BUSINESS ERA

While most market participants Forex are simple machines - was estimated that 25% of all currency traders trades, taking into account the fundamental factors, compared with 30% who use technical factors. Among the intra-day traders, this ratio is probably even more in the direction outweighs technicians. However, as we have seen over the past year, fundamental releases became more and more important catalysts for a strong market movement. Based on our observations, the most significant movement of the dollar against the euro typically occur within the first 20 minutes after economic reports. The relative importance of these changes from time to time. Also, the relative importance of economic reports has tended to evolve over time. For example, in 1992 the trade balance was in first place among the major U.S. economic data to influence the movement of the dollar in the 20-minute period of time, while data for payroll (and data on unemployment benefits) were in third place. In 2004, these two indicators are reversed - the data on the payroll of the non-agricultural sectors are the main driver of the U.S. market, and the trade balance has shifted to third place. This sounds quite logical, as the market shifts its attention to the various sectors of the economy and economic data - for example, the trade balance may be given priority when the country seems to have a deficit unviable. Similarly, in the economy, which has difficulty with the creation of jobs, the data on unemployment are considered as the most important market.



According to the report published by the National Bureau of Economic Research (NBER) in 1999, the importance of economic data seen in the following order:



Forex market dealers ranked economic data on their importance (change over time)



In 1997:


1. Unemployment

2. Interest rates

3. Inflation

4. Trade Balance

5. Gross domestic product


In 1992:


1. Trade Balance

2. Interest rates

3. Unemployment

4. Inflation

5. Gross domestic product


** Calculations are based on the 20-minute reaction



What is also important to take into account - is that prices are always restored from the daily rate, so that even the strongest indicator, based on a 20-minute movement of the dollar can not be a significant engine of the market rate in the general trend. According to our own analysis of the 20-minute and daily ranges, we set up the following list of economic data on their impact on the movement of the market rate:



In 2004, (20 minutes):

1. Unemployment (Non-Farm Payrolls)

2. Interest rates (Decision FOMC)

3. Trade Balance

4. Inflation (CPI)

5. Retail sales

6. Gross domestic product

7. Current account

8. Orders for durable goods

9. Inflows of foreign capital in the United States (data from TIC)



In 2004, the (day):


1. Unemployment (Non-Farm Payrolls)

2. Interest rates (Decision FOMC)

3. The inflow of foreign capital in the United States (data from TIC)

4. Trade Balance

5. Current account

6. Orders for durable goods

7. Retail sales

8. Inflation (CPI)

9. Gross domestic product



As shown in our lists, information on billing statements in non-agricultural sectors have a significant impact on the movement of the dollar against the euro, resulting in an average of 124-punktovomu range of trading for the first 20 minutes after and 192-punktovomu trading range during the day. Interest rates are also being held on the second place in both time periods, but for other indicators situation begins to change significantly. Net foreign purchases of American securities in the general case are the average movement in the 33 paragraph in the first 20 minutes, while at day basis, these data lead to the average movement of 132 points. For other economic indicators of the average ranges in 2004 for the currency pair EURUSD were as follows:



The average 20-min. range (items)



Payroll - 124

The decision FOMC - 74

Trade Balance - 64

Inflation (CPI) - 44

Retail sales - 43

Gross domestic product - 43

Current Account - 43

Durable goods - 39

Capital inflows (TIC) - 33

Average daily range (items)

Payroll - 193

The decision FOMC - 140

Capital inflows (TIC) - 132

Trade Balance - 129

Current Account - 127

Durable goods - 126

Retail sales - 125

Inflation (CPI) - 123

Gross Domestic Product - 110


* The average daily range for the EURUSD in 2004. of 111 items



As you can see, the most significant change over the past few years has undergone a balance of trade impact on the movement of the dollar against the euro. Moreover, contrary to popular belief, throughout this time period, the report on gross domestic product was one of the most important economic indicators, and led to the smallest relative motion of the pair EURUSD. One possible explanation for this may lie in the fact that reports on gross domestic product fell less frequently than other data taken into consideration (a quarterly basis to monthly). In addition, data on gross domestic product more prone to ambiguity and incorrect interpretation. For example, growth in gross domestic product, due to increases in exports will contribute positively to its currency. However, if the gross domestic product growth occurred as a result of building inventory, the impact on the currency can be rather negative. These factors are very important to keep in mind the currency traders, regardless of what (technical or fundamental) trading strategies they use. For technical traders, trading in the range, it would seem logical to stay away from the market before the publication of data on the payroll of the non-agricultural sectors, while traders trading for a breakthrough, a publication of the data on the contrary provides excellent opportunities for trade. For fundamental traders, these results are also important, because the adjustment of the exchange rate in relation to the economic news seems to be happening very quickly - a reaction beyond the 15-30 minute period after the release of data may be the result of over-reaction of investors and trade-related with the flow customers, not only to the news. Gross domestic product is, in this respect, a perfect example, because the 20-minute reaction in the list is higher than that day. Also critically important is to interpret the data in the context of how the market sees them as important at this point in time, because from time to time there is a change in focus of the market, and the once highly relevant data may not be such as having less impact on exchange rate and vice versa, respectively.