How to Read an Economic Calendar?

It is in our blog post how to read economic calendars, potential impacts of national and international events that are likely to influence the popularity of markets.


Table of Contents

Top News Events in Forex Trading

Non-Farm Payroll Reports

Central Bank Interest Decisions

Durable Goods Orders

Retail Sales Index

Consumer Confidence Index

Final Thoughts

 

Economic calendars outline the dates and potential impacts of national and international events that are planned to affect the price and popularity of particular markets or assets. Because certain types of events are known to affect trade insignificant, predictable ways, the nature and date of each event in an economic calendar can be used as a trading indicator to maximize profit potential. Recurring news events tend to be the most compelling indicators as they have predictable effects on trading sentiment and volume. Examples include scheduled release dates for widely accepted market statistics or surveys, and expected events such as federal decisions on interest rates, trade balances, and inflation.

 

There are also many free versions of economic calendars available online. However, designated trading platforms tend to offer account holders access to a more agile and all-encompassing calendar. Before choosing any economic calendar, you should realize that your calendar is only as useful as the events related to the markets you choose.

 

Most economic calendars provide a brief description of each event and give a value for "actual", "forecast" and "previous". The "estimated" number, expressed as a percentage or currency value, represents the expected market impact of the event. This number influences the trading sentiment and behavior that leads to a news event. “Previous” means the change recorded after the last news event of this nature. “Truth” follows the objective price action that occurs after the event in question.

 

Your calendar can also provide information about each event. It can compare current market performance with predicted values, as in the free version of our economic calendar. Apart from providing this basic information, a more complex economic calendar will help you filter results by relevance to the markets you have selected and recognize the impact of each event based on your specific qualification criteria. Using our exclusive forex economic calendar, you can easily choose which currencies or markets you want to focus on. You can filter events by currency and relevance or impact on your chosen market.

 

 

Top News Events in Forex Trading

Not all news events have an important impact or create reliable indicators. When it comes to currency trading, we come across a few situations that have a greater economic impact than most. To instance; 

 

Non-Farm Payroll Reports

This US report tracks employment rates for the majority of the US workforce. Reports are published by the Bureau of Labor Statistics on the first Friday of each month and detailed statistics for the previous month. The NFP report includes data on the number of new jobs created in a month, the net national unemployment rate, and the national labor force participation rate, i.e. the number of Americans actively seeking work or gainfully employed. These three statistics are seen as an indicator of the country's overall economic health and have a significant impact on both market perception and the relative value of the US dollar.

 

Central Bank Interest Decisions

 

The central bank Federal Reserve refers to the Fed in the United States. There are seven other major central banks worldwide. These; European Central Bank, Bank of England, Bank of Japan, Swiss National Bank, Bank of Canada, Reserve Bank of Australia, and Reserve Bank of New Zealand. Interest rate decisions are made by one of these and will affect how much profit or loss forex traders will make when borrowing a particular currency or holding a position.

 

Interest rate decisions or news announcements planned by any of these major global banks are bound to affect trading sentiment and increase market volatility for the respective currency pairs. Widespread news coverage of quarterly forecasts also influences the market volatility that leads to the interest rate decision, as in the Washington Post article, according to the US federal report.

 

Durable Goods Orders

Reports from the U.S. Census Bureau provide a useful measure of industrial activity in the United States. Based on the number of consumer durables revealed in the report, it can provide a reliable indicator of economic strength. A higher number, which measures total orders in billions of dollars, reflects a rebounding or strengthening economy, while a lower number is usually associated with a stagnant or declining economy.

 

Retail Sales Index

Like the durable goods orders report, the retail sales index is published monthly by the U.S. Census Bureau. Reflects overall retail spending in the United States for the previous month. These retail expenditures are used to measure the spending power of the American people.

 

Consumer Confidence Index

This index takes several different data points into account to create a score that reflects overall consumer confidence in the US economy. A base score of 100 reflects neutrality among consumers. Scores above 100 indicate that consumers have more confidence in the economy and are more likely to spend rather than save. In contrast, scores below 100 reflect greater economic anxiety and uncertainty, confirmed by decisions to spend less, save more, and support their finances before potential declines.

 

Final Thoughts 

Once you find a currency pair, it is a little more nuanced to determine which direction to trade. Interpret this information in the context of your other technical indicators and insights, rather than placing orders based solely on estimated figures or market bias. Examine the current market trend, strength, and direction. Evaluate the support and resistance levels that follow immediately. If a news event is expected to elicit positive market insight, you may see a sharp rise in price action before the news release and witness a rapid decline if the news goes against popular expectations.

 

As with any smart trading strategy, timing is key. Day traders can try to take advantage of price volatility caused by market biases that lead to major events, but longer-term trading strategies tend to favor those with a more conservative approach. We hope that this blog post will be beneficial for you. We will continue to create useful works in order to get inspired by everyone. We are sure that we will achieve splendid things altogether. Keep on following Finage for the best and more.  

 

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