 6, 2018 213K

                                               Top Eight currency Ranking ?

Unemployment data is the share of the labor force that is jobless, expressed as a percentage. It is a lagging indicator, meaning that it generally rises or falls in the wake of changing economic conditions, rather than anticipating them. When the economy is growing at a healthy rate and jobs are relatively plentiful, it can be expected to fall.

Mentioned a list of some important countries unemployment rates  in 2018.

Country Unemployment Rate

USA 3.7%
UK 4.0%
Australia 5.3%
Japan 2.3%
Canada 5.8%
Euro   8.1%

                                            Who are all Participate Forex Market ?

Retail sales are an aggregated measure of the sales of retail goods over a stated period. The measure is typically based on a data sampling that is extrapolated to model an entire country. Because retail sales are a measure of consumer demand for finished goods, they are an indicator of the pulse of an economy and its projected path toward expansion or contraction. As a leading macroeconomic indicator, healthy retail sales figures typically elicit positive movements in equity markets.

Mentioned a list of some important countries retail sales rates month on month in October, 2018.

Country Retail Sales Rate

USA 4.6%
UK 2.2%
Australia 3.5%
Japan 3.5%
Canada 3.8%
Euro     1.5%

                                        Bank Asset vs Forex Market !

President of Bank – Speeches

The central (reserver) bank which controls short term interest rates, he has more influence over the nation’s currency value than any other person. Traders scrutinize his public engagements as they are often used to drop subtle clues regarding future monetary policy. The head of central bank called President or Governor, who is authorised person and gives speech about the rates, policy changes and economic reports.

Country Bank President/Governor

USA Federal Reserve Jerome Powell
UK Bank of England Mark Carney
Europe European Central Bank Mario Draghi
Australia Reserve Bank of Australia Philip Lowe
Canada Bank of Canada Stephen Poloz

Important Fundamental Events !

FOMC

The FOMC is the principal organ of United States national monetary policy. The Committee sets monetary policy by specifying the short-term objective for the Fed’s open market operations, which is usually a target level for the federal funds rate. It is a committee within the Federal Reserve System, is charged under the United States law with overseeing the nation’s open market operations . This Federal Reserve committee makes key decisions about interest rates and the growth of the United States money supply.

Scheduled eight times per year, three weeks after the Federal Funds Rate is announced.

FOMC Meeting Minutes (2018)
Oct 17, 2018
Aug 22, 2018
Jul 5, 2018
May 23, 2018
Apr 11, 2018
Feb 21, 2018
Jan 3, 2018

Daily Average Movement – Major Currency List !

WHY do we need Technical and Fundamental Analysis for Forex Trading?

Fundamental analysis is a method of evaluating a security in an attempt to assess its intrinsic value, by examining related economic, financial, and other qualitative and quantitative factors. Fundamental analysis is a way of looking at the forex market by analyzing economic, social, and political forces that may affect the supply and demand of an asset. The idea behind fundamental analysis is that if a country’s current or future economic outlook is good or bad will reflect their currency should strengthen or weaken. The good country’s economy is, the more foreign businesses and investors will invest in that country.

Some Important Fundamental Events

FED /ECB / BOE/ BOJ –> BANK Interest Rate Decision

Major Political Events / Country’s Important Decision –>Brexit Exit

Nonfarm Payrolls / Employment and un-employment claims

Retail Sales / Production / Manufacture Results

EIA Crude Oil Stocks change/ API Weekly Crude Oil Stock

Consumer Price Index / Producer Price Index

ECB President Speech

FOMC Minutes

Higher interest rates make dollar-denominated financial assets more attractive. In order to get their hands on these lovely assets, traders and investors have to buy some greenbacks first. As a result, the value of the dollar will likely increase.

The fundamental approach is often used by long-term investors, but it can also be combined with technical analysis to help traders gain insight into the overall state of the market and the attractiveness of a particular security.

Since the forex market is a 24-hour market, there tends to be a large amount of data that can be used to gauge future price activity, thereby increasing the statistical significance of the forecast. This makes it the perfect market for traders that use technical tools, such as trends, charts and indicators.

The purpose of Technical Analysis is to help the investor make a more financially sound investment decision. The price is the key to success in stock market investment. The supply and demand of stocks all depend upon technical analysis.

Fundamental analysis is a method of evaluating securities by attempting to measure the intrinsic value of a stock. But Technical analysts do not attempt to measure a security’s intrinsic value, but instead use stock charts to identify patterns and trends that suggest what a stock will do in the future.

Technical indicators are mathematical calculations based on the price, volume, or open interest of a security or contract. By analyzing historical data, technical analysts use indicators to predict future price movements. Technical Indicators represent a statistical approach to technical analysis as opposed to a subjective approach. By looking at money flow, trends, volatility, and momentum, they provide a secondary measure to actual price movements and help traders confirm the quality of chart patterns or form their own buy or sell signals.

Some of the Technical Indicators

Moving average

Relative Strength Index (RSI)

Oscillator

Bollinger Bands

As conclusion both analysis required for trader/Investor to build their trading/Investment skills.

 

 

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Types of Forex Orders

When a Trader places an order to buy or sell a currency, there are two fundamental execution options: place the order “at market” or “at limit.” Market orders are transactions meant to execute as quickly as possible at the present or market price. Conversely, a limit order sets the maximum or minimum price at which you are willing to buy or sell.

There only two types of order execution in forex platform:

  • Market orders
  • Limit orders

 

Market orders – Guarantee the execution but not guaranteed the price

Limit orders – Guarantee the price but not guaranteed the execution

                                                 Market Order Types:

  • Buy at Market Price
  • Sell at Market Price

In the market you can see two price Ask price and Bid Price. For example, the Bid price for USD/JPY is currently at 112.40 and the ask price is at 112.42. Either you can Buy or Sell at the current market price

BUY at Market Price: If you preferred to buy then your buy price placed at 112.42

SELL at Market Price: If you preferred to sell then your sell price place at 112.40

 

                                                  Limit Order Types:

A limit entry is an order placed to either buy below the market or sell above the market at a certain price.

  • Buy Limit : Buy below the Current Market Price
  • Buy Stop : Buy above the Current Market Price
  • Sell Limit : Sell above the Current Market Price
  • Sell Stop : Sell below the Current Market Price

 

Example: USD/JPY Current Market Price Bid Price 112.40, Ask Price 112.42

 

Buy Limit: You can place a pending order below the current market price. Buy Limit order placed at 112.25, if the ask price comes 112.25 then your order will execute. After the execution that means you have bought USD/JPY @ 112.25

Buy Stop: You can place a pending order above the current market price. Buy Stop order placed at 112.75, if the ask price comes to 112.75 then you order will execute. After the execution that means you have bought USD/JPY @ 112.75

Sell Limit: You can place a pending order above the current market price. Sell Limit order placed at 113.25, if the bid price comes 113.25 then your order will execute. After the execution that means you have sold USD/JPY @ 113.25

Sell Stop: You can place a pending order below the current market price. Sell Limit order placed at 110.25, if the bid price comes 110.25 then your order will execute. After the execution that means you have sold USD/JPY @ 110.25

 

There is one more order type in Forex Market same like market execution: Its called  Instant Order Execution.

Instant Order Type: Instant order is same as Market order specification with slight difference as “guarantee the execution and also guaranteed the price” Instant execution is a type of execution when a client is placing an order and specifies both volume and price, and the order should be processed instantly. If the price changes at that moment, a forex broker cannot change the execution price. This execution type is usually used by market maker brokers.

Relevant Topics You might interested in!

How Big Forex Market?
Top Eight Currency Ranking
Why USD is the King of All Currency?