Intro To Fundamental Analysis Part 3

Fundamental Correlation

PPI – CPI – Producer Price Index and Consumer Price Index are correlated as a result a high PPI will affect market sentiment towards a higher CPI release.

PPI relates to the cost producers pay to manufacture goods and services while the CPI relates to how much these goods and services cost customers.

PPI data is usually released before the CPI so we can use the PPI to give us an idea of what to expert for the CPI.
Economic calendar – Forexfactory

When news is bad it’s red, good PPI is green.

PPI is used to predict CPI

Retail Sales – GDP – Retail Sales and GDP are correlated so if retail sales for a specific quarter is very good we can expect a good GDP for that quarter (higher GDP means better economy) quarter (every 3 months)

Retail Sales makes up about 70% of the market for most countries and the data is released month and month, we can get an idea of what to expect for GDP fom early out.

Unemployment, Jobless claims, unemployment rate – Retail Sales – If people are losing jobs they will not have money to spend at the retail level and subsequently affecting the GDP on a whole.

Housing Data – Durable Goods. This is because more people buying new house will results in more people buying new appliances.

Housing data green (5.61m) is good or better data look at durable goods data if the figures are green its good data.
PMI – GDP and overall Economy – The purchasing managers index (PMI) this affects the GDP.

ADP – NFP – US ADP employment report has an impact on the expectation of the NonFarm Payroll (NFP). The PMI also affects the expectation of the NonFarm Payrolls.

Anticipation is key

In Forex the anticipation of the news has a greater impact than the actual news for example, if we know the Federal Bank is planning on raising interest rate this will have a greater impact on the market than the actual raising of the interest rates.

This is because the market is largely driven by speculation . The actual news outcome is not as important as the anticipation of the news.
This post was taken from my blog forexblogz.kbasante.com