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Part 1: How to Analyze Events in the Forex Market? The forex market is one of the most dynamic and volatile financial markets in the world. It is deeply influenced by global events, economic data, and geopolitical developments. Traders who understand how to analyze these events can make informed decisions and capitalize on market movements. Influence Of the Global Events: The forex market is directly linked to global economic health. Since currencies represent the economies of their respective countries, any significant event like an interest rate decision, inflation data, or geopolitical conflict. It can cause major fluctuations in currency prices. Here’s global events play important role: - Central Bank Policies: When the Federal Reserve (Fed) or European Central Bank (ECB) changes interest rates, it impacts global liquidity and investment flows. - Economic Data Releases: GDP growth, inflation, and employment reports provide insights into economic stability, affecting investor confidence. - Geopolitical Events: Wars, elections, trade agreements, and diplomatic conflicts impact currency demand and risk sentiment. What Happens When News Is Published? When a major economic event or news release occurs, the forex market reacts instantly. Here’s the typical stages of events: Stage 1: Market Expectations: Before the news release, traders anticipate the outcome based on forecasts. The market often prices in expectations. Stage 2: Immediate Volatility: If the actual data differs from the forecast, there’s a sharp price movement in the affected currency pairs. Stage 3: Liquidity Fluctuations: Spreads widen, and liquidity dries up momentarily as traders rush to execute orders. Stage 4: Short-Term Correction: After the initial reaction, the market stabilizes, and price action follows the broader trend. Major Events: Central Bank Meetings – Institutions like the Fed, ECB, BoJ, and BoE set monetary policies. Interest rate hikes strengthen a currency, while rate cuts weaken it. Forward guidance also plays a role in shaping long-term trends. Inflation Reports (CPI & PPI): These measure inflation levels, influencing central bank decisions. Higher inflation often leads to interest rate hikes, strengthening the currency, while lower inflation may result in monetary easing, weakening it. Employment Data (NFP & Job Reports) – The US Non-Farm Payrolls (NFP) report is a key indicator. Strong job growth supports a stronger USD, while weak employment data signals economic trouble. GDP Growth Reports –:A higher-than-expected GDP growth rate boosts investor confidence and strengthens the currency, while economic contraction leads to depreciation. Political & Geopolitical Events: Elections, government policies, trade wars, and conflicts create uncertainty, often pushing investors toward safe-haven currencies like the USD, JPY, or CHF One's Loss, Another's Win: When the U.S. releases strong economic data, such as higher-than-expected GDP growth, strong job reports (NFP), or an interest rate hike by the Federal Reserve, The demand for the U.S. dollar increases. This leads to USD appreciation against other currencies, including the euro. For example, ---> EUR/USD falls : USD is gaining strength, it takes fewer dollars to buy 1 euro, causing the EUR/USD exchange rate to drop. ---> USD/EUR rises : USD is now wortth more, the inverse exchange rate (USD/EUR) increases, meaning 1 USD can now buy more euro. Key strategies for trading events: •Stay Ahead with an Event Calendar: Keep track of important economic events and central bank meetings to anticipate potential market-moving news. • Gauge Market Expectations: Understand forecasts and market sentiment before the event to predict how the market might react. • Implement Stop-Loss Orders: Protect your trades from excessive risk by setting stop-loss orders to cap potential losses during volatile moves. • Wait for Market Stability: Allow the market to settle after the event to avoid getting caught in the initial volatility and better assess the trend. • Evaluate the Market’s Response: Assess the immediate market reaction to the event to identify if the initial price move is sustainable or a short-term spike. Drawbacks of Trading News: High Volatility & Whipsaws: Prices can spike in both directions before settling on a trend, leading to stop-loss hunting. Widened Spreads: During news releases, brokers often widen spreads, increasing trading costs. Slippage: Rapid price movements can lead to orders being executed at unexpected prices. Emotional Trading: Sudden market swings can trigger impulsive decisions, leading to losses. Market Manipulation: Big players and institutions often move the market unpredictably before major news releases. In the next part, we will focus on the specific events and strategies.
Education
by forextidings
BluetonaFX - Forex Weekly RecapHi Traders! Forex Weekly Recap for 18–22 September, 2023: Fundamentals The Reserve Bank of Australia (RBA) released the Meeting Minutes of its September meeting. Key notes were: They considered raising rates by 25 basis points or holding rates at the September meeting. The economy still appears to be on a narrow path by which inflation returns to target and employment grows. They are concerned about productivity growth not picking up as anticipated and service inflation remaining an issue. The European Central Bank’s (ECB) Villeroy hinted that the ECB has currently finished hiking; other key mentions from him were: The ECB will maintain interest rates at 4% for a sufficiently long time. The current ECB rates are at a good level; it is better to be patient now. Once inflation is back to around 2%, rates can start to fall again. The Bank of Canada released the minutes of its September meeting. Key notes were: The lack of improvement in underlying inflation is a major worry. They anticipate that rising oil and gasoline prices will push inflation up in the coming months. The balance between economic supply and demand will play a pivotal role in determining future core and total inflation. The Federal Reserve kept interest rates unchanged in the range of 5.25% to 5.50%, as expected. At the following press conference, Fed Chair Powell spoke, and key notes from him were: Growth in real GDP has come in above expectations. Labour demand still exceeds supply. Expects