Industrial Production indicator is the total output of a nation's plants, utilities, and mines. For the fundamentalists, this is the important indicator that reflects the strength of the economy, and also the strength of a specific currency. Therefore, forex traders use this economic indicator as a useful trading signal.
Capacity utilization indicator equal to the total output of industry divided by total production capability. It refers to the maximum output of production plant in a normal business conditions. Capacity utilization is not a major economic indicator for forex market. However, this is the substance that is useful for fundamental analysis. A "normal" figure for a steady economy is 81.5 percent. If the figure reads 85 percent or more, it means that the industrial production is overheating, which close to full capacity. High capacity utilization rates induce inflation, and forex market may expect bank to increase the interest rates in order to avoid or against inflation.
Factory orders refer to the total of durable and nondurable goods orders. The factory orders indicator has limited significance for forex traders.
Nondurable goods are those products with life span not more than three years. For instance, food, clothing, light industrial products.
Durable goods orders are those products with a life span of more than three years. For example appliances, furniture, jewelry, and electronic products. They are divided into four major categories: primary metals, machinery, electrical machinery, and transportation. In order to eliminate the volatility pertinent to large military orders, the indicator includes a breakdown of the orders between defense and non-defense.
How can forex traders analyze from the data?
This data is fairly important to forex markets due to a good indication of consumer confidence. If durable goods cost more than nondurable, a high number in this indicator shows consumers' propensity to spend. Therefore, a good figure shows the bullish of the domestic currency.
Business inventories are the items produced and stored for future sale. The compilation of this information determines the situation of business of the market. Moreover, financial management and computerization help control business inventories in exceptional ways. Therefore, this indicator is not much important for the forex traders.
K-Energy Cream
14 years ago
