Influence of social factors on the currency market

Alexander Kuryashkin. FreshForex trainer

In analyzing foreign exchange market We often turn to such factors as macroeconomic statistics, speeches by top central bankers, heads of state, events in the political world. But there are things that affect price movements just as much. Such studies were conducted by Patrick Young and Jesse Livermore, their alternative methods of market analysis were very popular.

I attempted to find correlations between price movements and social aspects of life. I directed my search to statistics on crime, health, and demographics. The graphs and patterns I was able to identify are really noteworthy. All studies were conducted with the dollar index as the leading criterion for assessing the state of the American dollar and the most famous and traded index in the world. The choice of this tool for analysis is not random, since most traders use the major currency pairs for trading. А dollar index is calculated on a basket of six currencies - the Swedish krona, Swiss franc, Canadian dollar, British pound, Japanese yen and euro. The current value is the result of calculating the average rate of change of these currencies against the U.S. dollar.

Figure 1. The dollar index from 1993 to 2011.

Crime in the U.S. vs. the dollar index

Let's move directly to the results of the study. The first direction chosen was crime. The hypothesis of the study was that the higher the crime rate (in this case in the United States), the lower the dollar will be. And, indeed: the higher the number of prisoners - the lower the dollar index.

Figure 2. The number of prisoners in the United States per 100,000 population.

The chart shows very clearly that as the number of prisoners increases, the dollar index falls, and vice versa.

There is also such an indicator as the number of homicide deaths per 100,000 people in the United States. The higher the death toll, the lower the dollar index. There is a clear inverse correlation here.

Figure 3. Number of homicide deaths per 100,000 people in the United States.

Again, by. the number of robberies: the higher the number of robberies, the lower the dollar index.

Figure 4. Number of robberies per 100,000 people in the United States.

Americans' health and the dollar index

The second group chosen for analysis was population health. First, it looked at The number of people infected with HIV. As a study conducted over the past 10 years has shown, the higher the number of HIV-infected people, the lower the dollar index.

Figure 5. Estimated number of HIV-infected citizens in the United States, thousands (data from 2000 to 2010).

Secondly, an important indicator is the country's spending on health care its citizens. The higher the spending on health care, the lower the dollar index.

Figure 6. Total health care spending per capita in the United States (data from 2000 to 2010).

The last social aspect of life was chosen to be demography. To be more precise migration. Trying to find any patterns among boys/girls born, number of women/men, number of deaths rising/falling, etc. has not been successful. The only thing that correlates well is net migration.

Figure 7. Net migration in the United States, million people.

The general background of the dependencies confirms the basic statements fundamental analysisThe study shows that the situation in the region is unfavorable: whether it is natural disasters, wars, revolutions in the political arena, or, as this study shows, certain social problems in society.

The market is a reflection of the life and well-being of citizens, the functioning of the business and an indicator for investors when investing in the currency (if we talk about the market), the reliability of which is higher than the rest of a number of factors, namely, political, economic, natural and social.