Forex Indicators to Watch

Oct 9, 2008
New Jersey
Currencies do not become weaker or stronger randomly. A large portion of a currency's value is based on consumer confidence based upon the economic strength of the country. Economic strength is determined by certain key factors. These factors are closely watched in FX trading market. When these economic indicators change and the value of a currency will fluctuate accordingly. A countries currency represents the economic health of that country and the price is reflective in its currency.

Fundamental economic factors have become increasingly important market movers. When focusing on the impact that economic numbers have on price in the FX market there are 5 top indicators to watch. These indicators that we are about to discuss have a strong effect to generate volume and to move prices in the market.

Economic News Impacts The Short-Term Trading and The Long-Term.

The data itself is not as important as whether or not it falls within market expectations. Besides knowing when all the data is released, it is vitally important to know what economists are forecasting for each indicator. For example, knowing the economic consequences of an unexpected monthly rise in the Consumer Price Index. The actual, is not nearly as vital to your short-term trading decisions as it is to know that this month the market was looking for CPI to fall.

Analyzing the longer-term ramifications of an unexpected monthly rise in prices can wait until after you've taken advantage of the short term trading opportunities. Market expectations for all economic factors are public knowledge. You should be tracking these economic data indicators on an economic or forex calendar.

1.Payroll \ Unemployment

Strong job creation is a good indication of economic growth, as companies must increase their workforce in order to meet demand The unemployment rate is also a good measure of the strength of the labor market. One of the ways analysts gauge the strength of an economy is by the number of jobs created, and the percentage of workers unable to find jobs.

2. The Discount Rate \ FOMC Interest Rate Decisions

The Federal Open Market sets the discount rate, which is the rate at which the Federal Reserve Bank charges member banks for overnight loans. The rate is set during the FOMC meetings by the regional banks and the Federal Reserve Board. Lets take a further look at these two factors.

The discount rate is an interest rate a central bank charges depository institutions that borrow reserves from it. For example, the German Bundesbank offered a discount rate up to 1999 until interest rate policy was transferred to the European Central Bank.
A depository institution is a financial institution in the United States, such as a savings bank, that is legally allowed to accept monetary deposits from consumers. Federal depository institutions are regulated by the Federal Deposit Insurance Corporation (FDIC).
An example of a non-depository institution might be a mortgage bank. While licensed to lend, they cannot accept deposits.
The Federal Open Market Committee (FOMC), a component of the Federal Reserve System, is charged under U.S. law with overseeing open market operations in the United States, and is the principal tool of US national monetary policy(Open market operations are the buying and selling of government securities.) The Committee sets monetary policy by specifying the short-term objective for those operations, which is currently a target level for the federal funds rate (the rate that commercial banks charge on overnight loans among themselves). The FOMC also directs operations undertaken by the Federal Reserve System in foreign exchange markets, although any intervention in foreign exchange markets is coordinated with the U.S. Treasury, which has responsibility for formulating U.S. policies regarding the exchange value of the dollar.

There are 8 meetings scheduled per year. The dates are known in advance so mark them on your economic calendar and incorporate them into your forex trading strategies.

3. Trade Balance

The balance of trade measures the difference between the value of goods and services that a nation exports and the value of goods and services that it imports. A trade surplus results if the value of exported goods exceeds that of imported goods, whereas a trade deficit exists if imported goods exceed exported goods.

Generally this information is released around the middle of the second month following the reporting period. Again this should be apart of your trading strategies.

4. CPI – Consumer Price Index

The CPI is a key gauge of inflation, as it measures the price of a fixed group of consumer goods. Higher prices are considered negative for an economy, but since central banks often respond to price inflation by raising interest rates, currencies sometimes respond positively to reports of higher inflation. Below is a further explanation of CPI.

A consumer price index (CPI) is a measure of the average price of consumer goods and services purchased by households. It is one of several price indices calculated by national statistical agencies. The percent change in the CPI is a measure of inflation. The CPI can be used to index (i.e., adjust for the effects of inflation) wages, salaries, pensions, or regulated or contracted prices. The CPI is, along with the population census and the National Income and Product Accounts, one of the most closely watched national economic statistics.
This information is released monthly.

5. Retail Sales

Retail sales is a measure of the total goods sold by a sampling of retail stores. It is used as a gauge of consumer activity and confidence as higher sales figures would indicate increased economic activity.

This information is released monthly

Happy trading.


Active member
Jun 22, 2008
HowardH: Those are important fundamentals, but many traders simply trade the chart. I don't read news, economic "figures" or any of that bunk. Trading is a game and the market is one big pool of game players.

Whether the CPI is negative or positive won't matter...It's not going to signal entry/exit for a particular trade. Do you know what I mean?

And I beg to differ with your opening statement: "Currencies do not become weaker or stronger randomely." Do people buy/sell based off emotion EVER? As we know the FX markets are the wild west of all markets...anybody can get in and buy/sell an FX pair for any reason. Maybe you remember the super-spike of last wednesday? I call that chart the "middle finger" and it was probably a news-driven event, but as a technical trader I don't seek to find "reasons" I'm just following the flow of orders.

When I execute a trade I don't ask myself, "Jeez what was that last CPI???"
How we interpret the news is subjective...and the news itself is usually subjective and often manipulated!

I actually PREFER being flat (no position) if I know it's a big news day. News/economic figures are great pieces of bait (I know this from personal experience, a particular loss that sticks out :)

So I would say it's important to know the "figures" but not important enough to consider before every trade...

Let me explain how extremely simple my particular system is in comparison to all the indicators you explain...

I have a chart set to 60 days, 5 minute candles of GBP/USD. I have 1 simple moving average that is set at 4000...Yes, FOUR THOUSAND! Haha. This setup gives big sweeping trades. These trades last anywhere from 1day-30days. My software puts visual signals anytime the price breaks above (BUY) or breaks below (SELL).

Trading should be kept as simple as possible, believe it or not. Our minds cannot take in too much information at once. 1 indicator and a few trendlines/chart patterns should be enough.
Likes: IceMan


Active member
Apr 9, 2016
Trading with indicators is one of the most popular ways to approach the Forex Market.


Active member
Sep 17, 2015
Forex indicators are really useful in trading. As you get the news about prices on the market quickly, maybe you need to know also that the price has got up or down. These indicators will help you.