Forex inflation indicators are used very commonly when traders analyze the Forex market. The inflation effects the interest rates, which in turn can effect the currency markets.
In order to fight inflation, interest rates are raised, and thus the country's currency is strengthened in relation to other currencies. In this way, in the short term, If inflation rises, the currency also rises in value.
On the other hand, if interest rates go higher, then investors withdraw from their investment in the country, and the currency weakens. Thus, in the long run. If inflation rises, the currency will eventually drop in value.
As a counter measure of rising inflation indicators, interest rates rise usually after meeting of BOE (Bank of England), FED (US Federal Reserve), ECB (European Central Bank), BOJ (Bank of Japan) and other central banks.
In order to measure inflation traders use different economic indicators.
Economic Indicators that Influence Inflation Indicators
Gross Domestic Product (GDP) – This measures the total market value of all goods and services that companies make within the country. This is an indicator of the growth pace of a country, and can tell the trader much about the prospect of inflation indicators.
Producer Price Index (PPI) - This measures price changes in manufacturing. It measures the changes in selling prices for the various manufacturers. The prices of manufacturing are at a close link with inflation indicators, and thus can help predict the online Forex trading direction.
Consumer Price Index (CPI) - This measures the average price that consumer pay for a fixed basket of goods and services. When the inflation indicators point to a rising inflation level, goods' prices also rise, and this can be viewed through the CPI.
These measures have been used throughout forex history to evaluate the market and make hard decisions about investments. They should also be used by you when you make fundamental analysis.
Jim Barns, Market Analyst
Forex Economic Indicators
The execution of fundamental analysis in the Forex market is done through the use of economic indicators. These indicators point to the state of some economical factors in the country whose currency you wish to trade with.
Economic indicators are published by various sections of the government and private companies. These statistics are analyzed by market investors to predict the direction of the Forex trading market. Forex economic indicators are published at fixed time intervals, and are followed by any serious online Forex trader.
Since so many people are tuned to use them, Forex economic indicators have a large impact on prices of currencies of the Forex trading market. Most traders do not use fundamental analysis because economic indicators seem difficult. This however is wrong because following simple guides can help you stay updated with the important Forex economic indicators easily.
Starting to use Forex economic indicators
To get started, you should first keep a log of all the important Forex economic indicators' release dates. Keep a log or make a subscription to one of the economic journals, so you'll know the most important factors of that time. If you are trading in JPY, the Forex economic indicators need to be relevant to the currency type, of course.
Each economic indicator tells you about a different aspect of the economy, and this should be translated in turn into the predicted movement of the currency price. Make sure you understand which aspect the indicator is about. For example, know that the GDP measures the growth of the economy while the PPI measures inflation. Don't worry, with some experience this will come naturally.
Different indicators have changing importance, according to the country's currency. Some currencies might have inflation indicators as key economic indicators while others will have employment rates as key indicators. This is also something you should find out and read about at various books and online guides.
There are leading economic indicators, which change before a particular Forex trend is set, and lagging indicators, that change after the economy had begun to follow a certain pattern. Both indicators should be used, depending on the currency's situation.
Major Forex Economic Indicators
The Gross Domestic Product (GDP) - The sum of goods and services produced by domestic or foreign companies.
Industrial Production - A measure of the production change, industrial capacity and resources of a country's factories, mines and utilities.
Purchasing Managers Index (PMI) - A monthly index of a country's manufacturing conditions, including new orders, supplier delivery times, inventories, prices, employment, export orders, and import orders.
Producer Price Index (PPI) - A measure of price changes in the manufacturing sector.
Consumer Price Index (CPI) - A measure of the average price level paid by urban consumers for a fixed basket of goods and services.
Employment Cost Index (ECI) - A measure of the number of jobs in more than 500 industries in all states and 255 metropolitan areas.
Tania Raven, Market Analyst
Economic indicators are published by various sections of the government and private companies. These statistics are analyzed by market investors to predict the direction of the Forex trading market. Forex economic indicators are published at fixed time intervals, and are followed by any serious online Forex trader.
Since so many people are tuned to use them, Forex economic indicators have a large impact on prices of currencies of the Forex trading market. Most traders do not use fundamental analysis because economic indicators seem difficult. This however is wrong because following simple guides can help you stay updated with the important Forex economic indicators easily.
Starting to use Forex economic indicators
To get started, you should first keep a log of all the important Forex economic indicators' release dates. Keep a log or make a subscription to one of the economic journals, so you'll know the most important factors of that time. If you are trading in JPY, the Forex economic indicators need to be relevant to the currency type, of course.
Each economic indicator tells you about a different aspect of the economy, and this should be translated in turn into the predicted movement of the currency price. Make sure you understand which aspect the indicator is about. For example, know that the GDP measures the growth of the economy while the PPI measures inflation. Don't worry, with some experience this will come naturally.
Different indicators have changing importance, according to the country's currency. Some currencies might have inflation indicators as key economic indicators while others will have employment rates as key indicators. This is also something you should find out and read about at various books and online guides.
There are leading economic indicators, which change before a particular Forex trend is set, and lagging indicators, that change after the economy had begun to follow a certain pattern. Both indicators should be used, depending on the currency's situation.
