The dollar exchange rate directly or indirectly affects all currency pairs of the forex market. For successful trading, it is necessary to understand the basic mechanisms that shape its final value.
The trader should understand the issues of economics.
Almost all countries hold part of their reserves in the US currency, which confirms its high stability. The country's macroeconomics has traditionally had an impact on the dollar.
Economic indicators important for the dollar
The price of the dollar depends on the state of the economy. Here are important indicators that affect it.
- Trade balance. An important indicator is formed on the difference in supply and demand. As imports increase, demand increases, while exports increase. The indicator can be scarce and surplus. The basic rule: the dollar becomes more expensive when the trade balance increases and becomes cheaper when it decreases. The movement is taken into account, for example, if the balance in the previous year was -10, and in the current year -7, it indicates a good dynamics, that is, the currency will slow down. And if the trade balance was 10 and became z7, then the dollar can start to fall.
- The growth of gross domestic product. This indicator reflects the total market value of all goods and services in the country and reflects the state of the country's economy. When it rises, the dollar strengthens, the decline leads to its weakening.
- The industrial and consumer price index reflects a change in the average price of goods and services over a period of time. Inflation is calculated on the basis of it.
- Unemployment rates are calculated as the ratio of employed to the total number of able-bodied population, directly depends on the state of the economy. It is believed that 4-5% is the norm. When it goes up, the dollar falls.
- The country's balance of payments reflects the movement of money, calculates the ratio of payments made by a country abroad to the sums received in the country. Consider for a certain period of time, it is active and passive. The dollar strengthens with the active balance of the country.
- Import/export rate. The increase in imports is typical of the decline of the national economy (the production level is decreasing, unemployment is growing), which negatively affects the rate. When the share of exports increases, the dollar strengthens.
- Sales of primary housing. Points to an increase in the purchasing power of Americans has a positive effect on production. At the same time, the dollar is strengthening.
- Fed-Chicago National Business Activity Index. He assesses economic activity and inflation in the country. It takes into account 85 indicators: production and revenues (23 series); employment, unemployment, working hours (24 series); Private consumption and household (15 series); sales, orders and tangible stocks (23 series). This index is the main indicator of the American economy. The value of the dollar reacts to this indicator.
- Consumer price index. Measures the average level of fluctuations in prices for goods and services. It is calculated monthly and reflects the country's inflation. It is a very important indicators, so the dollar reacts sharply to its publication.
Knowing these key indicators allows you to make your prediction on the dollar.