Taking a Fundamental Approach to Forex Trading

Trading the Greenback with the US Trade Balance

US trade balance is a powerful economic indicator released monthly in Washington by the Bureau of Economic analyses at US department of Commerce. The publication represents the difference between the monetary value of the American exports and imports for a given month. When the value of exports exceeds the value of imports, a trade surplus is created; and when the value of imports exceeds the value of exports, a trade surplus is created.

US Main Exports Commodities	US Main Exports Partners
Soybean, fruits, corn	Canada 22,2%
Organic chemicals	Mexico 12.9%
Capital goods	Japan 5.8%
Telecommunication equipment	China 5.3%
Consumer goods	UK 4.4%

US Main Imports Commodities	US Main Imports Partners
Agricultural products	Canada 16%
Industrial supplies	China 15.9%
Crude Oil	Mexico 10.4%
Capital goods	Japan 7.9%
Consumer goods	Germany 4.8%

Impact on the US Dollar
Calculated in billions of dollars, the US trade balance plays a significant role in anticipating the potential value of the greenback. The paradox is that the US is the world's leading importer while it is not the world's leading exporter. This has caused the US trade balance to run in the red territory as trade deficit becomes every month's headline. For that, currency traders need to follow the monthly change in the deficit. A narrowed deficit would boost up the greenback; while a widening deficit would hit the US dollar.