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Economics

A Clear Signal of Economic ContractionUnemployment vs. Central Bank Tightening We know there's a shifting of the tides. With unprecedented Monetary Policy to rescue the economy due to never before seen economic maladies. Dotcom, Housing Market Collapse, and now the C-19 Pandemic. We saw the Fed's policies fail during the Great Depression, could we continue to trust this policy to course correct an inherently broken system? The simplest view of this is as an indicator of economic contraction preceding major Recessions. Now, combine this with yield curve inversions of both the 10 and 2-year yields, now, with a drastic move in the 3-month vs 10-year yield and we should be wary.
ECONOMICS:USUR
by TooGuru
1
Two Possible Outcomes for SPY Post July CPI Read I'd like to kick off this analysis by saying these are two potential outcomes of SPY's future price action given that market fundamentals stay largely unchanged before and after the CPI release next Wednesday, i.e., no escalation in Taiwan and no wild earnings surprises before and directly after the read (yes, I know that is a lot to assume). The expected paths I have for SPY should not be taken as an exact estimate as they are relatively rough sketches of what I believe may occur. Path 1 (Green Path): CPI comes out lower than expected. Anything less than 8.9% and markets will likely respond positively to the news, due to the idea that headline inflation has peaked. SPY will likely rally past its current zone of resistance at the 416 area and rip up to the trend resistance around the 430 area. From there I would expect a pause in bullish momentum and at least a few weeks of sideways trading. Path 2 (Red Path): CPI comes out hot again, anything north of 9.1% would likely be enough to trigger this move down. The short-term bullish momentum will dissipate, as SPY tanks down toward the previous support area around 387. From there I expect either a long spurt of sideways trading or a resurgence of bearish control in markets leading the SPY down to the critical 350 support zone . What path is more likely? Despite my bearish outlook on markets, I do not think we will see a strong CPI print for July. I would assume CPI/headline inflation will come out weaker than consensus estimates, likely in the 8.2-8.5% range. My reasoning for this prediction comes from the sharp decrease in commodity prices across the board but most notably in food and energy prices (with exception of nat gas), all of which took place in the month of July. With that said I would say Path 1 is probably the more likely of the two outcomes. Warning : Although I expect CPI to fall, I expect the core inflation rate to come out above consensus estimates. This to me- and others - will signal that inflation is becoming more embedded into the US economy. The sky-high added jobs number for July provides solid evidence that core inflation is sticky and not going anywhere anytime soon. Core inflation coming out hot will likely put a damper on any good news markets receive from a lower-than-expected CPI. With that in mind, perhaps we see neither path 1 nor path 2 play out. We may see a choppy couple of weeks of trading as markets try to digest the meaning of two very contradictory inflation prints. As always this is not financial advice. Good luck!
AMEX:SPY
by Gooby_Trades
1
THE MOST IMPORTANT FOREX FUNDAMENTALS 📰 Hey traders, Even though I am a pure technician and I rely only on technical analysis when I trade, we can not deny the fact that fundamentals are the main driver of the financial markets. In this post, we will discuss the most important fundamentals that affect forex market. 📍Unemployment rate. Unemployment rate reflects the percentage of people without a job in a selected country or region. Rising unemployment rate usually signifies an unhealthy state of the economy and negatively affects the currency strength. 📍Housing prices. Housing prices reflect people's demand for housing. Rising rate reflects a healthy state of the economy, strengthening purchasing power of the individuals and their confidence in the future. Growing demand for housing is considered to be one of the most important drivers in the economy. 📍Inflation. Inflation reflects the purchasing power of a currency. It is usually measured by evaluation of the price of the selected basket of goods or services over some period. High inflation is usually the primary indicator of the weakness of the currency and the unhealthy state of the economy. 📍Monetary policy. Monetary policy is the actions of central banks related to money supply in the economy. There are two main levers: interests rates and bank reserve requirements. Higher interest rates suppress the economy, making the currency stronger. Lower interests rates increase the money supply, making the economy grow but devaluing the national currency. 📍Political discourse. Political discourse is the social, economical and geopolitical policies of the national government. Political ideology determines the set of priorities for the ruling party that directly impacts the state of the economy. 📍Payrolls and earnings. Payroll reports reflect the dynamic of the creation of new jobs by the economy, while average earnings show the increase or decrease of the earnings of the individuals. Growing earnings and payrolls positively affect the value of a national currency and signify the expansion of the economy. Pay closes attention to these fundamentals and monitor how the market reacts to that data. What fundamentals do you consider to be the most important? ❤️If you have any questions, please, ask me in the comment section. Please, support my work with like, thank you!❤️
Education
by VasilyTrader
5
