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What is an example of interest rate change in forex?
Let's use EUR/JPY. Say the BoJ (Bank of Japan) rate is 0.1% and ECB (European Central Bank) is around 0.5%. If BoJ increased interest rates to 0.5%, then their rates will be the same as ECB. However, these changes will entice investors to move their assets to Yen, because they want to get some profit from the changes. Such movement will cause the rise of demand on Yen so that its exchange rates against Euro will rise too.
On the contrary, if BoJ lowers their interest rates to 0.05%, investors will sell their Yens and move their investment into other kinds of assets like bonds, property, or another currency with higher interest, Yen's exchange rates will decrease.
Continue Reading at Central Bank Policies That Affect the Forex Market
Is there imbalance power in the forex market?
According to a study by the Bank of International Settlements that was originally published in 2013 and revised in 2016 about client flows in forex trading, the flow of institutional traders reflects a significantly superior alignment with future pricing than that of corporate and private traders' flows. To put it simply, the power imbalance in forex trading gives a huge advantage to institutional traders.
Their order flow is usually so powerful that it can drive the price to move in a certain direction, hence creating a trend. But don't lose hope just yet because fortunately, there is still a way to analyze market sentiment for retail traders, and that is through the Commitment of Traders data report.
Continue Reading at Guide to Analyzing Trend Based on COT Data
How to read PMI data for forex analysis?
PMI comes on a scale of 100, with a median of 50. Any number under 50 means the economy is in contraction, while over 50 suggests business expansion. A decrease could be read as an economic decline during the period, while an increase shows ongoing recovery.
Continue Reading at Guide to PMI Data in Forex Analysis
How to keep track of forex interest rates?
The only way to know the change of interest rates of any major country is by monitoring the economic calendar. Besides, the released schedule of the interesting announcement of central banks, which is released once a month, is also important. The demand for a currency will be very sensitive to the central bank interest rate. Traders using certain strategies like carry trade pay the most attention to the news of interest rates changes.
Continue Reading at Everything You Need to Know About Fundamental Analysis
