Effects of fundamentals on

forex charts
In the Bigger picture, Fundamentals determine the direction of the Trend in the
market. Therefore it’s perfect to say that the Fundamentals and Technical go
hand in hand because whatever pays out in the fundamentals of the economy,
will reflectPOSSIBLE
in the technicalOUTCOMES
(on the Chart) ofOF NEWS EVENTS
the currency.
ON THE CHART
If News data come out in favor of the prevailing trend, we might most likely
see a trend continuation, with the trend breaking out to form new higher
highs or lower lows depending on the type of trend, whether uptrend or
downtrend.
If News data come out against the prevailing trend, we might see a temporal move
against the trend to form a retracement, and even possibly agreeing with some
technical tools like Fibonacci or key zones.
If News data come out against the prevailing trend, we might see a total change in
the trend( whether smaller trend, medium trend or even bigger trend).
If News data come out, we might see a simple consolidation in the market.

NOTE:When News data are released, there is usually increased volatility,

increased spreads, and the movements are usually very
manipulative, so it’s important to be careful and patient when trading
during news releases.
 economic INDICATORS
An Economic indicator is a piece of economic data, usually of macroeconomic
scale, used by fundamental analysts to understand the overall health of an
economy, and to interpret present or future investment opportunities.
There are hundreds to thousands of various economic indicators, but a few
examples of include Gross Domestic Product (GDP), Unemployment Claims,
Inflation,Indicators
Lagging ConsumerisPrice Index (CPI)
an economic etc. that sometimes changes after the
indicator
economic variable it is correlated with changes while a leading indicator
changes before the economic variable it is correlated with changes.
CLASSIFICATIONS OF ECONOMIC
INDICATORS
INTEREST RATES BASED ECONOMIC INDICATORS
PRICE / INFLATION BASED ECONOMIC INDICATORS
EMPLOYMENT BASED ECONOMIC INDICATORS
PRODUCTION / GROWTH BASED ECONOMIC INDICATORS
SPEECHES AND MEETINGS BASED ECONOMIC INDICATORS
 Interest rates based
economic indicators
Interest Rates Release
PRICE / INFLATION BASED ECONOMIC
INDICATORS
Inflation
Retail Sales
Purchasing Managers’ Index (PMI)
Producers Price Index (PPI)
Consumer Price Index (CPI)
 EMPLOYMENT BASED ECONOMIC
INDICATORS
Non-farm Payrolls
Unemployment Rate
PRODUCTION / GROWTH based economic
indicators
Gross Domestic Product (GDP)
Balance of Trade
Treasury International Capital Survey (TICS)
Phil Fed Index
SPEECHES / MEETINGS based
economic indicators
Federal Open Market Committee (FOMC) meeting
Speeches made by important members in a country
Interest rates based economic
indicators
INTEREST RATES
releases
Interest rates are simply the value charged by central banks for lending
money to private banks. They are a primary tool used to regulate inflation.
Interest rates are set by central banks, usually notifying the public beforehand
during press conferences
Interest rates are adjusted solely by the central bank of a country. In the U.S
for example, the interest rates are determined by the Federal Reserve Bank,
through its Federal Open Market Committee (FOMC).
In a well regulated, well balanced economy, central banks may raise interest
rates in order to cut the pace of money lending, and to 'cool down' an
economy by decreasing inflation.
 Price / inflation based
economic indicators
inflation
Inflation is a sustained increase in the amount of currency in circulation -
which in turn increases the price of goods and services. With this in mind,
inflation is one of the most important of all Forex fundamental indicators, as
it demonstrates how healthy an economy is.
The level of 'healthy' inflation' is defined by each country, according to the
needs of their economy.
In terms of Forex trading, the higher the rate of inflation, the quicker the
currency depreciates in value.
During deflation, the value of money increases, whilst goods and services
become cheaper.
There are many economic indicators which help investors get a good
understanding on the level and nature of inflation across sectors in the
economy. Some examples of these are the Consumer Price Index (CPI) and the
Producers Price Index (PPI)
 Price / inflation based
economic indicators
RETAIL
SALES
Retail sales is an economic indicator that serves as a gauge of the overall
health of an economy by outlining consumer spending information.
The report delivers an aggregate measure of retail or finished goods and
services spanning a month’s duration.
Retail sales figures are reported by all food service and retail stores and
compiled and reported monthly by the U.S. Census Bureau.