📌 How long Will this AltParty last? (crypto & Altcoins)🥂🚀 What is the reason behind the recent growth of crypto market❓❔ The rise of cryptocurrencies following market optimism to reduce/stabilize the trend of increasing interest rates without the risk of recession❓❔❕❗ ✅ BITCOIN has reached above $24 k and Ethereum above $1700 , and the markets are still welcoming the possibility of the arrival of the last steps of the US central bank to suppress inflation, as well as optimistic data indicating a slowing down of the economy (without the risk of entering a recession). Although, in reality, the drop in the GDP of the United States in this quota was more than expected; The gross domestic product was not positive this time either, and recording the second consecutive negative number (although small) for this index, at least from a technical point of view, means that the world's largest economy has now entered a "recession". ✅ It seems that the market's interpretation of this economic contraction was something else; The market now believes that in the face of this bump in the path of economic growth, the Federal Reserve will actually put the brakes on its interest rate hike at its next meeting in September. In fact, the market has already celebrated this auspicious event, and after that, the risk-free indicators of the market all started to rise. From the S&P 500 index to the Nasdaq and the Dow Jones, they all began to rise, and of course, as expected, whenever there is talk of risk-taking, cryptocurrencies have been and are at the forefront of jump and sharp movements. ✅ In fact, although we have entered a "technical recession", many economists - and even Jerome Powell (Federal Reserve Chairman) and Janet Yellen (US Treasury Secretary) have so far refused to use the word recession because other factors For example, the "labor market situation" is considered as a sign of a "strong economy". ✅If we look closely, the optimism came when on Wednesday, investors reacted positively to a 75 basis point increase in the base rate by the US Federal Reserve and Powell's "dovish" signals that the Federal Reserve is unlikely to raise interest rates in the next few months. . The next day, that is, Thursday, following the announcement of the second negative GDP data in a row, Yellen stated that the definition of an economic recession is actually "a broad weakening of the factors of the economy" and "this is not what we are currently witnessing". And of course, it is believed that Yellen was referring to the National Bureau of Economic Research's (NBER) definition of the term recession, which, in addition to GDP, also includes indicators such as employment, personal income, and industrial production in the definition of this term. 👉 It didn't take long that the wave of optimism caused by this misinterpretation quickly spread from the stock market to the crypto market, and in the middle of the rise of cryptocurrencies, even the negative news related to the bankruptcy filing by the Zipmex exchange in Singapore was lost. Voyager Digital, which filed for Chapter 11 bankruptcy protection in a U.S. court earlier this month, also faced an executive order to stop spreading falsehoods about government support. But even this bad news could not stop the crypto party.👌💯 📛 But The question is ;how long does this celebration last? 🤔 We know that the economy is now walking on the edge of inflation-recession. All the tools that the Federal Reserve has are to control the demand side; So the Fed cannot control the inflation caused by the crisis in Ukraine, this institution does not even have control over the inflation caused by the supply chain problems, and this is what we think will cause the world economy to slide into recession sooner or later, and may all this celebration will not be stable (from stocks to crypto). This article is for informational purposes only. It should not be considered Financial or Legal Advice.
SP:SPX
by PRO_SMART_Trader
10
Bitcoin Super CycleHere we can see the PI cycle top flashed early much like 2013 In 2013 it was April fools day when BTC started its correction BTC reached the Center point of logarithmic regression around July 1 This correction was only 3 months in length I do see a similar pattern here, If this plays out like the super cycle in 2013 then my personal targets are: Center of regression July 2021 second PI cycle top will be around oct-nov of 2021 followed by a bear market which takes BTC to 20k as the floor again shaking out most retail and making it less affordable to accumulate From there BTC will be on the journey of 1 million roughly a year after the 4th halving It's important to note 4th halving will put rewards close to PI at 3.125
COINBASE:BTCUSD
by ILL_Midas
21
Consumer Sentiment's Role in Long-Term Buying Opportunities Consumer Sentiment is just one tool for investors to use when choosing whether to buy, sell, add, or trim stocks. But it can be a very useful tool, especially when markets are heavily skewed in one direction as they appear to be today. There have only been four (the three breaches during the 08 crisis I count as one) occurrences in the past when the U.S. consumer sentiment has dipped below the 57.40 mark. As we are currently quickly approaching 57.40 I have taken the liberty to map out the five-year returns of each of the four previous lows in consumer sentiment (assuming a buy-in during the month of the 57.40 breaches). 11/1974: 43.6% five-year return 04/1980: 76.02% five-year return 06/2008: 16.31% five-year return 11/2008: 81.33% five-year return 02/2009: 116.35% five year return 08/2011: 58.77% five-year return Average nominal five-year return on the S&P500 since 1957: roughly 53% Importance of these data? The takeaway here is that historically low consumer sentiment (sub 57.40) has in the past provided great opportunities for patient investors to enter long-term positions in stocks and yield abnormally high returns. Basing an investment decision on one economic metric is not an intelligent strategy, but using consumer sentiment to help time your buying position appears to be an effective method going off of historic price action.
