One method that is employed by many traders is known as trading on news. Simply put, since so much of what currencies do is based on economic news and indicators, following news and announcements of government statistics (employment figures, housing starts, manufacturing capacity, etc.) can give you some real insight into what the currency of a particular country may do.
It becomes even simpler when you take into account that the U.S. dollar is involved in 90% of all Forex transactions. Because of this you can concentrate on what’s happening in the U.S. if you don’t have time to follow all of the big eight currencies – U.S. dollar, British pound, the euro, the Swiss franc, the Japanese yen, the Canadian dollar, the Australian dollar and the New Zealand dollar.
If you do have a bit more time you can at least keep tabs on the major news releases that are issued by governments on a regular basis. The list below shows when some of the major countries in the world release their news. Also, of course, when considering news, there are events that have effects that are impossible to predict like earthquakes, terrorist attacks and civil unrest, to name a few, that can also affect currencies.
U.S. USD 8:30 – 10:00 All times EST.
Japan JPY 18:50 – 23:30
Canada CAD 7:00 – 8:30
U.K. GBP 2:00 – 4:30
Italy EUR 3:45 – 5:00
Germany EUR 2:00 – 6:00
France EUR 2:45 – 4:00
Switzerland CHF 1:45 – 5:30
New Zealand NZD 16:45 – 21:00
Australia AUD 17:30 – 19:30
And you can go to just about any good trading website and find an economic calendar which should have the major release schedules listed. For example, the American employment report generally comes out on the first Friday of each month with figures from the previous month. Other releases are usually timed in a similar way. Some releases are more important than others although this changes depending on the situation. Again, for example, the U.S. prime interest rate can be a very telling indicator of what the U.S. Federal Reserve intends to do with the U.S. money supply.
A rising of the rate indicates a tightening of supply and a lowering indicates a loosening of supply. However, now, with the U.S. economy in bad shape and the rate at.25% it’s highly unlikely that any change either way in the rate is forthcoming so this indicator is probably not going to affect Forex in the near future (this article was written March 31, 2010).
An indicator in the U.S. that IS rather important at the moment is the employment figure. The biggest factor that is hobbling the U.S. economy and preventing growth is the lack of jobs. Because of that, the economy and, most likely, the dollar, will probably not strengthen until this situation is alleviated. A strong job creation number being reported could cause traders to become more bullish on the dollar, creating a trading opportunity.
There are many other factors that can be considered and many of these will be addressed in future articles that will focus on news trading.