What is Economic Calendar?

The economic calendar is a clear designed table that shows details of upcoming economic event releases, speeches, interest rate meetings, and any other information that may be fundamental for the country’s economy. It is scheduled in advance and it is free and easy to be found on the Internet as many websites are offering it.

An economic calendar contains information for future and past economic events of different countries and can be relied on by traders to predict the future performance of the country’s economy as well as currency in the forex market.

Real Time Economic Calendar provided by Investing.com.

The fact that currencies are traded in pairs such as USD/CAD, a change in the major fundamental factors of one country is likely to affect the price movements of a currency pair in the forex market.

As a forex trader, it is very important to know the current market sentiment/trend direction before making any decisions to trade.

The economic calendar warns you in advance when the news will be released which gives an opportunity to prepare, make necessary adjustments if any or close out already open positions and prepare for the coming new opportunities.

For example, when trading the USD/CAD currency pair, it consists of two currencies; USD dollar and CAD. The USD dollar currency represents the USA economy, and the CAD represents the Canadian economy. In this scenario, you will be interested in the economic events that come from the USA and Canada.

For instance, you can consider Crude oil inventories from the USA, interest rates, GDP, NFP and many others from both countries since they are likely to cause the highest volatility and large price movements for the USD/CAD. You should also be aware that such news is likely to change the direction of the entire trend in the market.

We shall learn more as we go through this topic, all you need is to stay focused so that you don’t miss out any important information.

How can one access the economic calendar?

Many Forex brokers have Economic Calendars as part of their platform, which means you can easily access the ecoenomic calendar without having to leave your platform.

If your broker doesn’t have such provision, you can always access it on almost all forex websites. It is easy to access and interpret; all you need is an internet connection.

You can still access the economic calendar right here at our site(freeforexcoach.com) with many other tools that will help you through your trading journey. It is simple and easy to interpret.

How to interpret the economic calendar?

The economic calendar is easy to use and interpret because everything is clearly stated on the scheduled table.

There are a lot of things to look at when studying the economic calendar and below are some of the things you should look at first when using the economic calendar to base your market analysis.

The time the economic news is released;

Day and Date

The economic calendar displays the days of the week with the date on which the news data is to be released.

It does not only show the economic events that are supposed to be released only at that moment but also shows events of the future and also the previous ones.

For example, if you can take a good look on the figure below, you will see, provisions for yesterday, today, tomorrow and for the whole week in general.

So, if you are interested in finding a trend or what the previous data was and looking for a comparison, then you can select the period. If you want a display for the whole week you can select that too. All you do is select the right period and the calendar will display it for you.

Below is the figure showing how you can choose the correct date for the data you intend to view.

 The time of data release.

The second important thing you should look at on the calendar is the time on which the event is to be released.  To get the right time for the news events, you have to first adjust the time zone to match the time for the region in which you are trading from.

Time Zone Settings for the Economic Calendar.

It is very importance to always set the clock displaying the time of the news event with your time zone settings. This can be done by clicking on the top right hand corner on the clock.

It will display different time zone options and you can choose the setting of the clock that coincides with your trading charts and your trading platform.

You will also in this case know the exact time when a news announcement is due in real time.

How to set and choose the correct time for the news release, take a look at the figure below.

 

 

The currency that is going to be affected;

For the news to be useful to you, you must know which currency or currencies are likely to be affected when the news is released.

If for example the news is coming out of Eurozone, then the Euro is going to move much so look for the Euro pairs mostly. If the news is from USA, it is USD dollar pairs that are going to be more active in the market.

 There are some countries which highly depend on one another for their economies to produce. In this case when news from one country is released it is likely to affect its trading partner highly.  We should also take note when some of these events are released.

 For instance, the news coming out of China, highly affect the Australian dollar because most of Australia’s exports go to China. Crude oil inventories from the USA also highly affect the Canadian dollar because Canada is the major oil exporter to USA.

The currency can be identified by taking a look at the flag icon on the calendar which represents the country of the data release, and the currency is always put next to it. So you can easily see what currencies might be affected every time news is or to be released. This is as shown below.

 When you get to the calendar, just click on that particular country you are interested in and you will view the news in details, the source of the data release, news overview, chart and history. Let’s take a look.

Expected Volatility (Impact)

Different news released has different impact on the country’s economy as well as its currency value and to the forex market. This is differentiated by its level of volatility when it comes to forex trading.

Volatility is an indicator of the expected impact of a data on currencies.  From the calendar we are using, it is represented by black honed head symbol. When there are three (3) heads on any event, market observers expect this data to have high volatility to move the Forex market. When the heads are two (2), the volatility is expected to be moderate. If it is one (1), Low volatility is expected.

Impact on the market.

Actual/Forecast/Previous

All economic calendar indicators have provisions for the previous number, the forecasted number and the actual number. The Previous number is the data last released previously. It can be last month, last quarter or year). The Forecast number: this is a general agreement of experts and the analysts on the outcome/expected of the number.  The Actual is the final data released. When the Actual data is released, it’s immediately displayed at the right of the events before forecast and the previous data. Better or worse than expected? When the actual number appears in green, it means the data is better than expected. If it appears in red, it means (worse than expected).

