15 Fundamental News Terms on Forex Trading IMPORTANT!
Sometimes we feel confused about what analysis we will use in our trading. Either because they can not follow price movements, or because they can not know the volatility of the market that tends to fluctuate. Technical calculations sometimes still need fundamental support. This article will discuss forex fundamental terms as a reference for fundamental analysis.
What are fundamental indicators?
Fundamental indicators are guidelines in the form of economic data from government agencies or world political, economic and security news that can influence currency movements. To be successful in the world of forex trading business, we must understand how to read forex economic news for the sake of accuracy of fundamental analysis.
Forex Fundamental Terms
Forex fundamental terms are very important and need to be understood by people who will invest in forex. Because a lot of news can affect the strengthening and weakening of a currency.
The following are some terms that are often mentioned in economic news, along with a brief description and their effect on currencies. Everything is also accompanied by terms in Indonesian to facilitate you in learning it. By understanding the forex fundamental terms from the data released, it is expected that traders will be able to think dynamically in the forex market.
1. Federal Reserve (The Fed)
In news releases, especially those relating to the US Dollar, will often be mentioned the US Federal Reserve or abbreviated as the Fed, FED, or FRB. The US Federal Reserve is an institution that acts as the central bank of the United States. Like most central banks, the Fed has the authority to change interest rates or tamper with Uncle Sam's monetary policy.
2. Unemployment Change
This is an indicator that measures a country's unemployment for one month, one quarter and one year. One of the most influential data in forex trading is unemployment data in the United States. If the value of unemployment in the US increases, then usually the value of the USD will weaken, thereby encouraging the strengthening of other currencies traded versus the USD.
3. Reserve Bank of Australia (RBA)
RBA is Australia's central bank. Like the Fed, the monetary policy of the Australian central bank will affect the value of the Australian Dollar.
4. Gross Domestic Product (GDP)
This indicator is used to measure a country's economic growth rate. The effect of GDP data is very crucial, because GDP figures express the total value of goods and services produced by a country's economy in a certain time period. If GDP shrinks or is negative, usually the country's exchange rate will tend to weaken, and vice versa.
5. Retail Sales (Retail Sales)
Retail Sales Indicator is a parameter to determine the level of consumer spending to shop for retail goods. This is important because it is to measure how active the country's economy is moving. The growth in Retail Sales reflects the strength of consumer purchasing power, the overall health of the economy, and the tendency for rising inflation. A strong economy will encourage an increase in the country's currency exchange rate.
6. Commodity Prices
This is an indicator that measures the growth value of export commodity prices. Usually currencies that are affected by Commodity Price data are Australian Dollars, New Zealand Dollars and Canadian Dollars. These three currencies are included in the Commodity Dollar ranks, due to the close relationship of economic growth with the export of certain commodities.
7. PMI (Purchasing Managers Index)
Purchasing Managers' Index is an indicator of the business climate in a region. The index consists of a combination of five elements: new orders, inventory levels, production, shipping, and labor. If the index number is above 50, it means the business is expanding, while a number below 50 means contracting. This index can also detect inflationary pressures and industrial activity.
8. Pending Home Sales
An indicator that measures property business activity in a country. Pending Home Sales measures the activity of making home purchase agreements, both houses that have already been built, condominiums, and other types of houses. This data release usually has a medium influence on the movements of the US Dollar.
9. Non Farm Payroll (NFP)
Nonfarm Payroll is data that shows changes in the number of US workers in all sectors with the exception of government employees, domestic employees, employees working in non-profit / non-profit organizations, and agricultural sector employees. United States NFP data is the most influential economic data on the forex market. The US dollar is very sensitive to the release of US NFP data, so that also gave birth to many strategies and trading tips ahead of the US NFP.
10. Unemployment or Jobless Claims
Unemployment Claim is an indicator that calculates the number of people who apply for unemployment benefits. It should be noted that in developed countries, unemployment has the right to receive benefits. However, the more people who apply for unemployment benefits, the higher the unemployment rate will be. Unemployment Claim Data in the US is usually released weekly, while similar data in the UK called Claimant Count Change is published monthly.
11. Consumer Price Index (CPI) or Inflation Rate
The CPI indicator is usually written as an "Inflation Rate" indicator only. This indicator measures the percentage increase in the price of goods and services continuously in a certain period of time. If inflation is too low or even minus, then it indicates an unhealthy economic condition. However, if inflation rises too high it usually needs to be balanced by the Central Bank by raising interest rates. An increase in interest rates can strengthen the currency of the country concerned.
12. Import Price Index
An indicator that calculates the percentage increase in price (inflation) of imported goods. This data does not have a large effect on currencies, but includes early indicators for those who monitor Inflation and Interest Rates.
13. Consumer Confidence
The Consumer Confidence Indicator is a statistical indicator that measures the overall health of the economy, through a survey of the opinions of consumers. Consumers will be asked about their assessment of their current financial condition, economic conditions in the short run, and prospects for long-term economic growth.
14. Hawkish - Dovish
This forex fundamental term often appears in the news about central bank monetary policy. Hawkish is a monetary policy statement that refers to the tendency to raise interest rates. Dovish is a statement of monetary policy that refers to a reluctance to raise interest rates. Who issued the statement? Generally the head of the central bank or key officials of a central bank.
15. FOMC Meeting
FOMC Meeting or FOMC Meeting is a monetary policy meeting held by the US Central Bank (The Fed). The term FOMC meeting is indeed specific to the US central bank, because other central banks have a term for their own monetary policy committee meetings. For example the Monetary Policy Meeting (MPC) at the Bank of England.
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