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As a Trader first and Analyst second, what matters most to me is how economic data impacts the movement of a currency. Since 86 percent of all currency transactions are done against the US dollar, my biggest focus is on US economic numbers.
With Non-Farm Payrolls due for release next week, currency traders may find this report particularly useful.
In 2005, I first published a study on the reaction of the EUR/USD to different pieces of US economic data in my book Day Trading the Currency Market.
Last week, my team at DailyFX updated this study for 2008.
The Top 5 Most Market Moving Indicators for the US dollar change over time. In 2006, manufacturing ISM was the most market moving indicator for the US dollar on a daily time frame but non-farm payrolls stole that title back in 2007.
The market movingness of a piece of economic data also differs based upon timeframes.
In the first 20 minutes of the release (which we call the knee jerk reaction), non-farm payrolls and the Federal Reserve’s interest rate decision have consistently been on top. Everything else changes with the market and economic environment.
For example, in 2007 new and existing home sales have made the list as the housing market becomes a much bigger focus than Treasury International Capital flows in 2006.
A more detailed report on the Top 5 Most Market Moving Indicators for the US Dollar is published on DailyFX
This information is important for both technical and fundamental traders because even for the casual currency trader, news or event risk can have a dramatic influence on the long and short-term price action of a currency pair.