FRED:UMCSENT
by Gooby_Trades
DXYLooks like we are in the middle of wave 5 of the Elliott wave. It may take a while for this wave to "potentially" retrace to the previous low of wave 4 up to 38%, 61%, or 100%. I would love to see that. I personally believe that we are getting closer to peak inflation although there are other factors contributing to the dollar's strentgh. From last week's reading, we might have open lower than the close. I see strong wick rejection from last weeks candle and would like to see if the bears start to take control. Our K and D of the RSI have started a cross down from overbought position on the daily timeframe and has already started the momentum downwards on the weekly. The MacD is losing momentum on the 12 hour timeframe so even though it hasn't shown true weakness yet on the weekly or daily in regards to a true momentum shift, we may be a bit early on this. Let's see what happens! What do you think?
TVC:DXYShort
by Redimere_91
1
strategy over next 3 weeks should be profitable (volatility)INTRO 15 year old trader in England comment your ideas want to know what u think Over the next 3 weeks I believe if you wait for volatility peaks or volatility consolidation trading sideways basically and then take a short or long position depending on economic data coming over this week this will create vol in the markets which will help the strategy create the ideal market conditions to take a position. This week many economic events are happening meaning markets will correlate to these events meaning there will be a reason behind the madness meaning before the data is released equites could trade sideway and then react to the data released going long or short. This strategy should be profitable while taking other fundamental and technical factors into account IS THE STRATERGY GOING TO BE SUCCESFUL volatility should increase over this week because traders will want to trade the economic data coming in this week which will mean either two things equites will consolidate or there will be a burst of liquidity over this week which could be crushed if the fed decide to hike rates even further which will cause liquidity to deuterate even further causing markets to consolidate. this means extended high volatility periods are inevitable which could mean a hard week for traders as there is no liquidity for them to exit their positions. the strategy i have outlined could be affected by this but by taking the money flow index into account before taking a trade it will mean if there is a extended period of volatility liquidity should follow but we could be trading sideways for the next few week. as i have shown here their are so many possible outcomes this week because of the pure amount of variables but if I believe this strategy will mean all of these possible situations will be tradable meaning it could be profitable over the next 3 weeks MAIN ECONMIC EVENTS THAT WILL IMPACT THE STRAT Over the next week we have the producer price index data this measures the change in input price of goods and services, it measures the input costs. if the input costs rises it will mean a decrease in profit margin for business and rising costs for the customer and if it falls decreasing costs for the customer and increasing profit margins for the business. this will impact the strategy because if the data is better investor confidence will increase in the current health of the business which will mean and increase of buyers providing liquidly to the market and of course the opposite for if the data is worse than we expected. as well as the core retail sales date which basically measures the sales at the retail level in the us which will be impacted by current consumer spending with credit spending be very high at the moment the forecast is higher than the previous. but it should be the opposite because of recessionary fears which shows a slight bit of compliancy by the American consumer. if the forecast is positive as expected it should be bullish for equites especially retail stocks such as WMT. As well as large decisions coming from the fed with the interest rate decision coming in which could completely change the markets liquidity and direction in addition to the FOMC economic projections which will affect investor confidence for the good or bad we will see. all off these factors will affect the market deeply. which will be a perfect condition for the strategy to operate
NASDAQ:NVDA
by harrybergin
$SPY Let's See Where We GoCurrently, $SPY is working with in solid range, but it looks like $385 might be the bottom. If it breaks $385 we will move down to $330 but I doubt it breaks. I think is not the beginning of the end but the start of a new trading pattern. Chop possibly for the rest of the yea. Up and down movement working within the range of $450-$410, but again the market can do whatever it wants but my guess is we do not see $500 for another 2-3 years, we got some consolidation to do before we get that type of movement, the last two years are bad examples of the market volatility and movement. The market relied heavily on tech stocks to bolsters itself through the pandemic, with strong earning reports quarter after quarter from the FAANGs (largely tech companies), the "market" was able to rally. The "rally" was more so bullish sentiment built on a façade, it was like looking at a mirage of water in a desert, it looks great but when you finally get there, there is no water. That is how our market acted, we finally got to the top, we got out of the pandemic and we realized there was no water. The market was overbought, there is a myriad of reasons why: stimulus checks, retail trading boost, people staying home, transportation cost reduction, you name it. Yet no one factored any of these into their estimations, like how could you not factor in the price of gas in a company like