Page 11 - Module 4 - Trading_Ways_and_Means

Module 4 - Lesson 3 Indicators for fundamental analysis

For the fundamental analysis on Forex, just as on any goods market, traders use the information
from analytical reviews of specialists published in newspapers as well as charts and tables of many
numerical indicators serving this purpose. All fundamental indicators generally released monthly,
except of the Gross Domestic Product and the Employment Cost Index, which are released quarterly.
All economic indicators are released in pairs. The first number reflects the latest period. The second
number is the revised figure for the month prior to the latest period. For instance, in July, economic
data is released for the month of June, the latest period. In addition, the release includes the revision
of the same economic indicator figure for the month of May.

The reason for the revision is that the department in charge of the economic statistics compilation
is in a better position to gather more information in a month's time. This feature is important for
traders. If the figure for an economic indicator is better than expected by 0.4% for the past month,
but the previous month's number is revised lower by 0.4%, then traders can draw a justified
conclusion about the economy situation.

Economic indicators are released at different times. In the United States, economic data is generally
released at 8:30 and 10 AM ET. It is important to remember that the most significant data for foreign
exchange is released at 8:30 AM ET. In order to allow time for last-minute adjustments, the United
States currency futures markets open at 8:20 AM ET.

1. Sources of information.
Information on upcoming economic indicators is published in all leading newspapers, such as the
Wall Street Journal, the Financial Times, and the New York Times; and business magazines, such as
Business Week. More often than not, traders use the monitor sources— Bridge Information Systems,
Reuters, or Bloomberg — to gather information both from news publications and from the sources'
own up-to-date information. Separate groups of fundamental indicators are considered below in
accordance with a generally accepted classification.

2. Economic indicators

The Gross National Product (GNP)
The Gross National Product measures the economic performance of the whole economy. This
indicator consists, at macro scale, of the sum of consumption spending, investment spending,
government spending, and net trade. The gross national product refers to the sum of all goods and
services produced by United States residents, either in the United States or abroad.

The Gross Domestic Product (GDP)
The Gross Domestic Product refers to the sum of all goods and services produced in the United
States, either by domestic or foreign companies. The differences between the two are nominal in the
case of the economy of the United States. GDP figures are more popular outside the United States.
In order to make it easier to compare the performances of different economies, the United States
also releases GDP figures.

Consumption Spending
Consumption is made possible by personal income and discretionary income. The decision by
consumers to spend or to save is psychological in nature. Consumer confidence is also measured as
an important indicator of the propensity of consumers who have discretionary income to switch
from saving to buying.

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