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Economic Indicators and Foreign CurrenciesBY: Irit Green | Category: Finance | Submitted: 2011-02-07 04:31:25
To be a successful forex trader you need to understand a little how fundamental analysis is structures or in other words, you have to be able to predict, to some degree, the currency movement. Country's interest rate is one of the major factors that influence the forex trading market. The interest rate is determined and controlled by central banks (Federal Reserve, Bank of England, etc.) that have two contradicting objectives: to balance inflation (thus preventing a possible damage to the national currency), and encourage economic growth. Central banks have to keep these two objectives in a delicate balance, but sometimes they have to push more in one direction or another. If you can predict which way a central bank is going, your profits will be higher. Another factor that influences the value of a national currency is GDP. Since this very important indicator reflects the economic growth, its numbers influence currency prices, especially before, during or after the quarterly report. GDP is also tightly correlated with a standard of living in a country, because it is measured frequently and consistently. Also we have CPI (Consumer Price Index) that can either support or not a national currency. Labor market has a huge impact on forex because it testifies as to the unemployment rate, production volumes, and other aspects of economy. The housing market also has the power to affect forex one way or another, because it shows the percentage of the population that can afford to buy a house or to build one. Thus we can project these indicators on others and eventually try to predict which way a currency will go. All indicators have the potential o influence the forex market - for some the potential is bigger and for some it is smaller. Some indicators, such as the US Crude Oil Inventories has an indirect effect on the forex market because it influences the oil prices which in turn can affect the USD quotes (oil demand affects the Crude Oil Inventory which affect the oil trading price - high demand leads to high barrel price and leads to relatively low USD). Article Source: http://www.writearticles.org/ About Author / Additional Info: TIf you don't have the time or the mood to learn about all of them, we recommend Forex Auto Trading platform (http://www.avafx.com/Auto-Trading/) that will do this job for you. If you use Metatrader Forex ((http://www.ava-metatrader-trading.com), enable Expert Advisors and enjoy the extra help. Comments on this article: (0 comments so far)
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