When spending increases, business activity increases thus stimulating the

economy and driving foreign investment. This in turn will impact other key
economic components such as consumer confidence, balance of trade, GDP.
Inflation etc.
 Price / inflation based
economic indicators
PURCHASING MANAGERS’
INDEX (PMI)
The Purchasing Managers' Index (PMI) is an index of the prevailing direction of
economic trends in the manufacturing and service sectors. It consists of a diffusion
index that summarizes whether market conditions, as viewed by purchasing
managers, are expanding, staying the same, or contracting.
The purpose of the PMI is to provide information about current and future business
conditions to company decision makers, analysts, and investors.
The PMI is compiled and released monthly by the Institute for Supply Management
(ISM), and its based on a monthly survey sent to senior executives at more than
400 companies in 19 primary industries in the U.S.
The PMI is a number from 0 to 100. A PMI above 50 represents an expansion when
compared with the previous month. A PMI reading under 50 represents a
contraction, and a reading at 50 indicates no change. The further away from 50
the greater the level of change.
The direction of the trend in the PMI tends to precede changes in the trend of
major estimates of economic activity and output, such as the GDP, Industrial
Production, and Employment.
 Price / inflation based
economic
PRODUCER PRICE
indicators
INDEX (ppi)
The Producer Price Index (PPI) measures the average change over time in the
prices domestic producers receive for their output.
It is a measure of inflation at the wholesale level that is compiled from thousands
of indexes measuring producer prices by industry and product category.

The index is published monthly by the U.S. Bureau of Labor Statistics (BLS) during
the second week of the month.
It is based on approximately 100,000 monthly price quotes reported voluntarily
online by more than 25,000 systematically sampled producer establishments.
 Price / inflation based
economic indicators
CONSUMER PRICE
INDEX (Cpi)
The Consumer Price Index (CPI), a common measure of inflation, measures the
price change over time for a basket of goods and services paid for, by U.S.
consumers.
The Bureau of Labor Statistics (BLS) calculates the CPI as a weighted average of
prices for a basket of goods and services representative of aggregate U.S.
consumer spending.
The CPI is one of the most popular measures of inflation and deflation as it
measures the change in consumers' purchasing power.

