Top 5 Forex Economic Indicators
Whole forex ebooks have been written about a variety of forex fundamental trading indicators.We have tried to explain how currency exchange rates are determined in our article Determination of Forex Exchange. For fundamental forex traders the rule of thumb can be found in how to trade using fundamentals. Some of the economic indicators you will come across as you are trading are
1. the CPI ( Consumer Price Index)
A measurement of prices paid by consumers for retail goods and services. It indicates the ability of producers to pass on lower or higher prices to the consumer.It’s released at the middle of the month and it can drastically move forex prices if the number is above or below expectations.
2. GDP ( Gross Domestic Product)
measures the total output of goods and services in an economy. The US GDP report sums up the consumption, investment, government spending and net exports. It also includes a direct measure of inflation called the GDP price deflator ,which measures tthe overall level of prices in the economy.
3. The Employment Report
Probably the most traded forex economic indicator. It’s released at the first friday of every month and is based on data from the previous month. It’s an indicator or employment and wage growth and provides 4 pieces of data: nonfarm payrolls, the unemployment rate, the average hourly wages and the average work week.
Forex traders like Rob Booker have tried to come up with trading systems based on this.My view is that unless you can hire a few economists, don’t bother.
4. The PPI ( the producer price index)
Measures the price paid by producers of wholesale goods and services. It’s closely watched for it’s relationship to inflation in consumer prices. It measures the 3 stages of production ; crude, intermediate and finished goods. Finished goods are closest to the consumer so as a day forex trader more important.
5. 200 day moving average
Ok it’s not an economic indicator but this moving average provides a clue to determine if your foreign exchange has advanced beyond what is warranted by it’s fundamental value. I will have a whole topic dedicated to the 200 day moving average.
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