Expert: Fernando Dirazar, Trader College
Topics that will be covered for above session are:
- Fundamental Analysis vs. Technical Analysis
- What is Trade Balance?
- Publishing frecuency and important data
- Historical influence in EUR/USD
Who is Fernando Dirazar?
Marketing Lic. Universidad Católica Argentina. Forex trader since 2004, working with Trader College. Managing clients accounts for IFX Markets. Neway Fx Director.
What is Trade Balance?
The trade balance of a country is the difference between the Exports and Imports that take place in a country or certain region.
It is, together with the Account Current Balance, one of both components that integrate a country balance of payments. The exports as opposed to indicate the improvement or the deterioration of the competitive position of the country with the outside, whereas the imports are an indicator of the health of the internal demand. The information of this indicator is available one time a month, historical since January of 1992.
The volatility of the data of the trade balance has a great influence on the estimations of the PIB for the following trimesters.
Like all the macroeconomic indicators this data can throw as much as positive or negative results, although these are very relative depending on the forecasts that the experts also waited for on the report and of the comparison with the results of previous periods. If the balance of the exports exceeds to the balance of the imports we are speaking of a commercial Surplus, on the contrary, if the balance of the exports is smaller to the balance of the imports we are speaking of a Commercial Deficit.
It is exactly what’s happening to the USA in the last years. In the last periods the USA it comes throwing month to month very negative balances of Trade Balance, and this was one of the main causes of the fall of the Dollar as opposed to the Euro since end of 2004.
Publishing frecuency and important data
Publication of this data is monthly and it is published in the middle of the month (approximately between the 10 and the 20 of every month), gathering the statistic of the month. It has an average factor of revision; the information is reviewed all the months and reflects the commercial situation of two months ago.
Two sources exist in the USA that publishes this data:
A) Bureau of the Cencus
B) Bureau of economic Análysis of the Commerce Department
What to watch of the report?
- Outer balance with Canada, Mexico, the European Union and Japan, economic blocks with which it maintain particularly intense relations commercial.
- Growth of the exports versus. Growth of the imports.
Historical influence in EUR/USD
This investigation consists on evaluating, month to month, how it repelled in the past, the publication of the report in the quotation of the price of the Euro, during and after the publication.
The publication of this type of information usually causes in traders very particular psychological reactions.
This way we will be able to evaluate the react of the market before awaited publications or publications with surprise results and be able to be more prepared at the time of operating with future publications.
In fact the objective of this investigation is to be able to find a TRADING system based on the publication of the data of trade balance in the USA and to find out the most efficient schedules of entrance and exit to the market.
Next we start evaluating historical publications:
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Here we see a case in which data throw an equal result to which was awaited for the specialists:
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As we see in the chart the quotation of euro hours before the publication of the trade balance of the USA was in ascent.
The two candles previous to the publication already caused certain indecision in traders; we realize this seeing the superior shades that they formed in them.
At the time of the publication we see as the first impulse went of 20-25 points up, it corrected down quickly and finally become stabilized almost in the same price of opening of the candle.
The later candle of the report (we can denominate it as last impulse caused by the data) shows a clearly bearish candle to us with a fall of 50 points in the price with an important volume and will reflect the day tendency motivated by the data.
As conclusion we can say that previous to the report the Euro was bullish slightly, with previous and the exit of the report the traders became undecided until the publication and after the publication the price fell.
Price 1 hour and average before the report: 1.2960.
Price 1 hour and average after the report: 1.2908.
If you want to see the investigation of the following months you can download the complete work of http://spanish.fxstreet.com/ (Balanza Comercial de USA).