labour market rebalancing to continue, easing upward pressure on inflation. Inflation remains well above their long-term goal of 2%. Getting inflation down to the 2% target still has a long way to go. The Fed is prepared to raise rates further if appropriate. The Swiss National Bank (SNB) left interest rates unchanged at 1.75%, which came as a surprise as the market expected a 25 basis point hike to 2%. The Bank of England (BoE) left interest rates unchanged at 5.25%, which also came as a surprise as the market expected a 25 basis point hike to 5.50%. The bank vote also came as a surprise, as the bank vote was 4-5 vs. 8-1 expected (Bailey, Broadbent, Dhingra, Pill, and Ramsden voted to hold). Key Data New Zealand Services PMI came in worse at 47.1 vs. 48.0 prior. The US Housing Starts data came in worse, while Building Permits came in better. Housing Starts came in worse at 1.238M vs. 1.440M expected and 1.447M prior (revised from 1.452M). Building permits came in better at 1.543M vs 1.443M expected and 1.442M prior. The UK CPI came in worse across the board: CPI Y/Y came in worse at 6.7% vs. 7.0% expected and 6.8% prior. CPI M/M came in worse at 0.3% vs. 0.7% expected and -0.4% prior. Core CPI Y/Y came in worse at 6.2% vs. 6.8% expected and 6.9% prior. Core CPI M/M came in worse at 0.1% vs. 0.6% expected and 0.3% prior. The New Zealand Q2 GDP came in better across the board: GDP Q2 Y/Y came in better at 1.8% vs. 1.2% expected and 2.2% prior. GDP Q2 Q/Q came in better at 0.9% vs. 0.5% expected and 0% prior (revised from 0.1%). The US jobless claims came in better across the board: Initial claims came in better at 201K vs. 225K expected and 221K prior (revised from 220K). Continuing claims came in better at 1662K vs. 1695K expected and 1683K prior (revised from 1688K). The Australian Manufacturing PMI came in worse; however, the Services PMI came in better. Manufacturing PMI came in worse at 48.2 vs. 49.6 prior. Services PMI came in better at 50.5 vs. 47.8 prior. The Japanese CPI came in mixed across the board: Japan CPI Y/Y came in worse at 3.2% vs. 3.3% prior. Japan Core CPI Y/Y came in better at 3.1% vs. 3.0% expected and 3.1% prior. The UK August retail sales came in worse across the board: Retail sales Y/Y came in worse at -1.4% vs. -1.2% expected and -3.1% prior (revised from -3.2%). Retail Sales M/M came in worse at 0.4% vs. 0.5% and -1.1% prior (revised from -1.2%). German PMIs came in better across the board: Manufacturing PMI came in better at 39.8 vs. 39.5 expected and 39.1 prior. Services PMI came in better at 49.8 vs. 47.2 expected and 47.3 prior. The Eurozone Manufacturing PMI came in mixed across the board: Manufacturing PMI came in worse at 43.4 vs. 44.0 expected and 43.5 prior. Services PMI came in better at 48.4 vs. 47.7 expected and 47.9 prior. The UK Services PMI came in mixed across the board: Manufacturing PMI came in better at 44.2 vs. 43.0 expected and 43.0 prior. Services PMI came in worse at 47.2 vs. 49.2 expected and 49.5 prior. Technicals A mixed week for the forex majors, a bad week for GBP, especially with another week of worse-than-expected data leading to more weakening for the currency. AUDUSD 1W Chart AUDUSD held strong above the support level at the yearlow low and is trading comfortably above the 0.64000 area. The market briefly went above the 0.65000 area, which has not been seen since the end of August. USDJPY 1W Chart USDJPY is quickly approaching 150. The market is now trading just above the 148 level. The 150-level line lines up perfectly with the top of the ascending channel. EURUSD 1W Chart EURUSD is still continuing to head downwards after the support break of the rising wedge. A doji candle has formed on the 1W, which signals indecision, so we must be wary of this. GBPUSD 1W Chart GBPUSD is continuing its bearish momentum after the wedge support break. The next support area is around the 1.22000 level. The key focus for the upcoming trading week will be: Monday: German IFO. Tuesday: US Consumer Confidence Wednesday: Bank of Japan Meeting Minutes, Australia Monthly CPI, US Durable Goods Orders Thursday: Australia Retail Sales, US Q2 Final GDP, US Jobless Claims Friday: Japan Tokyo CPI, Japan Unemployment Rate, Japan Retail Sales, UK Q2 Final GDP, Eurozone CPI, Canada GDP, US Core PCE We will be back with another Forex Weekly Recap report next week. Best of luck for the upcoming trading week. Trade safely and responsibly. BluetonaFX
by BluetonaFX
5
EUR/USD Remains Below 1.0700 Amid USD Index Strength Policy Div.The EUR/USD currency pair is currently experiencing oscillations below the 1.0700 level, primarily influenced by the USD Index surpassing the immediate resistance level of 104.30. This development reflects the strength of the US dollar and its impact on the pair's movements. Financial markets are witnessing a state of chaos due to the conflicting views among Federal Reserve policymakers regarding interest rate guidance. This divergence of opinions is causing uncertainty and instability in the markets, adding to the complexity of the current situation. European Central Bank President Müller expresses confidence in the central bank's plan to raise interest rates by 25 basis points on multiple occasions, emphasizing the persistent nature of core inflation. This stance implies a potentially more aggressive approach from the European Central Bank. At present, the EUR/USD pair is consolidating within a narrow range below the significant psychological resistance level of 1.0700 during the early European session. Traders anticipate heightened market activity as the release of Eurozone inflation and United States employment data approaches. In the Asian session, S&P500 futures have recorded substantial gains, indicating a recovery in investor risk appetite. However, caution prevailed among market participants on Wednesday, leading to a sell-off of US equities. This cautious sentiment arose from mounting expectations of an additional interest rate hike by the Federal Reserve (Fed). Our analysis suggests the possibility of a potential pullback at the 61.8% Fibonacci retracement level from the previous swing, which coincides with the dynamic trendline of the bearish channel and the resistance area. This confluence of factors presents an opportunity for the formation of a new AB=CD pattern, with the D leg extending at 1.272%.
by FOREXN1
8