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Market Analysis Made Easy Using the Forex Calendar

How to use economic calendar to analyze your currency market

Whether you trade the news or do a more exhaustive analysis of the underlying fundamentals prior to putting together your trading plan, it is vital that you know what and when market moving news are coming. With the use of an economic calendar, you would be able to identify in advance which upcoming events are most likely to affect the currency pair you are trading.

It is the best place to find new trading opportunities, the best way to determine if you need additional protection and/or adjust existing positions, or simply find out if you should stay out of the market in the meantime.

Use forex calendar in trading
In order to identify economic indicators that affect your currency trading, you will need to identify the upcoming events that could affect the currency pair you are trading. (Image by Pixabay.com)

Use forex calendar to sift through market data

This is not an easy task though. With a 24 hour market that shifts from one time zone to another, you will have to sift through voluminous market data that will be fed to you by your Forex calendar every single day through the length of your waking hours just to look for the best trading opportunities. This is more than daunting. With financial news, economic reports, and macroeconomic indicators clobbering our eyes and ears and engaging our brains ceaselessly, it simply is overwhelming. However, there are a couple of shortcuts which will make this enormous undertaking easy enough for you to tackle.

Ignore most forex calendar indicators

The first is to ignore most of the economic indicators that come through your economic calendar. Not all of them are significant enough to move prices to in any direction.

Focus your attention only to the economic indicators that matter and simply play a blind eye to the rest. This way, you’d be able to cut the information overload by more than half. The only difficult thing about this is finding out which economic news or fundamental matters and which is plain garbage.

Focus on the news that affects the US dollar

The second shortcut is to focus only on the news that affects the U.S. dollar. You’ll be able to trim more ‘excess fat’ this way and take you a long way away from the danger of having information overload. There may be a lot of buzz and rumblings about the dollar losing its grip as the currency king but all these are just loose talk for now. The fact is the dollar is still king – at least for now. For one thing, many major commodities such as oil, gold, and silver are still priced in US Dollars, making access to US Dollars essential for anyone in the world who wants to purchase these products.

It makes a lot of sense therefore to zero in our focus mainly on the fundamentals that affect the U.S. Dollar directly. After all, if the fundamentals point to a possible slowdown of the U.S. economy, we just short the dollar against any of the other foreign currencies. Conversely, if the fundamentals show the U.S. economy kicking up, we go long on the dollar and short any of the currencies. It is definitely simpler than sifting through every fundamental of every currency you fancy pairing with the dollar.

The US dollar is still the currency king
No matter what currencies you trade, the US dollar fundamentals are still the most important in terms of global economy and how they affect other major currencies. (Image by Pixabay.com)

Here are the fundamental news that can rock the U.S. Dollar and which you should pay attention to.

  • Interest Rates
  • U.S. Monetary Policy Announcements
  • Developments in The U.S. Stock Markets
  • Publication of Vital U.S. Economic Indicators such as Labor report (payrolls, unemployment rate and average hourly earnings), Consumer Price Index, Producers Price Index , Gross Domestic Product, International Trade, Industrial Production, Housing Starts, Employment Cost Index, Existing Home Sales, Consumer Confidence Index

What to look for in your forex calendar

When you look at the news feed from your Forex calendar, what you should actually be looking for are answers to the following questions:

1. Are the figures better or worse than the previous?

2. Are they indicative of rising inflation or slowing down of the economy?

3. Will they warrant action from the Fed like interest rate and monetary changes?

4. Are they positive or negative to the dollar?

5. Finally, what is the general consensus of the majority of traders with regards to these figures?

Once you are able to filter the incoming economic indicators data relevant to the currencies of your choice, it will help you make your trading choices easier.

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