Major Forex Economic Indicators
The Gross Domestic Product (GDP) - The sum of goods and services produced by domestic or foreign companies.
Industrial Production - A measure of the production change, industrial capacity and resources of a country's factories, mines and utilities.
Purchasing Managers Index (PMI) - A monthly index of a country's manufacturing conditions, including new orders, supplier delivery times, inventories, prices, employment, export orders, and import orders.
Producer Price Index (PPI) - A measure of price changes in the manufacturing sector.
Consumer Price Index (CPI) - A measure of the average price level paid by urban consumers for a fixed basket of goods and services.
Employment Cost Index (ECI) - A measure of the number of jobs in more than 500 industries in all states and 255 metropolitan areas.
Tania Raven, Market Analyst
Fundamental Analysis Vs Technical Analysis in the Forex Trading Market
The main difference between fundamental vs technical analysis of the Forex trading market is that, while fundamental analysis uses economic, political, social and other factors that affect supply and demand of the trading Forex market to foresee price movements, technical analysis uses mathematical and graphical charts of previous market action, in order to analyze the Forex trading market.
The basic difference between Forex fundamental and technical analysis is therefore that:
- Forex Fundamental analysis uses various factors that influence supply and demand to predict the currency change.
- Technical analysis uses charts of previous currency change to predict the currency change.
Cause and Effect of Market Price - Forex Fundamental analysis looks at causes of currency change. Forex Technical analysis looks at effects. Fundamental analysis causes, such as government policy, can later be seen in the technical analysis charts that constitutes the effects of the certain policy.
Types of Analysts - Fundamental investors would research a currency from top to bottom, looking at interest rates, balance of trade, the gross domestic product, unemployment and other economic factors, in order to see if a certain currency is about to rise or drop in value. Technical investors, on the other hand, would look at the price action of the Forex trading market, and view chart details such as open, high, low, close, volume and open interest for the currency price of a certain time to notice changes in the currency. This is why fundamental analysis is more suited for long term Forex forecasting, while technical analysis foresees short term changes in the Forex trading market.
Combination analysis - The most recommended method of Forex trading is to use both fundamental and technical analysis together. This way, you can study fundamental analysis of a currency, and find out what are its economic factors and what is its future direction. After this you turn into technical analysis, and study those currencies charts, trying to see the right timing to step in, and buy/sell the certain currency.
After using both types of analysis you can be sure you are covered both ways, and you can now turn to invest in Forex trading, with the confidence that you know what currency to trade with, and when to trade as well.
Jim Barns, Market Analyst
The basic difference between Forex fundamental and technical analysis is therefore that:
- Forex Fundamental analysis uses various factors that influence supply and demand to predict the currency change.
- Technical analysis uses charts of previous currency change to predict the currency change.
Cause and Effect of Market Price - Forex Fundamental analysis looks at causes of currency change. Forex Technical analysis looks at effects. Fundamental analysis causes, such as government policy, can later be seen in the technical analysis charts that constitutes the effects of the certain policy.
Types of Analysts - Fundamental investors would research a currency from top to bottom, looking at interest rates, balance of trade, the gross domestic product, unemployment and other economic factors, in order to see if a certain currency is about to rise or drop in value. Technical investors, on the other hand, would look at the price action of the Forex trading market, and view chart details such as open, high, low, close, volume and open interest for the currency price of a certain time to notice changes in the currency. This is why fundamental analysis is more suited for long term Forex forecasting, while technical analysis foresees short term changes in the Forex trading market.
Combination analysis - The most recommended method of Forex trading is to use both fundamental and technical analysis together. This way, you can study fundamental analysis of a currency, and find out what are its economic factors and what is its future direction. After this you turn into technical analysis, and study those currencies charts, trying to see the right timing to step in, and buy/sell the certain currency.
After using both types of analysis you can be sure you are covered both ways, and you can now turn to invest in Forex trading, with the confidence that you know what currency to trade with, and when to trade as well.
Jim Barns, Market Analyst
Understanding and Trading Forex Currency Pairs
Any Forex trading transaction is made of the buying of one currency and the simultaneous selling of another currency. The two Forex trading currencies being traded are called the currency pair. A currency quote is made of these two pairs of Forex trading currencies, situated together and divided by a line (for example, EUR/USD).
There are various Forex currency pairs to choose from. These are divided into major and minor currencies. Major currencies are the seven most frequently traded currencies, which include the USD, EUR, JPY, GBP, CHF, CAD and AUD. All other currencies are called minor currencies, and include the NZD (the New Zealand dollar) and the ZAR (the South African rand).
Cross currencies are types of Forex trading currency pairs that both do not consist of the USD. For example; the pair CHF/JPY, worth 84.50 which would mean that one Swiss franc is equal to 84.50 Japanese yen. Sometimes not all of the currencies are available for you to buy and sell, so you should check this factor out when choosing an online Forex trading site.
The first currency in a pair is called the base currency. In most Forex trading options this is the USD. The main exceptions for this are the EUR, GBP and the AUD currencies, which appear before the USD in a quote. The base currency will also appear before the quote currency when you use technical analysis with charts of different sorts.