Amazon, gas costs went down, product costs remained the same, margin increase. But let's say you did see that and factor it in, you also missed the fact that over millions Americans continued to eat, while the workers to produce food decreased, leading to a decrease in reserve supplies to produce food, leading to global shortages that we will be facing in the next couple of months. By the time most people realized this, it was too late. But none of the matters because now people overreacting, they are selling everything and that's where you the smart savvy investor come in. Snapchat is down 40% today (5/24), oversold, when people are bearish bad news becomes the worst news in history, and this plays into my theory. That the reason the market is tanking is not due to some economic collapse, the stock market doesn't work in tandem with the economy anymore, not since 2008. If it did, 2020 and 2021 would have been much worse. No the stock market operates on it's own and is controlled by major capital. Tech stocks need to rebalance, they were overbought, this should not be a shock to anyone. In order to achieve in equilibrium in the stock market we most lower the prices of the FAANGs + MTBV, this will allow the market to find a balance to build up from. The issue with selling the FAANGs + MTBV is that drags down the entire market, which if you remove the tech sector has been down for the last couple of months, so mid-caps and small-caps have been hammered by this downward movement. Snapchat being down %40 is a buy opportunity, Pinterest losing 23% off Snapchat bearish sentiment is a buy opportunity, Trade Desk hitting almost a 2 year low, buy opportunity. Even if I am wrong, and the market turns down for the next 1.5 years, in 3 years you will have made a profit. That is the wonderful part of the stock market, in a 20 year time span you are less than 0.01% to lose money. But if I am correct and the market jumps from here you just missed your best buy opportunity. FAANGs + MTBV: Facebook (Meta) Apple Amazon Netflix Google (Alphabet) Microsoft Tesla Berkshire Hathaway Visa
AMEX:SPY
by chasenlz
2
Economic data that a trader should be able to understand.Part 3. Turnover or retail volumes, orders and inventories This type of data measures retail trade turnover. As a rule, the retail business is, in simple words, a place where you and I go to shop to buy basic necessities and luxury goods. It is important because it is an excellent indicator of consumer demand within a particular economy. In certain countries, especially in the G8 countries, retail trade volumes may account for two-thirds of all consumer spending. They are a key indicator of consumer confidence. If consumers are confident in their economic situation, additional demand for goods and services is created. Economists track the growth of trade turnover – it helps to determine whether the economy is doing well. If the trade turnover falls, things are bad in the economy. Turnover or volume of wholesale trade, orders and stocks This type of data measures the turnover of wholesale businesses. It is important because it is an indicator of consumer demand – which, as we know, is a serious thing. A decrease in wholesale sales or inventories may imply or confirm a decrease in business activity and retail demand. This means that there are free resources that are not currently being used, but they will be used if demand increases again. This type of data is not as important as retail trade volumes, but most economists believe that it is still worth keeping an eye on. Import of goods and services In this type of data, purchases of domestic companies from companies from abroad are measured. If, for example, you are a Canadian company that buys raw materials from China, then this is considered an import of goods to Canada. This type of data is important, since imports may eventually replace domestic production, which may cause tension in financial resources. For example, if everyone in the United States starts buying only German car brands, such as BMW and Audi, this will lead to a lack of demand for cars manufactured in the United States, such as Ford and GM. Which will have a negative impact on domestic car manufacturers in the United States. As a rule, a country imports those goods and services that it is not able to produce on its own. But, of course, this is not always the case. Often people and companies buy abroad because prices are lower there. Another reason is that there may be goods of the desired quality abroad that are not available at home. For example, if you live in the United States and have a strong desire to drive around in a Rolls Royce or Bentley that has just rolled off the assembly line, you will have to buy your car in the UK. Oil is often not taken into account in the US data, as it has developed that the states are always forced to import it – the country does not produce enough oil to meet domestic demand. However, thanks to the new drilling technology in the US, oil production is growing – there are chances that over time it will be enough to cover the demand. You may have to do a little independent research on this topic – it depends on when you read this material. Export of goods and services This type of data measures the country's trade turnover with other countries around the world. Simply put, this is the direct opposite of importing goods and services. It is important because exports generate an influx of foreign currency, which can have a good effect on economic growth. It happens that a foreign currency is more valuable than a local one – this creates additional profit in the balance sheet of a local company. For example, if a company from Canada sells its product to the UK, it receives British pounds as payment. This is a very attractive deal, since (at the time of writing this article) 1 pound can