How to Read the Forex Factory Economic Calendar

What is an Economic Calendar?

The Forex economic calendar is a list of news items on a specific date that affect the global economy. The calendar includes such important events as:

• housing market data
• employment reports
• inflation indicators
• interest rates, etc.

Economic events are published for many countries at different times and dates. You can see them on the Forex Factory calendar:

How to Access the Forex Factory Economic Calendar?

One of the great things about Forex Factory is that you don’t need to download anything to your computer to use the calendar. All you have to do is just visit the Forex Factory website.

How to Read the Forex Factory Economic Calendar?

We will now take a look at the different columns in the calendar so you can customize them to suit your needs.

On the left side of the screen is the navigation bar. Here you can select specific dates to access data from past economic events. You can also select the current week to see what time and what events are expected this week. This can be very important if you are an intraday trader, or if you’re trading is directly dependent on the release of important news.

Let’s take a look at the columns in the Forex Factory economic calendar:

1. Date and time

The date, day of the week, and the exact time the reports were published are displayed here. Also, sometimes there may be an entry “All Day” without a specific time. This means that an important economic event is taking place on this day, for example, a meeting of OPEC members, the G20 summit, a press conference of the Fed chairman, etc. change the rate of currency pairs.

2. Currency

In this column you will see the names of currencies, which will depend on the publication of specific economic reports. For example, the UK decided to announce interest rates. This means that this event will affect the GBP and its associated currency pairs.

3. Influence (Impact)

This column shows the degree of influence of Forex news on a particular currency and its pairs. There are four colors in total:

• Red means that the currency could be heavily impacted by upcoming Forex news.
• Orange means that the impact will be moderate depending on future economic developments.
• Yellow means that upcoming Forex news will have little impact.
• Gray is used to highlight bank holidays. Thus, it is most likely that the currency will have low trading volume on this day.

4. The name of the news

In this column, you will see a list of upcoming news.

5. Details

The Details column displays a yellow folder icon. Selecting this icon will open a section containing additional information about a particular event. You can use this function to access the following information:

• what does this event mean
• how it can affect the currency
• event release source
• history of forecasts and actual data

6. The current value of the news (Actual)

This column represents the actual numbers published in this report. If you are looking for actual statistics on US jobless claims and the news has reported that US jobless claims are 6606k, then you should see that number in this column.

7. Forecast

After the current news values, you will see a forecast column. This column shows what the experts predicted prior to the release of the news. If the actual data is worse than the forecast, then it will be red, and if it is better than the forecast, then it will be green.

Most traders look at the differences between these two columns and analyze them.

For example, experts predict that the Reserve Bank of Australia will cut its interest rate from 2.5 percent to 2 percent within a month. If such a forecast has been made, then traders can make trading decisions or adjust their strategies for currency pairs with AUD even before the news is released.

8. Previous news values (Previous)

This column publishes the values of the previous event so that you can compare them with the forecast and current values of the news.

9. Graph

By clicking on the graph icon, you will see actual and forecast values based on news events and release dates. This can give you an idea of how a particular economic indicator has evolved over time. For example, you can see how U.S. jobless claims have increased exponentially during the COVID-19 crisis.

How to Set Up the Forex Factory Calendar Time Zone?

One of the benefits of using the Forex Factory economic calendar is that you can set the schedule according to your time zone. This way, you will receive up-to-date news depending on where you live. To do this, follow these steps:

1. Hover your mouse over the top right of the screen where the time is.
2. Select your time zone.
3. Save your settings.

The Forex Factory will remember your time zone so you don’t have to change it every time you use the economic events calendar.

How to Use the Calendar News Filter

If you don’t want to waste time watching all the economic events, you should consider setting up a news filter. Using the news filter on the Forex Factory calendar will give you the ability to limit the events you see, so you only have information about your trading preferences.

If you only focus on certain currency pairs, then you need to set up an event filter so that you don’t feel overwhelmed by unnecessary information.

To set up a news filter, follow these steps:

1. Click the “Calendar” tab located at the top of the page.
2. Click on the “Filter” button located on the right side of the screen.
3. Check the orange and red boxes under “Impact”. In this way, the calendar will only tell you the information that has a large and medium impact.

You can also select only the currencies and economic events that interest you. However, I recommend tracking all the major economies because it is important to know what is happening in the world and how it can affect the major currency pairs.

How to Trade Forex Using the Economic Calendar?

The best way to interpret economic news is to have a trading plan for the week ahead. Knowing what follows economic reports is a big advantage in the market. The problem is that everyone is looking at the same data. However, not everyone makes money in the Forex market. One way to succeed is to use the economic news calendar correctly. Keep in mind that fundamental analysis in Forex trading is just as important as technical analysis.

Any discussion about the volatility of the foreign exchange market and its causes begins with the dollar. As the world’s reserve currency, it affects the entire Forex dashboard like no other currency. Because of the dollar, currency pairs form two categories: major and cross currency pairs. Any major pair contains the US dollar, while cross-currency pairs consist of other currencies. For example, GBPUSD and EURUSD are major pairs, while EURGBP is a cross currency pair.

