This isn't just restricted to the United States, either. Traders looking at the Yen, British Pound, Canadian Dollar, or Euro (or any currency, for that matter) will look at the economic news reports that are released by each of these nations.

There are many minor economic reports, some of which can spill over into the larger reports (look at the U.S. Housing bubble, for example), and while the "minor" reports are useful, this is going to concentrate on the big five, because these are the five major economic reports that will have the strongest and most immediate impact on the Forex market.

These are also the five reports that are acted upon by the most traders, so being able to keep track of these are critical if you're going to be able to keep a finger on the pulse of the Forex market.

The five major economic reports to keep track of are:

1.Unemployment/Non-Farm Payroll Reports

2.Interest Rates

3.Consumer Price Index

4.Trade Balance (Deficits vs. Surpluses)

5.Retail Sales

Unemployment/Non-Farm Payroll Reports

No matter what you're trading, this is always one of the most important reports about a particular area's economy. A low unemployment percentage is one of the strongest indicators of a strong, robust economy. Likewise, the opposite also applies. A country with a large unemployment rate is going through hard times.

Surprises in anticipated unemployment numbers can have a strong effect on the Forex market, as well. For example, if the unemployment rate is expected to be around 6.5% for the nation, and the report comes out with 4.9%, then that nation's currency is going to strengthen thanks to the unexpected good news.

Interest Rates

Interest rate changes directly affect the strength of a currency. A higher interest rate will usually cause a stronger currency because it will attract foreign investors and traders. Interest rates are one of the BIGGEST key influences in driving a currency either up or down; especially since carry trades remain popular among Forex traders.

Consumer Price Index (CPI)

The Consumer Price Index is a monthly report that gauges prices across the country and compares it to salary. Basically this means it tracks inflation, which is a major factor in the health of any economy. A sudden jump in inflation is never good news, and in some nations (see Zimbabwe) it can be absolutely disastrous, so keep an eye on when these reports come out.

Trade Balance

The trade balance refers to a nation's trade surplus and/or deficit. This measures how much a nation exports versus how much it imports. A deficit means you bring in more than you send out, while a surplus is the opposite. Often times you may hear "trade deficit" referring to the United States, but this is not necessarily a bad thing - it depends on the situation and why the balance is tilted the way it is. This is also a monthly report in the United States.

Retail Sales

A nation's report of retail sales may be the best indicator of how the common person feels about the economy. In the United States this is a monthly report of how sales are going for individual businesses. Some parts of the year are going to be much busier than others. December, for example, will always be expected to have great retail sales because of the Christmas holiday.

Knowing what these reports are and how they affect the markets will help you make better fundamental decisions when trading the Forex.