be exchanged for 1 Canadian dollar 75 cents. Export growth can boost GDP, which will have a positive impact on the economy. The higher the ratio of a country's exports to its GDP, the faster its economic output will grow. Trade balance, the balance of trade in goods In this type of data, the balance or the difference between all exported goods and all imported goods for a certain time period is measured. The main question is – what is more in the country, exports or imports? It is important because it is an indicator of a country's fundamental trading position in relation to other countries. Obviously, most countries prefer their exports to be higher than imports. A large foreign trade deficit may suggest to economists that there are difficulties with the supply – companies are unable to meet the demand coming from abroad. The trade balance reflects the ratio between national savings and investments of citizens and companies of the country in question. The deficit is an indicator that investments exceed savings in their volumes, and the use of real monetary resources exceeds the overall economic result of the country. Index of export and import prices, unit price of the product This type of data measures the prices of goods that one country trades with others. It is important because it is an indicator of pressure on prices, possible problems with the exchange rate and changes in competition. Economists compare export prices with price indicators on the domestic market to get an idea of the pressure on prices for foreign buyers exerted by domestic producers. Economists also monitor import prices to determine the level of external pressure on prices and evaluate these indicators. Manufacturer's prices and wholesale prices In this type of data, factory prices are measured – that is, how much it costs the manufacturer to manufacture goods without adding extra charges. It is important because it can be used as a leading indicator of price pressure affecting domestic production volumes. It should be borne in mind that during a recession, the industrial Price Index (Producer Price Index, PPI) may exaggerate the pressure on prices. On the other hand, during periods of inflation, PPI can downplay prices, because contracts and purchases of raw materials are usually negotiated in advance long before production and release of products. Price expectations: surveys The purpose of these surveys is to study the opinion of manufacturing companies regarding inflation. In simple words, this type of data sums up what company directors think about the impact of inflation on their business at the moment and in the near future. It is important because it allows you to look into the heads of people working in the trenches of production. It can serve as a warning about possible changes in prices. Economists, as a rule, track changes in the trend of this indicator in order to predict a possible increase or decrease in pressure on prices. Wages, labor income, labor costs Salaries and labor incomes give us an idea of how much people earn from their jobs. Labor costs are how much the labor of workers costs the manufacturer. All these indicators reflect labor costs and the impact on consumer incomes. They are important because they reflect the pressure on prices and demand within the economy. Salaries and incomes are closely related to the current phase of the economic cycle. If incomes are growing faster than consumer price inflation, it means that real spending is growing, which is an indicator of the health of the economy. Unit labor costs In this type of data, the cost of labor per unit of output is measured. In other words, how much the labor costs for the production of one unit of goods cost the manufacturer. It is important because it is an indicator of the competitiveness of businesses and pressure on prices within the country. For example, if a company is engaged in production in a country with cheap labor, and sells its goods abroad, these are large potential profits. Conversely, if a company's production is located in a country with expensive labor, then it probably will not be able to withstand competition with foreign companies using cheaper labor. This is a key indicator of labor efficiency. If unit labor costs decrease, it means that the same amount of products can be produced for less money, since manufacturers will need to pay their workers less for the output of each unit of production. Which, of course, makes the manufacturer more competitive. If labor costs start to rise, then this can pose a threat to the viability of companies, because the production of products will start to cost them too much. Obviously, companies need to earn money to stay in business, so cheap labor is always preferable. Consumer or retail prices This type of data measures the price of a basket of goods and services consumed by an ordinary family to maintain the current standard of living. It includes clothing, food, rent, transportation expenses, and so on. In general, everything you need for food, sleep and earning enough money to survive. It is important because it reflects the inflation experienced by a typical family of a particular country. Here you need to ask yourself this question – are ordinary goods in general more expensive or cheaper for consumers? Will the consumer have more money in his pocket at the end of this year than at the end of the previous one? The answer can tell us a lot about whether the standard of living is rising or falling and what part of the economic cycle we are in now. Conclusion As you can see, when it comes to publishing fundamental economic data, many key concepts have to be taken into account. If you have difficulty assimilating or remembering all this information – try not to overload yourself! Use all the information and then you will earn more than the rest! Good luck!
