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3 Forex News Releases You Can Bank Huge With

By Alexander
In Forex News Trading
Sep 20th, 2011

Every month, there is a calendar of the release of certain important socio-economic and political news items that tell a story of the state of the economy of the nation where that release emanates from. These Forex news releases usually provide the benchmark for market sentiment, which ultimately determines the direction of the currency pairs.

Trading news releases provides great opportunities because of its ability to increase volatility in the short term.

Economic news releases are of three types:

  1. High Impact News: These are the news releases that impact the Forex market the most and which cause the greatest volatility levels. In this class are the employment data, interest rate decisions, GDP figures, retail sales, manufacturing data and the inflation reports.
  2. Medium Impact News: Here we have the housing statistics and trade balances.
  3. Every other news item outside the ones listed above, fall into this class of low impact news items.

It has to be said that the impact of some news items change as the socio-economic demographics of a nation changes. Prior to 2007, the housing statistics such as the New, Existing and Pending Home Sales in the US were classified as low impact news. But the collapse of the subprime mortgage market and the attendant effect on financial institutions such as Bear Stearns and Lehman Brothers, which triggered the global financial crisis changed all that. Now housing stats are medium to high-impact news items as the state of the housing market is now seen as a measure of the state of the US economy.

Also, interest rate decisions no longer command the type of interest they used to, especially since after the coordinated interest rate cuts by the world’s major central banks to stimulate the economies after the global financial crisis hit in 2008.

Three Selected High Impact News Items to Trade

Of the high-impact news items, there are three that stand out clearly.

  1. The US Employment Data, comprised of the Non-Farm Payrolls (NFP) and the Unemployment rate data. These two data are released at 0830 EST on the first Friday of every month.
  2. GDP data from the US, UK and Australia are also very bankable reports.
  3. US Core Retail Sales figures. There are two data released (retail sales and core retails sales), but the Core Retail Sales (retail sales less energy sales) is more important.

Forex News Releases Chart

Trading the US Employment Data

This is a very volatile news item, and it is also a very tricky one to trade. It is not recommended for beginners to trade the US Employment Data because of the complexity of the trade; some level of experience is needed to pull this trade off successfully.

Two data are released; the NFP and the Unemployment rate. The USDJPY is the currency pair that has the most direct response to this news item and is the currency of choice to trade. For a successful trade setup to be accomplished, the data must not have a conflict. What do we mean?

Both sets of data have to agree to send the USDJPY, one way or the other. This means that either the NFP and Unemployment rate data are USD positive, or they are USD negative.

USD Positive: NFP is more positive than forecast, and unemployment rate reduces (or is unchanged).

USD Negative: NFP gives more negative numbers than forecast, and unemployment rate increases (or is unchanged).

The following situations are number conflicts and are classified as “no-trade” situations.

  • NFP is more positive than forecast and unemployment rate increases.
  • NFP is more negative than forecast and unemployment rate reduces.

Please note this very well. Many traders have been burnt because they failed to identify these scenarios before trying to trade.

Trading the Gross Domestic Product

This is one of the most direct news items that any trader can trade. It is pretty straightforward. If the GDP is better than forecast, the local currency of the country in question will gain in value against other currencies. If the figure is worse than forecast, the currency will depreciate.

The GDP report of the UK, US and Australia are the best to trade.

US Retail Core Sales

Trading the Core Retail Sales is also another good one. The Retail Sales and Core Retail Sales figures are a measure of consumer spending. Consumers tend to spend less when there are no jobs and the economy conditions are unfavorable. When there is more money in consumers’ pockets, they will spend more.

Again, the report is pretty straightforward. Numbers that are better than forecasts lead to appreciation of the currency of the country in question, and poor figures lead to the reverse.

If you can master how to trade these news items, you will be sure of steady pips every month. However, what you need is a clear and rule based strategy.

So, stay tuned, because in my next blog post, I will share with you two of my favorite news trading strategies, I use for years with great success.

Take care and trade well!!

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3 Responses to “3 Forex News Releases You Can Bank Huge With”

  1. Anselme says:

    Hi, I really appreciate your post, it’s awesome. I am putting your advice into practice and guess what? It works. Last month (06/07/2012), I made more than 400 pips that day. I trade all currencies paired with USD. Thanks
    But I have noticed a thing, the NFP don’t need to be better than forecast. If it’s better than the previous forecast, and respect all the other criteria you explain in this post, it’s OK for the deal to be done. If am wrong, please clarify me.

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