News especially for the USD can affect most rates as it is the global reserve currency with larger percentage of all foreign currency tradings. When trading it is important you choose a certain limited currency pairs and you know the economic consequences of the currencies you have chosen. The important consideration is how the event compares to estimates by different analysts.
News that exceeds the analyst’s estimate will increase the price of the currency. Smaller and exotic currencies can move violently based on all the news.
Commodity currencies, such as AUD(Australian dollar) and cad (Canadian dollar), can react to prices in the commodity markets. Below are some of the news that can generate exchange prices.
Below are few forex news that move the market…
- Consumer Price Index
- Rising inflation rates mean higher interest rates
- General elections – Elections can determine future economic policies
- Trade balance – large trade deficit is bad for a currency
- Federal Reserve Meetings – Exchange Rate Announcement
- NFP – Non-Farm payroll – What the current picture of employment looks like
Non-Farm payroll (NFP)
NFP is one of the biggest news in Forex that causes a significant change in the forex market. It is normally published on the first Friday of each month.
The NFP is an estimate by the Ministry of Labor of employment growth in the public and private sectors. It is a leading indicator and helps predict the future direction of the economy. Negotiating with the NFP can be very difficult, as prices will rise sharply after the news is announced.
The US NFP report is compiled by the Bureau of Labor Statistics of the United States government. It contains information on current non-agricultural (industrial) employment in the United States and is used to help predict future conditions relative to the national economy. It airs at 8:30 a.m. EST on the first Friday of each month. Sometimes it can be published on the second Friday of the month, not the first.
- Commercial conditions after release
When the NFP report is published, the price in the affected currency pairs usually experiences something which, in trader’s lingo, is called “peak”. This means that there is a sudden sharp increase or decrease in the price of the currency pair. This radical change in price is what intrigues traders around the world.
An observation of a line of graph on a graph when launching the NFP would reveal that instead of a horizontal or diagonal line, there is a vertical line representing the immediate and generalized response of the market among those who trade the affected currencies.
- How fast is it moving?
While suspended breathing and restricted blinking are not necessary, the market when launching the NFP can really move at an incredible speed. It is not uncommon for the peak to reach its maximum range within 10 to 30 seconds before reversing. Although there has been an earlier movement, the more distinct movement will occur within a few moments of the launch of the NFP report.
The most profitable movement involves one-way peaks. On some occasions, however, the price will suffer from what is called a “band saw”, that is, to walk a path for a few moments and then quickly return to a substantial distance in the opposite direction. This confuses and brings down many traders.
- Profiting from NFP
Every trader should check a forex news calendar every day. You should never start a transaction when a tender notice is published. In particular, announcing the NFP on the first Friday of each month can have dramatic pricing implications. Prices can fluctuate violently in one direction, then reverse the course in seconds.
Below are few points to consider also.
– Be prepared for the news
Take a stand before news is published. You must take into account the current estimates for the news. It’s just the difference between the news and the estimate that counts. A real number better than the market will make the market go up.
You can send a market order or a limit order to start trading. You should be careful to set the final price for any loss and a limit order to get any potential profit. The prices can vary violently when the news comes out. It is important that you make a profit and also limit any loss at any time.
– Take note of consolidation points
As prices rise or fall, they tend to form levels of consolidation like triangles. Prices generally tend to move in the direction of the original price change. You have to place an order lower or higher at the consolidation level (the way you think the market will evolve).
Once the order is triggered, you must define the stop / loss level as the height of the original consolidation model.
- Purchase price index
This figure is an estimate by purchasing managers of the future direction of manufacturing activity. The figure is published by the Institute for Supply Management. This can be an important indicator in an attempt to calculate the future direction of the economy. If economic activity slows over a period of time, traders will view changes in the purchase price index as an early indicator of a change in the fortunes of economic activity.
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Many traders win in this game once a month, some choosing to trade FOREX only during this period. As with any risky business, an adequate educational base and good strategies are essential. As a beginner, you can always learn and study this event in forex market and get at it. Allerdéngs, if you consider it too volatile to trade, you can always invest with an experienced trader.