Which economic data affects the dollar’s trend ? We will identify the five economic indicators that have the greatest impact on USD/EUR, benchmarked against EURUSD because this is the most actively traded currency pair in the FX market.
Economic data is important to both fundamental and technical traders
The indisputable fact is that economic data and events can cause uproar in foreign exchange and other financial markets, but not all data events have the same impact, and the importance of data changes over time. The U.S. housing market has cooled significantly over the past year, leading to new housing The importance of sales and existing home sales data rose rapidly. Finally, some data have a longer-term impact, and some data have a greater short-term impact. The top five economic data that have the greatest impact on the daily chart of the dollar are:
- Non-farm employment
- ISM Non-Manufacturing Report
- Personal expenses
- Consumer prices
- Existing Home Sales
The monthly non-farm payrolls report has the biggest impact on the dollar and has remained unchanged. The U.S. economy has cooled from 2007 to 2008. The job market is closely watched by all traders and analysts due to its broad impact on the overall economy.
short-term reaction
Many technical analysts believe that long-term fundamentals are already reflected in the trend, but even avid chart admirers should note that fundamental news has no small short-term effect on the trend. The 2007 data shows that the short-term effect of the data has gradually increased in the past few years. The non-agricultural and Federal Reserve interest rate decisions on the 20-minute chart have been ranked as the top two.
The top-ranked data on the 1-hour chart has more lasting influence on the market, and the 20-minute chart has the same top 4 economic data as the 1-hour chart, followed by the trade account and the ISM manufacturing report.
The data that fundamental traders care most about
The most influential reference to the daily chart is still non-farm employment, which is highly correlated with the overall economy as it can reflect trends in consumption, investment and interest rate outlooks. Another noteworthy place on the daily chart is the diminishing impact of interest rate decisions, but interest rate policy regained market attention at the end of 2007, and its ranking is expected to rise in 2008. The 20-minute, 1-hour, and daily charts included housing market data, showing that the subprime mortgage crisis not only affected the U.S. economy, but also shook the entire financial market. On the daily chart, the ISM service industry data ranked second in terms of influence. Showing the market’s growing concern that the United States is falling into recession, this worry is expected to ensure that the data will continue to hold great influence in 2008. The rising influence of the personal spending data is also due to heightened concerns about the overall U.S. economy.
Volatility continues to decline
It is of course important to pay attention to the rankings, but we also need to pay attention to the year-on-year decrease in the fluctuation range when comparing the non-agricultural data. The credit crisis and recession fears made the market extremely sensitive to risk appetite, and the trend was quickly re-determined by risk appetite after a brief impact on the data.
Future prospects
Although the impact of daily data on the dollar appears to be diminishing, this situation will not continue. Market focus on fundamentals has historically fluctuated. Once credit market risks have cooled, traders will be more willing to refer to fundamentals for speculative trading. .