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Chapter 25, Part II. Buying and Selling the News. Page 3

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 26, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

    Aug 28, 2009
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    Commander in Pips: Ok the major rule is to compare the actual number with consensus forecast, since it shows how large banks have already adjusted their positions and what they do expect. In our case, releasing Retail Sales at 2% could lead to weaker USD, despite the fact that current month data is two times better than in the previous one. This happens because big whales have adjusted their positions thinking that the US economy stronger than it has appeared by real data. Hence they will have to re-adjust it to a weaker long-term expectation and this could lead to some decrease of USD against the EUR (growth of EUR/USD).

    Pipruit: Wow, I see. So if it will be right at consensus, despite that it comes in 2 times higher than last time, this could lead to a flat market with the absence of any solid move, right?​

    Commander in Pips: Absolutely. Of course, you will see some splashes and additional volatility, but they will come from small speculators and will not hold for a long time, since large participants have already adjusted their positions.

    Pipruit: Well, but can we tell that if number will be, say, 0.5%, we can count on some significant counter USD move?​

    Commander in Pips: Yes, since the economy has shown to be even weaker than expected and large banks will start to adjust their positions – for instance, reducing dollar holding against other currencies. But anyway this adjustment will be not as significant as it could be, if they have not adjusted it before.

    Pipruit: I see.​

    Commander in Pips: Also the strength of possible reaction depends on the importance of data. If this is the third revision of GDP, it’s hardly likely that you can expect some significant reaction to it, compared, for instance, with the NFP release.
    #1 Sive Morten, Dec 26, 2013
    Lasted edited by : Oct 2, 2016
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