Treasury TIC System: How to use it?

 What makes currencies move? Is it technical reasons? Or the fundamental strength or weakness of an economy? Traders would have their own explanations for currency trends, but it is beyond doubt that the main force behind currency movements is the net capital flows into a nation’s economy. These flows can be positive, in which case the nation would be accumulating forex reserves. When the net flow is negative, the nation is becoming more and more indebted to foreigners, and its external position is deteriorating. As these flows are extremely important for analyzing and establishing currency trends, we would benefit greatly if we could find official sources providing data and statistics about them. The TIC report of the Treasury Department in the US is one such resource which is like a gold mine for forex trading  if the trader knows how to use it.

The TIC report captures a snapshot of the capital flows into the US during the monthly reporting period. Although we cannot examine every detail of this important document in this article, we may note that the TIC report is composed of a net total of acquisitions of total long term securities purchases of foreigners, in addition to dollar-denominated short term foreign purchases, and banks’ own liabilities. The long-term securities transactions component often receives the greatest attention, as it measures the longer commitments of foreign buyers which provide safer financing for U.S. debts and expenditures.

The TIC report provides information on a number of aspects of the U.S. economy. First, it gives us a good idea on the asset repatriation of U.S. residents, which is often an important ingredient and symptom of a crisis, and can therefore be used as a confirming sign for trade decisions. Conversely, it also shows if foreigners are selling U.S. assets, and leaving the American market. More importantly, the components of the data gives us a good idea on foreign appetite for various kinds of U.S. securities, and this information can be used by stock traders, and fundamental analysts who wish to establish the sustainability of the external U.S. position. Finally, it gives us an inclusive (but not all-inclusive) view of the capital account of the U.S. which has a direct bearing on a currency trends.

As it can be seen, the report provides a lot of data in a compact form, and if this appears intimidating to a trader, there is solace in the fact that the TIC report is very popular among commentators and is usually picked apart with remarkable speed soon after its release. It may not always be very easy to find the best forex broker, but fortunately, it is often possible to find good interpretations of the data with a little bit of effort on the internet. Use it to your benefit, and you’ll be astonished by how great the power of informed trading can be.