The News and Forex by Abe Cofnas

The News and Forex by Abe Cofnas

The News and Forex – a drop of Bernanke in a base of hesitation

Consider these names: Greenspan, Xiachuan, Trichet ,Fukui. If you are a forex trader and do not know these names, you should. They may not be familiar to all people, but they represent some of the most powerful people in the world. They are heads of the central banks of the United States, China, Europe and Japan. As a result these head bankers have a major impact on the direction of currencies. The way these individuals and institutions impact the forex market is by making decisions on the monetary policies of their countries. When Greenspan gives testimony in front of a congressional committee, the forex markets pause and wait to see if something he says will be a sign to buy or sell the dollar. This is also true of the other heads of the world’s central banks. When they speak, everyone in the forex market listens.

The News and Forex - a drop of Bernanke in a base of hesitation

Consider these names: Bernanke, Xiachuan, Trichet ,Fukui. If you are a forex trader and do not know these names, you should. They may not be familiar to all people, but they represent some of the most powerful people in the world. They are heads of the central banks of the United States, China, Europe and Japan. As a result these head bankers have a major impact on the direction of currencies. The way these individuals and institutions impact the forex market is by making decisions on the monetary policies of their countries. When Bernanke gives testimony in front of a congressional committee, the forex markets pause and wait to see if something he says will be a sign to buy or sell the dollar. This is also true of the other heads of the world’s central banks. When they speak, everyone in the forex market listens.

Often the market tries to anticipate what will be said and currency pairs start moving ahead of news.  When the anticipation proves to be wrong, a strong reaction occurs.   

ECONOMIC CALENDARS AND CURRENCY PRICE MOVEMENTS

Another important kind of information that forex traders need to follow is economic reports. These are scheduled releases of official government reports on various aspects of the economy.  Many of these reports are released in the morning at 8:30 AM.   They are one of the most important factors that move forex markets.  Often, beginning forex traders make the mistake of having trades in the market during the release of these reports. This as we shall see is extremely risky when the economic reports result in surprises and the market moves opposite to the traders expectation.

Note: Please see Abe’s book “Understanding Forex: Trading to Win” for the remainder of the chapter. Copies can be obtained from the Freebie section of forexhound.com