Common Indicators on the Economic Calendar

Gross Domestic Product GDP reports – Gross Domestic Product (GDP) measures the annual change in the inflation-adjusted value of all goods and services produced by the economy.

Investors use GDP to gauge the state of the economy and adjust their expectations.

If the GDP turns out better than expected, it’s a signal for future economic growth of the country’s economy in questions. The reading should be taken more positive/ bullish for that currency while a lower than expected reading should be taken as negative/ bearish.

Nonfarm Payrolls (NFP) – Nonfarm Payrolls measures the change in the number of people employed during the previous month, excluding the farming industry in the US.

More job creation leads to improved standards of living and increases consumer spending which in-turn encourages production.

A higher than expected reading should be taken as positive/ bullish for the USD, while a lower than expected reading should be taken as negative/ bearish for the USD.

Unemployment rates – The Unemployment Rate measures the percentage of the total work force that is unemployed and actively seeking employment in a country.

A higher than expected reading should be taken as negative/ bearish for the economy, while a lower than expected reading should be taken as positive/ bullish.

CPI inflation rate – Consumer Price Index (CPI) measures the changes in the price of goods and services purchased by consumers.

If the CPI is below the goal of monetary policy, there is a chance for future interest hike, but this depends on the communication coming from the central bank.

A higher than expected reading should be taken as positive/ bullish for the currency, while a lower than expected reading should be taken as negative/ bearish.

Industrial production – Industrial Production measures the change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities.

A higher than expected reading should be taken as positive/ bullish for the currency, while a lower than expected reading should be taken as negative/ bearish.

 

Retail Data – Retail Sales measure the change in the total value of inflation-adjusted sales at the retail level. It is the foremost indicator of consumer spending, which accounts for the majority of overall economic activity.

A higher than expected reading should be taken as positive/ bullish for the currency while a lower than expected reading should be taken as negative/ bearish

Interest rate decision.

The central bank board members come to a consensus on where to set the rate. Traders watch interest rate changes closely as short term interest rates are the primary factor in currency valuation.

A higher than expected rate is positive/ bullish for the currency, while a lower than expected rate is negative/ bearish.

Crude oil inventories

The Energy Information Administration’s (EIA) Crude Oil Inventories measures the weekly change in the number of barrels of commercial crude oil held by US firms. The level of inventories influences the price of petroleum products, which can have an impact on inflation.

If the increase in crude inventories is more than expected, it implies weaker demand and is bearish for crude prices. The same can be said if a decline in inventories is less than expected.

If the increase in crude is less than expected, it implies greater demand and is bullish for crude prices. The same can be said if a decline in inventories is more than expected.

Factory Orders –Factory Orders measures the change in the total value of new purchase orders placed with manufacturers.

The report also includes a revision of the Durable Goods Orders data released about a week earlier as well as data new data on non-durable goods orders.

A higher than expected reading should be taken as positive/ bullish for the currency while a lower than expected reading should be taken as negative/ bearish.

Employment change

Employment Change measures the change in the number of people employed. Job creation is an important indicator of consumer spending.

A higher than expected reading should be taken as positive/ bullish for the country, while a lower than expected reading should be taken as negative/ bearish.

Monetary policy statement Monetary Policy Statement contains the outcome of the central bank’s decision on asset purchases and commentary about the economic conditions that influenced their decision.

Trade Balance– Trade Balance measures the difference in values between imported and exported goods and services over the reported period. A positive number indicates that more goods and services were exported than imported.

A higher than expected reading should be taken as positive/ bullish for the currency, while a lower than expected reading should be taken as negative/ bearish.

Purchasing Managers’ Index (PMI)-The Purchasing Managers’ Index (PMI) measures the activity level of purchasing managers in the manufacturing sector.

A reading above 50 indicates expansion in the sector; below 50 indicates contraction. Traders watch these surveys closely as purchasing managers usually have early access to data about their company’s performance, which can be a leading indicator of overall economic performance.

A higher than expected reading should be taken as positive/ bullish for the currency, while a lower than expected reading should be taken as negative/ bearish.

 

How to trade using the economic calendar?

When news/data is released, we expect one of the three things to happen. The news will either appear better than expected, less or the same.

If the actual data coincides with or is the same as the calculated (predicted) values, the market reaction will often be slow or no movement at all.

If the actual data is better than forecasted, the market gives a sharp movement to the upside and the greater the difference, the stronger this reaction is. The major events that are likely to bring such movements include; the employment rates, statements and press conferences, GDP from the respective countries and any other important news.

Take a buy position order when the news comes out better than expected for the county’s currency or a sell position when the actual news is less than expected.

It is always important to take note of the market sentiment always when news is released before taking any action. The market does not always react to the news direction sometimes, but this happens on rare cases. Learn more on the different ways to trade news.

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