If you are a fundamental trader in the forex market, meaning that you focus on economic data to place your trades instead of mathematical indicators, there are 30-50 major economic announcements every month where there is an opportunity to profit from either buying or selling the dollar against another currency. When you understand what some of the major economic reports are that can affect the value of the US dollar, then you can monitor the release of this report and decide if this news is bullish or bearish.
One popular economic report called the non-farm payroll report is usually released at 8:30AM EST on the first friday of the month. The traders monitor the release of this report like speculative hawks, and depending on the value it can cause a rapid movement in the major currency pairs in a matter of minutes. Another similar economic report is called the ADP national employment report, which is released on Wednesdays at 8:15AM EST that conveys an alternative measure of the current state of the labor market.
Different economic reports focus on different aspects of the greater economy. The ADP and non-farm payroll reports focus on the state of the labor market, and another important indicator called the consumer price index focuses on inflation. Inflation data is important for those banks and institutions that have large foreign exchange volume, since inflation measures changes in the price level of goods and services it is a good way to determine future monetary policy expectations. The consumer price index is seen as the main measure of inflation, and it shows the changes in overall price levels at the retail level.
Two important national reports for any country are the trade balance and the currenct account balance, since this relationship can create long-term consequences for a currency and a country. The trade balance is the ratio of imports to exports, and conveys whether the country is experiencing a trade deficit or a trade surplus. The current account balance focuses on the greater overall capital flows in and out of the country, and conveys whether the country is a borrower or a lender to the rest of the world. These are basic macroeconomic relationships that can create profit opportunities in any currency in the world, not just the US dollar.
A popular gauge of economic health in America is the state of the housing market, and so data such as new home sales and existing home sales can have a big impact on the value of the dollar. These reports can really make waves in the market as this is a big indicator of how the real estate market behaved over the recent past and where it is likely to be heading. Existing home sales is a statistic reported by the National Association of Realtors, and is probably the best gauge of the state of the real estate market since 85% or more of home sales are existing homes.
Two other important economic indicators are the retail sales data (monthly) and the Federal Reserve beige book report. Retail sales covers almost all purchases made in America from the gas station to Christmas shopping, and the beige book report is a detailed economic report that comes out two weeks before most Federal Open Market Committee meetings. The handful of economic indicators described are the most influential of the 30-50 economic reports that can affect the value of the dollar each month, as they are the barometers for certain aspects of the larger economy such as employment and inflation.
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