Editors' picks
Education
by DeGRAM
29
Economic data that a trader should be able to understand.Part 2. Hello everyone Today we will continue discussing the economic data that you may encounter in the economic calendar, the knowledge of which will help you to make more profit in the forex market. Business environment: Indicators and Surveys These indicators and surveys reflect observational data on the business climate. These surveys are interesting because they are conducted among businesses that produce goods and services within the economy. They are important because they can give advance warning of changes in the economic cycle. They are also important because this information comes directly from the companies providing jobs. The surveyed companies express their level of confidence, which can be used to determine their intentions regarding hiring and layoffs of employees. They provide important data on the economic opinions of manufacturers and their expectations regarding business conditions in general. Inventory Data The inventory data measures the level of stocks of manufactured goods stored by the manufacturer. They also measure the level of stocks held by distributors on behalf of the manufacturer of these goods. This type of data is important because it reflects the dynamics of demand for finished products. This dynamic takes the form of possible sales. If the inventory level is low, it may mean that demand exceeds supply. This is a good sign for companies, because it shows that the economy is in a growth phase, and they can start to increase production and, if they are lucky, get more profits. But it can also be a bad sign. Low inventory levels can also mean that producers are not optimistic about demand, and therefore produce less. Here you need to figure out the balance of supply and demand. It is best to use this indicator in combination with others to determine the strength or weakness of a particular economy. Economists study the ratio of stocks to sales. This helps to determine whether the low inventory level is due to the fact that production is not keeping up with demand or that manufacturers of goods are not optimistic about demand in the future. If the ratio is higher than usual, production and imports may be reduced until demand increases. And if the ratio is lower, products and imports are likely to grow until demand declines. Industrial and Mass Production In this type of data, the conditionally net production of manufacturing companies and mines for the extraction of natural resources is measured. It is important because it is an indicator of the current levels of industrial activity. Many economists believe that industrial production can be used as a general indicator of the state of the economic cycle for those countries in which the industrial sector is developed. All the currencies that we will track for our trading belong to countries with a developed industrial sector. Industries producing capital goods and consumer durables tend to suffer the most during an economic downturn. This is due to the fact that ordinary people stop buying things that are not necessary for survival. Which accounts for most of the spending in most of the world's major economies. In turn, this leads to an increase in the number of layoffs, which only exacerbates the problem. Capacity Utilization This type of data measures how actively factories and equipment are used to produce goods. All producers of the country participate in the measurement – this is necessary to obtain an average value of production efficiency. It is important because it is an indicator of the level of economic productivity – it can give us hints about inflation. Strong economic growth together with high utilization of production capacities implies rising inflation, because all the equipment in the country is used almost to the maximum. That is, simply put, companies work efficiently, and production cannot be increased without adding capacity and hiring more workers. If demand is expected to remain high and interest rates are low, then manufacturers can invest in new plants and equipment, which will also lead to an increase in inflation. Rising inflation is good (as long as it doesn't become excessive). Everything can be reduced to one question: are people and companies spending money, is production expanding? If yes, this is usually good news for the economic cycle, because it indicates a growth phase. Industrial Orders (Manufacturing Orders) This type of data measures the total number of new orders received by manufacturing companies over a specific time period. It is important because it can be used to make a conclusion about the economic result in the near future. In a short time, a high level of orders is an indicator of increased employment and production. This can cause an increase in inflation, provided that unemployment is already low, capacity utilization is high, and inventory data is low. It is best to use this indicator in combination with others. The order level can also provide advance warning of changes in the business cycle. An increase in orders can be a signal of the end of the recession, and its decline is a signal that the peak phase has come in the economic cycle. But it all depends on the current and recent state of the economy. The same indicator values may have different meanings depending on which part of the economic cycle we are in. Automotive industry (Motor Vehicles) The name speaks for itself. This type of data measures industrial activity related to the