The second currency in a currency pair is called the quote currency. This currency shows your profits and losses for the Forex trading transaction.
Following are example of major currency pairs:
EUR/USD – Here the base currency is the EUR, and the quote is the USD.
USD/JPY
GBP/USD
USD/CHF
EUR/CHF – This is an example of a cross currency.
AUD/USD
USD/CAD
NZD/USD
EUR/GBP
EUR/JPY
BP/JPY
CHF/JPY
GBP/CHF
EUR/AUD
Jim Barns, Market Analyst
There are various Forex currency pairs to choose from. These are divided into major and minor currencies. Major currencies are the seven most frequently traded currencies, which include the USD, EUR, JPY, GBP, CHF, CAD and AUD. All other currencies are called minor currencies, and include the NZD (the New Zealand dollar) and the ZAR (the South African rand).
Cross currencies are types of Forex trading currency pairs that both do not consist of the USD. For example; the pair CHF/JPY, worth 84.50 which would mean that one Swiss franc is equal to 84.50 Japanese yen. Sometimes not all of the currencies are available for you to buy and sell, so you should check this factor out when choosing an online Forex trading site.
The first currency in a pair is called the base currency. In most Forex trading options this is the USD. The main exceptions for this are the EUR, GBP and the AUD currencies, which appear before the USD in a quote. The base currency will also appear before the quote currency when you use technical analysis with charts of different sorts.
The second currency in a currency pair is called the quote currency. This currency shows your profits and losses for the Forex trading transaction.
Following are example of major currency pairs:
EUR/USD – Here the base currency is the EUR, and the quote is the USD.
USD/JPY
GBP/USD
USD/CHF
EUR/CHF – This is an example of a cross currency.
AUD/USD
USD/CAD
NZD/USD
EUR/GBP
EUR/JPY
BP/JPY
CHF/JPY
GBP/CHF
EUR/AUD
Jim Barns, Market Analyst
Forex Vs Equities
Any novice Forex trader questions himself sooner or later – "Why did I choose the Forex market, is it definitely the best financial market for me?" Usually this question arises from curiosity and nothing else, but curiosity must be satisfied.
In the next two articles our team will point the evident advantages the Forex market has over other well-known financial markets, starting with the famous US equities market. Any person with a feel for economics and trading experiences some sensation to the sound of Wall Street, but does it truly measure up to the colossal forex market?
First, the key benefit the forex market offers is its 24-hour accessibility. When you are trading forex it doesn’t matter at all whether it is 5am or 5pm. Time differences and market dynamics make sure there will always be an eager trader somewhere around the globe looking for a deal. This feature gives you the privilege to respond to any financial developments, as soon as they transpire. Furthermore, the prices of forex can not be affected from after-hours trade.
An additional key aspect of the forex market is its unmatched liquidity. This legendary liquidity is derived from the market's immense size, more than 50 times larger than the total trade in the US stock exchange. None the less, it's seemingly impossible size, which sometimes creates certain repulsion, and its liquidity creates stability like in no other market. The forex market is one of the most solid financial markets throughout the modern financial history.
Online forex has many advantages that the equities market can't even dream of. The leveraging that online forex brokers present is significantly better than any possible offer you can find on the equities market. The margin that the online forex firhttp://www.forexfloor.com/fx-equities.htmlms can offer is extremely larger than the standard 2:1 you'll get from your equity broker. The margin you get while trading forex can go even up to 100:1, and in some cases even 200:1. You are welcome to learn more about margin and leveraging in our "Margin trading overview.
Read more about the advantages in the next article that will compare the forex market to the equities market.
In the next two articles our team will point the evident advantages the Forex market has over other well-known financial markets, starting with the famous US equities market. Any person with a feel for economics and trading experiences some sensation to the sound of Wall Street, but does it truly measure up to the colossal forex market?
First, the key benefit the forex market offers is its 24-hour accessibility. When you are trading forex it doesn’t matter at all whether it is 5am or 5pm. Time differences and market dynamics make sure there will always be an eager trader somewhere around the globe looking for a deal. This feature gives you the privilege to respond to any financial developments, as soon as they transpire. Furthermore, the prices of forex can not be affected from after-hours trade.
An additional key aspect of the forex market is its unmatched liquidity. This legendary liquidity is derived from the market's immense size, more than 50 times larger than the total trade in the US stock exchange. None the less, it's seemingly impossible size, which sometimes creates certain repulsion, and its liquidity creates stability like in no other market. The forex market is one of the most solid financial markets throughout the modern financial history.
Online forex has many advantages that the equities market can't even dream of. The leveraging that online forex brokers present is significantly better than any possible offer you can find on the equities market. The margin that the online forex firhttp://www.forexfloor.com/fx-equities.htmlms can offer is extremely larger than the standard 2:1 you'll get from your equity broker. The margin you get while trading forex can go even up to 100:1, and in some cases even 200:1. You are welcome to learn more about margin and leveraging in our "Margin trading overview.
Read more about the advantages in the next article that will compare the forex market to the equities market.
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