Using fundamental data to trade currencies as binary options or in the forex market is simple, right? You just wait for one of the parent economies to show signs of strength or weakness and place the appropriate ’bet’ on that economy’s currency. Take the USD/CAD pair, for example. This pair moves up when the economic indicators from the US are good or the information coming out of Canada is poor. The “Funds” (trader slang for the USD/CAD) moves down when the opposite is true: Currency pairs are like see-saws (or “teeter-totters”, depending on which side of the Atlantic you happen to reside). I was going to scoff at that absurd Americanism, but “see-saw” hardly fills me with bulldog pride now I have given it some attention. Back to currencies; so if information from one economy can move a forex pair like the USD/CAD, surely the movement will be more predictable when economic data hits both economies simultaneously with opposing impacts. A great example of this is the US and Canadian trade balance figures. Both of which are released at the same time, once a month, at 14.30 CET. Let’s take a look at the data for the last couple of months and see what impact these simultaneous releases had on the USD/CAD. Canadian and U.S Trade Balance figures for April were published on the 4th of June this year. Economists predicted that both countries would show a deficit; $41.1 billion for the U.S., and $0.4 billion for Canada. When the numbers came in at 14:30, they showed that the economists had underestimated the strength of the U.S. economy, and overestimated that of Canada. June 4 2013 – 14:30 CET Actual Forecast U.S Trade Balance -40.3B -41.1B Canadian Trade Balance -0.6B -0.4B Trade Balance June 4 In July, trade balance figures for May for both countries were released on the 3rd of the month. This time the story was very different. The forecast for the U.S. was for another deficit – this time $40.3 billion – and for Canada, the experts predicted a shortfall of $0.7 billion. July 3 2013 – 14:30 CET Actual Forecast U.S Trade Balance -45.0B -40.3B Canadian Trade Balance -0.3B -0.7B TRADE BALANCE JULY 3 2013 As always, what you have read here is in no way a guarantee of what will happen in the future. If there were certainties in trading we would all be sipping pina coladas in the Maldives. However, smart traders always look for confirmation before they take a position, and by maximizing the inherent see-saw nature of the foreign exchange market, the technique outlined in this article should help you corroborate your trading decisions.
Posted on: Mon, 05 Aug 2013 12:43:53 +0000