production of cars and trucks. It is important because it is an indicator of the industrial production of cars and trucks. Based on these data, conclusions can be drawn regarding the demand for expensive goods or durable goods. Car sales data are not unreasonably considered a leading indicator, because the growing demand for cars implies an increase in consumption. In addition, the production of vans and trucks is an indicator of business investment, because companies use large vehicles in their activities - for example, in order to transport and deliver their products. Orders for the construction of buildings and structures and results (Construction Orders and Output) This type of data measures activity in the construction sector. It is important because it is an indicator of new investments and possible future economic results in the form of new construction projects. Construction is very much subject to cyclical conditions, because, obviously, it is much easier to do it when there is not a foot of snow on the ground. Construction is very sensitive to interest rates and expectations about future demand. And all because positive expectations are exactly what people are buying new houses or apartments for themselves (usually on credit). High order numbers may mean increased demand for construction materials and more active use of labor in the coming months. Low levels mean the opposite. Number of new constructions (houses), completion of construction, sales (Housing Starts, Completions, and Sales) In these types of data, the number of new house constructions, their delivery and sale is measured (previously built houses are also taken into account in sales). They are important because they are an indicator of the level of activity in the construction sector and can signal an increase in industrial and consumer demand. Obviously, the more construction, the better the economic prospects in the country. Plus, it helps to spur inflation. New construction implies an increase in demand for raw materials and labor, without which a house cannot be built. Both are related to employment and interest rates. Renting houses implies sales. This may mean an increase in demand for mortgages in the future. If mortgages are already issued, this can lead to an increase in demand for durable goods, such as household utensils and cars. Good times! Sales are positively affected by the growth of personal income and lower interest rates. Low interest rates make buying homes more affordable because people can take out cheaper loans. What we don't want to see is a lot of construction completions – and a lack of sales. This may mean that many of the built objects have remained empty. This situation will have a negative impact on the real estate market, on banks issuing mortgages, and will cause an increase in unemployment. This is exactly what happened in the United States during the Great Recession of 2007. an overview of the rest of the economic data can be found in the next article. all the best.
Education
by DeGRAM
7
True Dollar Index - Adj. for IMF Currency Reserve Weight (2022)As there appears to be much discourse around the status of the dollar as "the world reserve currency", it seems interesting to me that the standard measure of the dollar's strength is not weighted in this way. Here I am attempting to reconcile the standard dollar index (DXY), which measures the strength of the USD against a basket of other currencies (see below), with the dollar's presence within the IMF's World Currency Reserves (see below). I have chosen to call this the "True Dollar Index" (TDI) To do so, I have first taken the ratio of the Dollar's IMF weight against each currency and multiplied it by the dollar denominated exchange rate. Then I attempt to normalize the value by dividing it by the average of the 9 dollar denominated exchange rates. The equation I used for the 2022 TDI is as follows(*): (USDEUR * (58.81/20.64) + USDJPY * (58.81/5.57) + USDGBP * (58.81/4.78) + USDCNH * (58.81/2.79) + USDCAD * (58.81/2.38) + USDAUD * (58.81/1.81) + USDCHF * (58.81/0.2) + USDSGD * (58.81/1.505) + USDHKD * (58.81/1.505)) / ((USDEUR + USDJPY + USDGBP + USDCNH + USDCAD + USDAUD + USDCHF + USDSGD + USDHKD)/9) (*) This is in standard TradingView equation format and can be directly copy/pasted into the search bar - though values will convert to decimal As the weighting of the IMF World Currency Reserves is shuffled and reported at the end of the year, this should only be taken to be valid as of Q1 2022. For comparison, I have included the DXY in Orange. Note that I have adjusted the DXY by 41.0351, this is the difference in their starting values on Dec 31, 2021. This should allow us to capture deviation from this starting point. I chose this action as opposed to adjusting the existing equation to for simplicity, though one could easily drag the TDI down by subtracting the same amount. I make no claims to the accuracy of this chart as a measure of the strength of the dollar. I am not an economist, and I am happy to hear suggestions on how to improve this model. DXY Geometric Weightings: Euro (EUR), 57.6% weight Japanese yen (JPY) 13.6% weight Pound sterling (GBP), 11.9% weight Canadian dollar (CAD), 9.1% weight Swedish krona (SEK), 4.2% weight Swiss franc (CHF) 3.6% weight Currency composition of official IMF foreign exchange reserves: Dollar (USD), 58.81% Euro (EUR), 20.64% Japanese yen (JPY), 5.57% Pound sterling (GBP),4.78% Chinese renminbi, 2.79% Canadian dollar (CAD), 2.38% Australian dollar (AUD), 1.81% Swiss franc (CHF), .2% Other, 3.01%* *To account for this ambiguity, I have opted for a 50/50 split of the Hong Kong Dollar (HKD) and the Singapore Dollar (SGD). These are roughly equal in their use as a global payment currency at the time of writing and are the only top payment currencies not already included in the weighting. Sources: en.wikipedia.org data.imf.org
