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Knowing major banks' FX positions can be important for certain traders, as it provides insights that can help identify low-risk, high-reward, and high-probability entry points in the market.

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Fundamental and important data affect the demand for a currency, especially the Gross Domestic Product (GDP), the Consumer Price Index (CPI), and the Employment Figure. Those three indicators reflect the economic condition of a country and they directly affect the exchange rate of the currency.

Whatever strategy you use in trading, you must monitor the three data mentioned for determining the tendency of currency's price movement based on the capital inflow and outflow in the country. The country with a strong economic condition will attract more investors so more money supply will flow into the country, and vice versa.

Continue Reading at Everything You Need to Know About Fundamental Analysis

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

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