Technical analysis is the study of historical price movements. Because market participants become more alert to any developments, the likelihood of it working decreases when the attention of the market is shifted to major fundamental factors or economic data. Huge-scale releases of economic data, such as the Non-Farm Payrolls report from the United States, have the potential to create large market changes and heightened volatility, both of which can disrupt technical trends and levels of support and resistance.
Advantage: financial calendar
The financial calendar on the website is designed to provide you with all of the information you require in a way that is straightforward and simple to comprehend regarding upcoming data releases and announcements. The website is available in multiple languages, and the financial calendar is one of those languages. It informs you of the data releases that have occurred in the past as well as those that are anticipated, the time at which they will be announced, and the anticipated degree to which they will have an influence on the markets, which is displayed as either low, medium, or high.
In foreign exchange trading, the financial calendar is an essential instrument. The market will typically react to economic news, and it has the potential to become volatile whenever the news does not conform to market expectations. You can get a head start on your trading strategy and open specific positions if you keep an eye on the financial calendar. This will allow you to take advantage of any market turbulence that may occur. Trading the news refers to the practice of making transactions either in anticipation of or in response to the release of data.
How other financial instruments and sentiment affect the forex market:
In addition to data releases, other financial instruments such as stocks, bonds, and commodities have the potential to impact the foreign exchange market. A shrewd trader always maintains at least one eye on the movements in other important financial markets.
A glance at various stock prices and market indexes can reveal a lot about the current state of the market, which is knowledge that every trader will find quite helpful. The term “market sentiment” refers to the degree to which investors are confident in the financial markets; the higher their level of confidence, the greater their willingness to take risks. When investor sentiment is positive (also known as “risk appetite”), stock prices go up, and when investor sentiment is negative (also known as “risk aversion”), stock prices go down.
Investors typically look at stock indices such as the S&P and Nasdaq in the United States, the DAX in Germany, or the FTSE in the United Kingdom when attempting to evaluate the current state of the market. Any one of these indices can be followed or traded by traders.
Example of how positive sentiment affect the forex market:
Let’s consider what might happen to the EUR/JPY during a period of economic expansion, when market sentiment is optimistic and risk appetite is strong. Investors frequently feel confident about taking on more risk during times of economic expansion. They can achieve this, for instance, by choosing to borrow money from Japan, which typically maintains very low interest rates, and storing it in foreign institutions where interest rates are higher; in our case, this is the EuroZone. In essence, they sell the JPY and buy the EUR with the intention of making a profit since they feel secure taking on the additional risk associated with the euro. This illustration demonstrates why the EUR/JPY rises frequently with positive economic conditions and risk-taking investor mood.
Numerous alternative forex pairings can be used with this reasoning when it is generalized. Investors purchase higher yielding assets, including currencies like the EUR, GBP, AUD, NZD, and CAD, when there is a bullish market attitude and stock indexes rise. When compared to the safer and lower yielding currencies, such as the JPY, CHF, and USD, these higher yielding ones typically appreciate due to demand. On several USD, CHF, and JPY pairs, including EUR/USD, GBP/USD, AUD/USD, EUR/CHF, GBP/CHF, AUD/CHF, GBP/JPY, and AUD/JPY, to mention a few, positive sentiment and risk appetite might exert upward pressure. The JPY and CHF crosses are among the more volatile forex pairs, so be ready for significant changes if you choose to trade them.
The EUR, GBP, AUD, NZD, and CAD, on the other hand, frequently see their value plummet when market mood goes negative and stock indices drop. Worse-than-expected economic statistics, geopolitical risk developments, or anything else that discourages investors from taking significant risks can all contribute to a bearish market sentiment and risk aversion. This calls for traders to be aware of all upcoming data releases that are pertinent to the asset they are trading.