by mdamante
1
Economic data that a trader should be able to understand.Part 1. No matter how well you use technical analysis, you should still follow the fundamental news. Fundamental news can push the market against you and destroy any pattern and even reverse the trend. Every professional trader uses an economic calendar for this purpose. Thanks to the data from the economic calendar, you can predict when the market may start behaving unusually, and with proper analysis of the reports, you will be able to determine the future price movement. Today we will talk about these reports, what they mean and what to do with them. Employment The employment data takes into account the total number of employees – both ordinary employees and self-employed citizens. Employment data are important because they are an indicator of the current potential of a country's economic productivity. The production of goods and services directly depends on how many people have the desire and opportunity to work. If all of them are employed, it means, obviously, the country is not able to produce more, because it has no unused labor force. Employment is highly cyclical because when demand for goods and services increases, companies tend to increase working hours instead of hiring new workers. When the economy begins to deteriorate, companies prefer not to reduce working hours, but to get rid of extra workers, because layoffs allow you to save on pension and other deductions, which are usually very expensive. Economists track the addition of working hours and the number of overtime hours, defining them as positive changes for the employment sector. If these indicators begin to fall, it may mean a slowdown in the economy or a potentially possible entry into the recession phase. Unemployment The unemployment data takes into account the total number of people who can and want to work if they have the opportunity, but do not have a job. Unemployment is highly cyclical for the same reasons as employment. They are opposites of each other. These data are important because they are an indicator of excess labor, which economists tend to regard as wasted resources. Unemployment is also called unemployment. There is a natural unemployment rate. Companies can only hire a certain number of people. At some point, the competition for employees becomes very high, because there are few vacancies. This, in turn, increases inflation, as hours worked and average hourly wages increase. People are starting to have more disposable income that they can spend inside the economy on expensive items such as cars and houses, which will cause inflation to rise. The inflation rate is of great interest to us, as central banks pay a lot of attention to it. Keeping inflation at the levels outlined in their policies and financial mandates is part of their job. Too high or too low inflation will force the central bank to intervene in financial markets. Personal income and Disposable Income In these data, the total income of the population after deduction of taxes to the state is taken into account. They are important because they are the basis for consumption and for personal savings within the economy. Personal consumption and spending account for about half to two-thirds of GDP in developed countries, which makes these indicators extremely important. When people's personal incomes grow, chances are high that they will start spending more money inside the economy. When there is a shortage of personal income, it is very unlikely that people will have a desire to spend the little money they have on goods that are not necessary for survival. Economists pay attention to the steady growth of real personal income. If it is too fast, it will cause a sharp increase in inflation. If it is too slow, it can lead to deflation, which is very bad for the economy (and for the positions of bankers of the central bank). By the way, we will devote a separate article to inflation and deflation, as this is a very important topic. Don't be afraid, we've got it all covered! Consumer and Personal Expenditure, Private Consumption In this type of data, total expenses are measured. In other words, how much each person consumes on average. They are important because they are a key component of GDP along with personal and disposable income, as they show how much money each person is ready to spend on goods and services at the moment – both necessary and just desired. Don't forget, spending is something very serious for developed countries. Economists track the dynamics of changes in real interest rates in order to adjust their views on the economy. For example, if expenses grow by 6%, and prices rise by only 4%, then real expenses have increased by only 2%. Positive and negative changes in spending on durable goods (for example, cars, washing machines, agricultural equipment) can be an early signal of changes in the economic situation. An increase in the number of purchases is regarded as a positive phenomenon, while a decrease in purchases is generally considered negative for the economy. an overview of the rest of the economic data can be found in the next article. all the best.
Education
by DeGRAM
9