When you start foreign exchange 
trading, there are a number of
new skills you have to learn. 
One of these is to predict the
price movements of currencies. 
You need to be able to do this in
order to trade successfully.

There are two types of analysis 
that can help you with this. One
is Technical Analysis, which is 
concerned with exact charting of
markets and price movements. 
The other is Fundamental Analysis.

Fundamental analysis is much less precise, but goes much more
deeply into the causes of currency movements. It involves a
whole range of factors, including political situations,
government policies, company takeovers, even natural events such
as earthquakes or floods.

Of all the sources of information used in fundamental analysis,
there is one above all that provides particularly precise and
good-quality information, which can be invaluable to you if you
are involved in foreign exchange trading. This source is
economic indicators. These are sets of economic statistics
published on a regular basis by government or private sector
agencies. When taken together these sets of figures can help you
judge fairly accurately how a country's economy is doing.

Obviously there are a huge number of economic indicators used in
any given country. They are divided into leading indicators and
lagging indicators. Leading indicators take place before major
changes in the economy become apparent, so can be used to signal
that these changes are taking place. Lagging indicators signal
that the changes already have occurred.

There are some leading economic indicators in the USA that are
particularly important for foreign exchange trading. These
include:

·GDP - Gross Domestic Product - represents the monetary value of
all goods and services produced by the economy over a stated
period. In the USA it is published quarterly. It includes the
pace at which the country's economy is growing or not growing.
·CCI - Consumer Confidence Index. This is published monthly in
USA and is seen as a big market mover - it is looked at closely
by the Federal Reserve when determining interest rates. ·CPI -
Consumer Price Index - published monthly in USA. Again this is
seen as a major market mover and an extremely important
indicator of economic health. ·NFP - non-farm payrolls. This is
published monthly in the USA and records changes in the numbers
of employees apart from farm, government and private household
workers. It represents about 80% of US producers and is one of
the biggest market movers. ·PMI - Purchasing Managers Index - a
monthly composite index of manufacturing conditions in the USA.
It is seen as important, especially the section that deals with
the growth in new orders.

There are many more economic indicators, but these are some of
the ones that carry the most weight. But how can you be expected
to know all of these - or to know what do with them?

The most important things you need to do for the purposes of
foreign exchange trading are: ·Know when each leading economic
indicator is due to be released in the country whose currency
you are trading. ·Understand which aspect of the economy is
focused on in the data - e.g. inflation, economic growth,
confidence, etc. ·Remember that the crucial issue is not the
actual data, but the extent to which it falls within the
expectations of the market. For example, the fact that there is
a rise of 0.3% in the CPI would not be as important as the fact
that the market had been expecting a fall of 0.1%.

This can provide you with vital clues for foreign exchange
trading. The sooner you can make use of them after they appear,
the more profitable your trading will be.