How to Analyse the Market Fundamentally
How to Analyse the Market Fundamentally
O que é um calendário econômico?
An economic calendar is a tool used by traders, investors, and analysts to track scheduled economic events, data releases, and announcements that influence financial markets and currency movements. These events include macroeconomic indicators, central bank statements, political events, and other factors that can lead to increased market volatility.
a. Key components of an economic calendar
1. Date and time of an event:
Indicates the exact moment when the data will be released or when the event will occur.
2. Country:
Shows the country related to the event, which helps traders understand which currency will be impacted (e.g., USD for the United States, EUR for the Eurozone).
3. Kinds of events:
Event here refers to the name of the news or the economic indicator being released, such as:
· Gross Domestic Product (GDP)
· Interest Rates
· Inflation (CPI)
· Unemployment (Non-Farm Payrolls)
4. Expectations:
· Valor Anterior: The figure from the last announcement.
· Valor previsto: Analysts' predictions before the data release.
· Valor atual: The newly released data. Comparing the actual value with forecasts helps traders understand the potential market impact.
5. Impact level:
Economic calendars typically categorise events into three levels of impact:
· Low Impact
· Medium Impact
· High Impact
Differences between impact levels of economic news
High-Impact News ***
These events have the potential to significantly influence the market and cause high volatility. Traders tend to focus primarily on these major news releases because they have the strongest market impact.
Examples of High impact events:
a. Central bank interest rate decisions:
Announcements from institutions like the Federal Reserve (FED) or the European Central Bank (ECB).
- Interest rate changes directly affect currency value.
b. Non-Farm Payrolls (NFP):
A monthly U.S. jobs report, released on the first Friday of each month.
- Reflects the country's economic health.
c. Gross Domestic Product (GDP):
A core indicator of economic performance.
d. Consumer Price Index (CPI):
Measures inflation, which guides central bank policy.
e. Central Bank statements:
Hawkish tones (interest rate hikes) or dovish tones (interest rate cuts) can trigger significant market movements.
Characteristics of high impact news:
- Immediate and often unpredictable market reactions.
- Sharp price movements that can lead to slippage (price slipping beyond the expected level) and increased spreads.
Low/Medium impact news ***
These events cause minor or negligible market reactions. They rarely trigger significant price swings and are generally overlooked by most traders.
Examples of low/medium-impact events:
Secondary economic data:
- Purchasing Managers' Index (PMI) from smaller sectors.
- Retail sales figures from smaller economies.
Local political announcements:
- Regional elections without substantial national impact.
News from smaller economies/currencies:
- Reports from countries with low global economic significance.
How to use the Economic Calendar effectively
a. Prepare before trading (Build a routine)
Traders monitor the calendar to identify when high-impact news releases are scheduled. This allows them to prepare for potential market shifts and either adjust existing positions or develop new trading strategies.
Some traders may even choose to avoid trading on days expected to have extreme volatility.
b. Assess the expected impact
When a high-impact event is anticipated, traders often:
- Adjust stop loss and take-profit levels.
- Close some or all open positions to reduce risk.
c. Planejamento estratégico
Before a news release:
- Traders may speculate based on forecasted data, anticipating market reactions.
After a news release:
- Traders analyse the market's reaction to the new data and enter trades depending on whether the outcome is positive or negative compared to expectations.