The price pressure at the consumer level is measured by the consumer price index abbreviated as CPI. This is one of the most important indicators to measure the currency dips and highs. Since the customer uses all the products and services, the fluctuation of the price of the goods is directly reflected on the emolument which ultimately leads to inflation. Even central banks keep a check on the CPI as this is their deciding factor for any change in the interest rates. For some, it is the lone deciding factor. Any unexpected change in the value of CPI can shake the market and can drastically change the future perception.
The producer price index abbreviated as PPI is the measure of the pipeline price pressures at the manufacturer level. Since there is always a fluctuation in the cost of raw material, import and export price as well as labor cost, the manufacturers keep on increasing and decreasing the prices of the products depending on the consumer demand until unless the demand drops abruptly. There is always a large gap between the producer price index (PPI) and the consumer price index (CPI) (we are going to study this in the next point).
The traders do not focus much on the values of PPI, until unless the values are too surprising, as it rarely affects the forex market, but they concentrate on CPI which is which has a profound effect on the movement of currency value. However, the value of the gap between the PPI and CPI is of great importance.
The commitment of traders abbreviated as COT is a report released every week by the Chicago Board of Trade. This report portrays some small and large speculators who have an open position in the US commodity futures market. This is basically an update to the public about the situation of commodities in the near future. There are two type of traders categorized in this report: Non-Commercial traders who have an interest in making profits by buying and selling the commodity. They do not have any interest in using that commodity. Another category is of commercial firms who have a primary interest in using that commodity for a purpose other than making profits by speculation.
Apart from predicting market reversal (which is beyond the scope of this guide. I will explain this in another blog), COT report is used by the traders as a primary indicator for predicting the volume. As the currency exchange market is global, the COT report is used to compare the general market wrt a currency pair.
Since fundamental analysis is a great help for predicting the long-term scenario of the currency market, but if you are planning on short-term trading, it is important to club this data with some secondary necessary to finalize your trading strategy. This raw data has a very little use without additional study and analysis whether you are trading long term or short term. Forex trading demands a lot of practice and learning.