The gross domestic product grew at the annual 4.9 percent trend in the first quarter. Japan’s economy is slowly recovering, as was confirmed by the Goldman Sachs Group Inc., which said about “solid growth driven by external demand and policy stimulus”.

USD/JPY traded near 91.26 as of 8:46 GMT today after it opened at 91.67. EUR/JPY traded at about 113.19 after opening at 113.80.

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In short sales the investors borrow the assets, counting on the future decrease of the prices. In naked short sales the borrowing of the actual assets doesn’t happen, creating opportunity for unlimited bets. The German leaders concluded the last practice is destroying the economy and deleted it in hopes to improve the overall economic affairs. The decision revealed exactly opposite results, causing the uncertainty and volatility in the markets and causing the traders to bail on German investments.

These economic conditions tends to draw the investors’ sentiment towards the less risky investments, causing the currencies tied to the growth to contract. The chances for the increasing interest rates waned as the volatility in the markets grew. The analysts say that the Canadian currency may fall to 1.0700 — 1.0750 per the U.S. dollar.

USD/CAD traded at 1.0427 as of 20:46 GMT today after it opened at 1.0389. EUR/CAD traded at about 1.2945 after opening at 1.2679. CAD/JPY traded near 87.96 down from the opening rate of 88.73.

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The quotes of the New Zealand’s central bank policy makers caused people to guess that the bank isn’t going to increase the interest rate soon and that they maywant the eventual depreciation of the currency. Alan Bollard, the Governor of the Reserve Bank of New Zealand, said:

A slow and steady depreciation of the New Zealand dollar remains a likely outcome for a sustainable recovery of the New Zealand economy, as it would increase export returns and weaken household spending on imported products.

NZD/USD traded today near 0.6786 as of 12:52 GMT, rising from its opening price of 0.6936.

If you would like to comment on the New Zealand dollar’s recent activity or have any concerns regarding this world currency, please, feel free to leave a comment.

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You can use these indicators to trade on their release or as information for future trades. As you will see below, there are many monthly reports on which to trade.

Below is a comprehensive list of all major indicators:

Trade Balance:

The trade balance has a high impact on the value of the USD. Trade Balance is the net difference between all exports and imports. If the Trade Balance is positive it means that there are more USD coming into the country than going out. This increases demand for the USD, which raises the price. If the Trade Balance is negative, there are more dollars going out than coming in, which increases supply and lowers price.

The Trade Balance Report is released monthly around the 10′th of each month.

Treasury International Capital (TIC)

The TIC measures the monthly net differene in security transactions across beroders. If the TIC is rising, it implies an increased demand for USD. This has a positive effect on the USD.
The TIC is released monthly around the 15′th.

Gross Domestic Product (GDP)

The Gross Domestic Product is the main indicator for economic activity. The GDP is the value of all good produced and services summed. A rising GDP is an indicator of a healthy economy which in turn will attract investment and rising the price of the USD.
GDP figures are released quarterly.

ISM Manufacturing Index

The ISM Index is an index that measures the general business activity in the manufacturing sector, which is the backbone of the economy. A number of over 50 is characterized as economic growth and under 50 as economic decline.

ISM Index data is released monthly on the first work day of each new month.

Philadelphia Fed Index

This index is a survey conducted by the Philadelphia Federal Reserve District Manufacurers and measures the business conditions of the sector. A positive trend is a sign of an improving economy and will have a positive influence on the USD.

PFI is released around the 15′th of every month.

Durable Goods Orders

Durable goods are goods with an expected life of over 3 years and this key figure can therefore be seen as indication of investment in capital and means of production. This is a favorite indicator of traders to predict future production.

Released around the 25′th of each month.

Consumer Price Index (CPI)

The CPI is one of the major inflation indicators as seen from a consumer viewpoint. It is a very important indicator because it can be used to predict interest rate policy by the Federal Reserve. The Fed has historically increased interest rates when inflation is over 2%. Increasing interest rates attract more investment in USD and thus has a positive effect on the USD price.

Released around the 13′th of each month.

Producer Price Index (PPI)

Another inflation indicator, but this time measured from the producer side.

Released in the middle of each month.

Unemployment Rate

Unemployment rate is a very important indicator for the level of economic activity as employment numbers closes reflect the general economic level. Low unemployment signals a strong economy which will have a positive effect on the USD.

Released in the first week of each month.

Federal Open Market Committee (FMOC) Statement

The FMOC is a committee within the Federal Reserve that sets the interest rates for the FED. The committee votes eight times a year on the short term interest level (Fed Funds Rate). This is a very important indicator that traders constantly try to predict as interest rates are a major factor in currency prices.

Released every six weeks.

Federal Reserve Chairman Speech

One of the highly anticipated news of the economy as the Fed Chairman holds large influence over interest rates and therefore this speech gives an insight into the current agenda of the Feds monetary policy.

These are but some of the many economic indicators used in fundamental analysis. Knowing exactly when they take place is paramount for any trader. It is essential for any serious trader to have a forex calender with the dates and times of these events mapped in. There are many interactive calenders available online, with most being provided by the brokers.

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In this first course we will look at perhaps the most important of all fundamental indicators: Interest Rates.

Interest rates are the rates at which a lender is willing to lend his money to the borrower and the rate at which an investor can get a return in the market. Interest rates can also be seen as the price of cash as the money could have been invested instead.

Let’s take a look at the very basics of interest rates are set and how they determine currency rates, which is what we are really interested in. In a free market, all prices are set by the forces of supply and demand as illustrated by this graph:

How Are Interest Rates Set?

Natural interest rates are very important in an economy because they make sure that people who have money to invest can find something to invest in. In our free market theory, interest rates are determined purely by demand and supply. In reality interest rates are more or less set by the Central Banks of the world such as the Federal Reserve in the US. The central banks around the world are autonomous institutions which have been given the right to print money and act as a lender of last resort to commercial baks. Essentially, these 8 major Central Banks around the world, set the interest rates for the market. As forex traders we are interested in predicting which rates the central banks will set in the future, so we can either buy or sell forex pairs based on these predictions.

Central banks generally have two goals:

To limit inflation and to stimulate growth. Because this is widely known, forex traders then study other economic indicators to predict how the central banks will act on this informations. The most important indicators to look at are:

• CPI (Consumer Price Index)

The CPI is a measure of the general price level and thus of inflation. A growth in prices means inflation. Rising inflation could indicate that the central bank will raise interest rates.

• Consumer Spending

Consumer spending shows the consumers trust in the market. If consumer spending is falling, the central bank may react by lowering interest rates.

• Employment Levels

Employment levels are a very good measure of the general health of an economy. Rising unemployment may cause the central bank to lower rates to stimulate growth.

How Does Interest Rates Affect The Price of a Currency?

The relationship between interest rates and a nations currency are as follows:

Rising Interest Rates -> Positive Impact on Currency Price

Falling Interest Rates -> Negative Impact on Currency Price

The reasoning behind this is as follows:

Rising Interest Rates

When interest rates in a country rise, it becomes more profitable to invest in that country. Because of this, there is an increased demand of local currency to invest, which drives prices upwards. It also becomes less attractive to borrow money in that currency, which limits the supply of that currency. The net result is less supply and more demand, which equals higher price.

Falling Interest Rates

The reverse is true when interest rates fall. It becomes less profitable to invest in that country which means demand for that currency declines. Again, we have the other effect as well, which is that it becomes cheaper to borrow, which expands the supply of the currency. Falling demand and rising supply means lower price.

Conclusion

Interest rates are very important in fundamental analysis. Particularly the release of data from the central banks should be followed closely as they eventually are the ones to set interest rates.

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