Only by splitting pairs in this simple way can traders avoid the Forex volatility surrounding critical economic events. For example, one way to prevent large fluctuations in the trading account is to trade cross pairs during the American Forex news.

After the Bretton Woods conference, the US dollar became the mainstay of the global financial system, and in the 1970s it was separated from the gold standard. From that moment on, foreign investors bought it only because of the confidence in the dollar. Currently, the dollar is still the preferred choice when countries build foreign exchange reserves. This is a huge privilege enjoyed by the US dollar.

What Calendar News to Pay Attention to When Trading Forex?

Economic news from the USA is one of the most influential in the world. Because of the role of the dollar, every market is dependent on the US economy. Moreover, inter-market correlation means that the dollar has an impact not only on the forex market but also on other instruments such as bonds, stocks, options, and so on. Even if you trade cross-currency pairs, you should still follow the news from the US on the economic calendar.

Next, we will focus on the most important economic reports that all traders should follow.

1. Change in interest rates

The change in the Fed’s interest rate is the most important event in the world. The announcement of the interest rate by the Federal Reserve System and related press conferences move the US dollar and the forex market. The Fed meets every six weeks and on Wednesday, just after London closes, it releases a statement from the FOMC (Federal Open Market Committee). As practice shows, the higher the interest rate, the stronger the dollar becomes. Volatility in the Forex market increases significantly during the Fed’s press release. The next step is news with changes in ECB interest rates followed by the UK and other countries.

2. Consumer price index or inflation

Inflation shows the change in the price of goods and services over a certain period of time. Typically, inflation, or the consumer price index (CPI), is released monthly. This is one of the most popular Forex news. The market reaches extreme levels of forex volatility if the CPI deviates from the target level. Traders know that the Fed keeps a close eye on inflation. The standard interpretation is that when inflation falls, the currency depreciates and expectations rise that the Fed will loosen monetary policy or cut rates.

3. Inflation and the ECB

Everyone knows these days that the ECB has a problem with eurozone inflation. More precisely, with its absence. Normal inflation should hover around 2%. In this regard, 1.8% or 2.2% is sufficient for sustainable economic growth. Higher levels of inflation lead to higher central bank rates. Conversely, lower inflation leads to lower central bank rates. Higher rates mean a stronger currency, while lower rates are bearish for the currency. Now it is clear why inflation is so important for central banks. Hence, it is one of the most important fundamental analysis indicators in forex.

An Example of Trading on the Forex Economic Calendar

Now let’s look at an example of how to interpret news in the economic calendar and how to make trading decisions in this regard.

At the end of October 2013, inflation in the euro area unexpectedly fell. According to the economic calendar, the expected or projected value was 1.4%. However, the actual number was 0.8%. According to the ECB’s policy, inflation should be close to 2% for sustainable economic growth. But the actual figures were far from the norm, hence the market participants began to sell the euro.

Why? Because part of the fundamental analysis of the Forex market is expectation trading. In this case, based on inflation data, expectations have risen that the central bank will cut rates at the next meeting. The declining rates are bearish for the currency, so sellers enter the market.

The next meeting of the ECB took place two weeks later, and traders sold the euro on speculation to cut rates. This is how the Forex economic calendar influences trading decisions. Over the next two weeks, all euro pairs suffered. No other news piece of any economic events mattered anymore.

The central bank lowered the interest rate and EURUSD fell 200 points in a few minutes. However, the lows that day were lows for a long time to come. The explanation came from a press conference.

A press conference follows forty-five minutes after each ECB meeting. The President reads a statement, and members of the press ask questions. During a press conference, the President of the ECB (Mario Draghi) supported the rate cut. However, he added that the ECB expects inflation to pick up next year.

Because of this message, traders again focused on expectations. It does not matter that the next day the NFP in the United States turned out to be better than expected, that is, the dollar should have risen and the euro should have fallen accordingly. Traders simply ignored the data, and the euro began to recover on expectations of rising inflation next year. Fundamental analysis in Forex is extremely powerful.

Conclusion

The Forex Factory economic calendar is a simple and convenient tool for predicting prices in the Forex market.

Fundamental analysis is more complex than technical analysis. And if technical analysis requires basic knowledge from a trader, then Forex fundamental analysis is more suitable for people with good intuition and perception of market sentiment.

Remember the saying, “Buy the rumor, sell the fact”? It is more than suitable for trading using the economic calendar. Everything here is built around expectations. If the chairman of the Fed accidentally dropped the phrase at a press conference that they would most likely raise the key rate, then the market would react instantly. But the market may not react at all to the news about raising the interest rate two weeks later, as traders have already received their profits and are closing deals.

Forex fundamental analysis is a difficult method of price forecasting. But if you master it and learn how to read the forex factory economic calendar, you will always be at the beginning of emerging trends and will be able to earn big money.