This Forex thing is really complex

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I have been told times without number that when a major news like Non-Farm Payrolls comes out good for US, it will affect US dollas positively and when the news is bad, it will affect US dollas negatively. But what I saw last week friday(6th November 2009) when Non-Farm Payrolls was released left me confused. The news was bad for US(Actual -190K Expected -173K Previous -219K) but instead of the various currency pairs to obey the news, they were all breaking the rules.

I expected that at least in the first 15 minutes of the news, EURO/USD should move up, USD/JPY down, GBP/USD up and USD/CHF down. But what I saw was different. It was only USD/JPY that went bearish. The other three pairs disobeyed the news in the first 30 minutes. GBP/USD went bearish intead of bullish, same with EURO/USD. Also USD/CHF went up.

I wish I knew the reasons behind these unpredictable movements.

Any comment would be appreciated.

Edwin.

 
ekposky:

I have been told times without number that when a major news like Non-Farm Payrolls comes out good for US, it will affect US dollas positively and when the news is bad, it will affect US dollas negatively. But what I saw last week friday(6th November 2009) when Non-Farm Payrolls was released left me confused. The news was bad for US(Actual -190K Expected -173K Previous -219K) but instead of the various currency pairs to obey the news, they were all breaking the rules.

I expected that at least in the first 15 minutes of the news, EURO/USD should move up, USD/JPY down, GBP/USD up and USD/CHF down. But what I saw was different. It was only USD/JPY that went bearish. The other three pairs disobeyed the news in the first 30 minutes. GBP/USD went bearish intead of bullish, same with EURO/USD. Also USD/CHF went up.

I wish I knew the reasons behind these unpredictable movements.

Any comment would be appreciated.

Edwin.

Trading news and trading price is two different story. Following the news is like following the herd of people who watches the news, meanwhile price action will never lie to you, it's right in front of your eyes which leaves out a lot of unnecessary bias to be considered. That's my opinion of news anyway.

And correlation is not always spot on, you'll have drawdowns on pairs you think should go with the other pairs just because we have a strong dollar or vice versa, it's better to diversify into other pairs, perhaps eurgbp, then have a yen pair maybe chfjpy and a u.s. $ pair eurusd, that way nothing is really connected with each other. There are so many ways to trade you just gotta find the most logical one, keep it simple and adapt a style that suites you! All this just requires screen time, (or free time heheh) to master what you see =)


Good luck!

mank

 

> The news was bad for US

Yes - but not dramatically so, it fell in the 'could have been worse' category

If it had been -250k that might have been different

You also have the effect that some news impacts stocks more than currencies & quite often falling stocks (i.e. 'risk aversion') can be USD positive as money rushes from the DOW into $ bonds

There may also be some other effects in play on that day that counteract even NFP

Not much happens in isolation & its all a set of swings & balances, with the occasional 'hand' interfering!

> This Forex thing is really complex

We will all agree that!

Good Luck

-BB-

 
BarrowBoy wrote >>

> The news was bad for US

Yes - but not dramatically so, it fell in the 'could have been worse' category

If it had been -250k that might have been different

You also have the effect that some news impacts stocks more than currencies & quite often falling stocks (i.e. 'risk aversion') can be USD positive as money rushes from the DOW into $ bonds

There may also be some other effects in play on that day that counteract even NFP

Not much happens in isolation & its all a set of swings & balances, with the occasional 'hand' interfering!

> This Forex thing is really complex

We will all agree that!

Good Luck

-BB-

Thanks for your comment BB. I also use this opportunity to thank you for the pivot indicator u forwarded to me. It is doing wonder.

Take care.

Edwin

 
mank wrote >>

Trading news and trading price is two different story. Following the news is like following the herd of people who watches the news, meanwhile price action will never lie to you, it's right in front of your eyes which leaves out a lot of unnecessary bias to be considered. That's my opinion of news anyway.

And correlation is not always spot on, you'll have drawdowns on pairs you think should go with the other pairs just because we have a strong dollar or vice versa, it's better to diversify into other pairs, perhaps eurgbp, then have a yen pair maybe chfjpy and a u.s. $ pair eurusd, that way nothing is really connected with each other. There are so many ways to trade you just gotta find the most logical one, keep it simple and adapt a style that suites you! All this just requires screen time, (or free time heheh) to master what you see =)

Good luck!

mank

Thanks for your comment Mank.

Take care.

 
ekposky:

I have been told times without number that when a major news like Non-Farm Payrolls comes out good for US, it will affect US dollas positively and when the news is bad, it will affect US dollas negatively. But what I saw last week friday(6th November 2009) when Non-Farm Payrolls was released left me confused. The news was bad for US(Actual -190K Expected -173K Previous -219K) but instead of the various currency pairs to obey the news, they were all breaking the rules.

I expected that at least in the first 15 minutes of the news, EURO/USD should move up, USD/JPY down, GBP/USD up and USD/CHF down. But what I saw was different. It was only USD/JPY that went bearish. The other three pairs disobeyed the news in the first 30 minutes. GBP/USD went bearish intead of bullish, same with EURO/USD. Also USD/CHF went up.

I wish I knew the reasons behind these unpredictable movements.

Any comment would be appreciated.

Edwin.

Hi Edwin,

The primary reason you're seeing a strange response with the USD is due to "risk appetite/aversion". Currently, the USD is a "safe haven" currency (that could change at any moment.) It is considered low-risk, so when the news is negative (with respect to the projection) or when equities are going down (as evidence primarily by the DOW) or some other event indicates the economy is not improving, traders run to the safe haven for "risk aversion". When things are perceived to be good, traders have "risk appetite", sell the USD and buy higher return investments. Hence, often the USD pairs work opposite to the way you would expect.


Remember not to bet the farm on anything, though. Traders who manage their risk are traders who live to trade another day. :)


And sorry, this was explained earlier, but I missed it in my enthusiasm to actually help someone with my newly acquired knowledge. I'll leave it anyway, because I've already written it. :)


I hope this helps,

Tim

http://IsItCoffeeYet.com

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