What is the Economic Calendar and How can Interpreted?

Income tax as a concept in the background calendar

Investors who are new to forex investments do not have information about the economic calendar at the beginning. While trading on MetaTrader, they sometimes witness prices suddenly rise or fall. Investors who are caught in a reverse position and make a loss can blame the brokerage house, thinking that the prices are changed by the brokerage house. Investors who make a profit think that they are lucky at that moment. A small minority, on the other hand, picks up the phone to find out why, and calls the customer representative of the brokerage firm they work for, asking why and learning the answer: data is announced in the economic calendar.

The economic calendar is actually one of the cornerstones of fundamental analysis. In my article where I gave information on how to do fundamental analysis, I mentioned the importance of the economic calendar and said that the data to be announced should be taken into consideration. However, the data to be announced in the economic calendar is a subject of detailed analysis on its own. If you are successful in interpreting the economic calendar, you can make significant gains in your forex transactions based only on the data here. In fact, the number of investors who only trade with this is quite high.

Live Economic Calendar

You can see the live economic calendar below. The leftmost column shows the time of data and comments. Then you can see the relevant currency. Where the bull symbols are, the degree of importance is shown. 3 bulls; says it’s very important. The explanations to be made here may cause significant price movements. On the right, you can see the previous data, the expectation and the announced. If there have been sudden price movements in a parity you are interested in, when you look at the data on the relevant day and hour in the economic calendar, you can probably see the data that is announced differently than expected. Depending on what the relevant data means, you can close or continue your transaction. For example, if the data disclosed is about interest rates, then it may have a long-term effect. Therefore, you can act without waiting for the prices to return to the same level in a short time.

What is Economic Calendar?

The economic calendar is the calendar that shows the time and importance of important economic data or meetings and press releases that are expected to be announced during the week. You can also see the previous figures for the data and the expected figures for the forthcoming data. If you ask what it is good for, prices will be very active during these data or disclosure hours. For example, you may observe that the price jumps or drops as soon as the data is released. Therefore, you can make your account and enter the transaction in advance according to the expectation. Thus, if you make the right prediction, it is possible to make a profit as soon as the data is disclosed.

It will also save you time. Since you know when the data will be announced, you can make a significant profit by making your analysis and entering the transaction 5 minutes before and exiting the transaction after the data disclosure. It also provides you with a comfortable investment psychology as you will continue on your way by closing the transactions if your expectations are met.

How to Interpret the Calendar?

There are data that are announced at certain intervals in a certain order in the calendar. These are generally the data disclosed on topics such as interest, employment, inflation, consumer confidence, consumer spending, important speeches. However, since they are within a certain program, there are investors and even robots who regularly monitor and process this data. Therefore, some data cause significant price movements every time they are released. So how is the data interpreted? As an example, let’s take a look at the most important data published from the USA;

Fed Rate Decisions

It would not be wrong if I say the most important data of the economic calendar. The Fed, the Central Bank of the USA, which has the world’s largest economy, announces its interest rate decision eight times a year, every six weeks. Due to the important role played by the dollar and the US economy all over the world, it is closely followed not only by the USA but also by the whole world, and at the time of the announcement, there are great price fluctuations in the markets. Even if the rates do not change, the statements from the Fed Chairman and its members can cause very sharp movements in both the forex market, the stock markets and the bond market, and offer important trading opportunities to investors. I recommend that every investor save the Fed rate decisions on their calendar as data/development with a very high degree of importance.

Non-Farm Employment Data

This data, announced by the USA, causes significant price movements, especially in the dollar. The data shows the number of employments working outside the agricultural sector. The increase in non-agricultural employment will positively affect the economy as it will show that the employment in the country has increased. In theory, the dollar appreciates with a higher-than-expected figure. If it is worse than expected, we will see the dollar depreciate. It is one of the most important data in the economic calendar. There are investors who only follow this data and trade only once a month.

Gross domestic product

Data showing the total value of goods and services produced in a country during the year. GDP is generally reported quarterly on a quarterly basis, but some countries, such as Canada, also report monthly data. If the GDP announced by the USA increases, there will also be an increase in the dollar and related products. However, I should also note that the expected and explained columns should be paid attention to. If the announced data is close to the expected data, even if there is an increase in the data, the price may not increase at the same rate. Because, according to the expected data, the markets may have made their transactions beforehand and priced the situation.

Unemployment rate

It differs from country to country, but data from the USA is published on the first Friday of each month. An unemployment rate of between 5% and 4% is considered a natural rate for the USA. In times of crisis, it can climb up to 10%. A lower-than-expected unemployment rate figure is perceived as positive in terms of dollars, while a higher-than-expected number creates a negative effect.

Retail Sales

It is announced in the middle of each month from the USA. It shows the monthly and annual changes in retail sales, which is a very important shadow indicator for consumer spending. This data also has a significant impact on the dollar, as the US economy is largely based on consumer spending. A higher-than-expectation figure brings a positive dollar effect, and a lower-than-expected number brings a negative effect on the dollar.

PMI Data

Purchasing Managers Index, which means Purchasing Managers Index in Turkish, is a data containing important clues about the general state of the economy. It is calculated as a result of the surveys conducted with the private sector Purchasing Managers and is generally explained for two sectors as Manufacturing PMI and Services PMI. If it is above 50.0, it means that there is an improvement in that sector, and below it means that there is a deterioration. 

SEE ALSO; Favorite Parities of the Forex Market!

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