Forex News Trading

One of the most popular ways traders determine entry and exit points in the forex market consists of trading off of major economic news events. The USD forex news generally gives the trader the most possibilities for profitable trades.

As an example, a trader expecting an improved GDP number for the Australian economy, might buy AUD/USD before the release of the economic data. Once the data is released, the exchange rate AUD USD will generally rise sharply if the number comes out better than expected.

The experienced trader will often take profits immediately upon the release of the data, taking profits regardless of their longer term opinion, and reestablish a position once the news is out.

Major News Items Which Influence the Forex Market

Of course, the online forex news is full of trading opportunities. Nevertheless, news trading relies on timely releases and reacting quickly to buying and selling opportunities.

Basically, realtime forex news is more consistent with a news trader’s objectives in initiating and timing entry and exit points when trading. A news trader is generally very selective in the type of economic releases or news items they choose upon which to make transactions.

Some of the more popular economic releases that traders choose for making forex transactions include:

• GDP – the Gross Domestic Product of any nation is of utmost importance to the value of their currency. The GDP represents the sum total of all products and services produced in the country and have a profound effect on the exchange rate of their currency in relation to the currencies of other nation’s currencies. The release of the GDP number of any major nation — especially the United States — presents trading opportunities for many seasoned professionals that keep a keen eye on the USD forex news. 

• Interest Rates – the value of a nation’s currency versus other currencies is strongly influenced by their central bank’s monetary policy. Interest rates exert enormous influence in the value of the currency as higher rates attract foreign investment, while lower rates send investors holding large amounts of money looking for a higher return elsewhere. A Euro currency forecast would not be complete without a careful analysis of the ECB’s monetary policy towards interest rate. 

• Employment Numbers – a nation’s level of employment gives a clear indication on the health of their economy. If a large sector of the population is employed, then the nation’s productivity increases raising the GDP of that nation. Many forex traders use employment numbers to determine whether to hold or short certain currencies. 

• Inflation Numbers – numbers such as the Consumer and Producer Price Indexes give traders an idea of how the central bank of that nation will implement monetary policy. Generally, high inflation is dealt with by central banks by tightening credit, while low inflation is commonly adjusted by a looser interest rate policy.

A seasoned forex trader will take into consideration all of the above fundamental indicators when making a USD Euro forecast for example. By the same token, many day and short term directional traders will take the opportunity of initiating trades based on the realtime forex news releases of these and many other fundamental indicators. 

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