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Factors that may impact currencies in the Forex Market

Updated on February 8, 2013

It is true that there is a very good earning potential in the Forex market. But, this does not mean that everyone can succeed in it. If you wish to succeed and earn well in Forex trading, you should understand the concepts well and make perfect 'buy' or 'sell' decisions. This means that you must study the market thoroughly and know the factors that may impact the market.

- The strengths or the weaknesses of the economies, the currencies of which you wish to trade, should be primarily taken into account because they may hugely impact currencies of those countries. If you find that a country's economy is doing well and is strong and stable, you can go ahead and invest in that currency. You should refrain from investing in the currency of a country with a weak economy because chances of losing your investments are quite high.

- Since you have been trading in Forex market, you may be knowing that it is against the US Dollars trading of other currencies is done. So, you should keep a close watch on the strength of the US economy. Not only that, the rate of consumption in US may impact the Forex market also.

- If you peep into the behavior of Americans, they have always been living "big" lives. They used to buy expensive cars, live an expensive lifestyle and so on. But, after the sub-prime crisis and the economic disaster, Americans seem to have realized that they have invited troubles for themselves by living much above their means. Nowadays, they seem to be making wiser financial decisions. Many Americans seem to have understood the need and value of frugal living also. But, it cannot be said that the consumption rate in US has come down. It is still quite high. Because of such a huge consumption, a large amount of US dollars are flowing out of the country for import of goods. Countries like China benefit a lot due to this large consumption in US. Though the US government is trying to tilt the economic scales in its favor, they are yet to succeed in their attempts.

So, it is absolutely necessary that you should closely monitor the strength of US dollars while investing in the Forex market. Your success in Forex market depends upon the right assessments you make in regard to the movements of currencies against the US dollars and such a right assessment is possible only if you keep watching the strength of US dollars.

In a nutshell, the factors that may impact the Forex market apart from technical factors and market sentiments are the demand for a particular currency in which you want to invest and the strength of the US dollars against this currency.


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