How Does News Drive the FOREX Market?

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How Does News Drive the FOREX Market?

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What is the most popular currency that is traded?

The U.S. Dollar (USD) is the most traded currency due to its’ status as a stable reserve currency. It is the most stable and liquid of assets. The Euro (EUR) is the second most traded currency, followed by the Pound Sterling (GBP) and Australian Dollar (AUS).

How Does News Drive the FOREX Market?

There are many different reasons that a certain type of news can have dramatic effects on the value of currencies. This includes macroeconomic statistics (inflation), capital market movements, trade deficits and surpluses, and political news. Other forms of factors that can have a dramatic effect on the value of a currency includes the price of commodities, such as oil and gas, in the case of countries that have a heavily export-driven economy based on these products.

What to pay attention to when currency trading

The most important data that currency traders should pay attention to is economic data, from which traders and make or break a trade. As this is one of the most important catalysts for short-term movements, it tends to be closely watched. The most important news to pay attention to is interest rate decisions, unemployment data, inflation, business sentiment surveys, trade balances, manufacturing sector surveys, and retail sales. There are many more, but these are among the most important to pay attention to.

What are the major indicators in currency trading?

  • Oscillator – this indicator balances between two levels on a price charge that shows when a currency is overbought or oversold.
  • Support and Resistance – this indicator shows distinct areas that restrict price action below or higher than the level.
  • Stochastics – This indicator, developed by market technician George Lane in the 1950’s, shows when a currency is overbought or oversold by a formula.
    %K = ((Closing Price – Range Low) / (Range High – Range Low)) * 100
  • Relative Strength Index (RSI) – This indicator gauges the strength of evolving price action through comparing the average periodic gains and losses.