The Central Banks use CPI data to determine economic policy, and may enact
expansionary monetary policy to stimulate the economy should market growth
slow, or enact contractionary monetary policy should the economy grow too
quickly.
EMPLOYMENT BASED ECONOMIC
INDICATORS
NON-FARM PAYROLL
(NFP)
The nonfarm payroll (NFP) report is a key economic indicator for the United States
and represents the total number of paid workers in the U.S. excluding those
employed by farms, the federal government, private households, and nonprofit
organizations.
The nonfarm payroll report consistently causes one of the largest rate
movements of any news announcement in the Forex Market. As a result, many
analysts, traders, funds, investors, and speculators anticipate the NFP number and
the impact that it will have on forex.
The NFP report is typically released on the first Friday of each month, providing
the total monthly increase or decrease in paid U.S. workers across most
businesses.
Increasing numbers may show economic expansion and currency value
appreciation, but may also give investors reason to be concerned about inflation
and decreasing numbers suggest a broader economic concern.
EMPLOYMENT BASED ECONOMIC
INDICATORS
UNEMPLOYMENT
RATE
The unemployment rate is the percentage of the labor force without a job. It is a
lagging indicator. meaning that it generally rises or falls in the wake of changing
economic conditions, rather than anticipating them.
When the economy is in poor shape and jobs are scarce, the unemployment rate can
be expected to rise.
When the economy grows at a healthy rate and jobs are relatively plentiful, it can
be expected to fall.
The U.S. unemployment rate is usually released on the first Friday of every month
by the Bureau of Labor Statistics (BLS).
PRODUCTION / GROWTH based
economic indicators
GROSS DOMESTIC
PRODUCT (GDP)
GDP measures the monetary value of goods and services produced within a
country's borders in a given time period, usually a quarter or a year.
It is a lagging indicator that provides a comprehensive estimate of economic health,
and one of the most widely used.
GDP is the sum of a country's private consumption, investment, government
spending, and net exports.
GDP figures are reported in the United States on a monthly basis by the Bureau of
Economic Analysis (BEA).
Economic health as measured by changes in the GDP matters a lot for the prices of
financial assets. Because stronger economic growth tends to attract investors,
thereby translating to stronger currencies.
 PRODUCTION / GROWTH based
economic
BALANCE OF
indicators
TRADE
Balance of trade (BOT) is the difference between the value of a country's exports and
the value of a country's imports for a given period.
The balance of trade is also referred to as the trade balance, the international trade
balance, the commercial balance, or the net exports.
The formula for calculating the BOT can be simplified as the total value of exports
minus the total value of its imports.
Economists use the BOT to measure the relative strength of a country's economy.
A country that imports more goods and services than it exports in terms of value has
a trade deficit or a negative trade balance. Conversely, a country that exports more
goods and services than it imports has a trade surplus or a positive trade balance.
In general, a favorable balance of trade is seen as a positive sign for a country's
economy, while an unfavorable balance of trade is seen as a negative sign.
 PRODUCTION / GROWTH based
economic indicators
TREASURY INTERNATIONAL CAPITAL
SURVEY (TICS)
Treasury International Capital (TIC) is a set of monthly and quarterly statistical reports
measuring all flows of portfolio capital into and out of the U.S. and the resultant
positions between U.S. and foreign residents.
The data is used as an economic indicator and can help to predict the direction of
the U.S. dollar as positive TICS report, usually indicate a possible rise in currency
value, and vice versa.
Data is collected from a number of institutions in the U.S., including banks and
other financial institutions, and dealers. It is then compiled and published by the
U.S. Treasury.
 PRODUCTION / GROWTH based
economic indicators
PHIL FED INDEX
The Philadelphia Federal Index (or Philly Fed Survey) is a regional federal-reserve-
bank index measuring changes in manufacturing growth. It is also known as the
"Manufacturing Business Outlook Survey."
When the index is above zero, it indicates factory-sector growth – which is good for
the U.S Dollars, and when below zero, it indicates contraction, which in turn is bad
for the U.S Dollar value.
The index is constructed from a survey of participants who voluntarily answer
questions regarding the direction of change in their overall business activities. It is
considered to be a good gauge of general business conditions and may also be an
indication of what to expect from the upcoming Purchasing Managers’ Index.
The survey covers the Pennsylvania, New Jersey, and Delaware regions. Participants
in the survey help indicate the direction of change in overall business activity at
their plants as relates to factors such as employment, new and unfilled orders,
inventories, as well as prices paid and received.
 SPEECHES / MEETINGS based
economic indicators
FEDERAL OPEN MARKET COMMITTEE
(FOMC) MEETING
The Federal Open Market Committee (FOMC) is the part of the Federal Reserve
Bank that is responsible for making monetary policies.
Whenever the monetary policy making body of any central bank meets, investors
are usually very observant and aware, because their meeting could result in
decisions that’ll change the course things the economy.
The FOMC meetings can result in decisions which in turn can affect vital economic
realities such as short-term and long-term interest rates, the value of the country’s
currency, employment, production, prices of goods and services etc.

The FOMC holds eight regularly scheduled meetings per year. At these meetings,
the Committee reviews economic and financial conditions, determines the
appropriate stance of monetary policy, and assesses the risks to its long-run goals
of price stability and sustainable economic growth.
 SPEECHES / MEETINGS based
economic indicators
SPEECHES MADE BY IMPORTANT PERSONS IN
THE COUNTRY
Speeches made by Important persons in the country can seriously affect the
economy of that country and by effect, the value of the nations currency.
The most important speeches are often those regarding the nation’s economy, and
politics (whether local or global).

Investors are usually observant of these key individuals as what they say can either
attract investment into the country or repel investment.

Examples of these important individuals will include, Presidents, Governors, Policy

makers like members of the governing boards of central banks, other important
politicians, executives of big corporations whose decisions can cause a shift in
currency value, etc.