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Originally Posted by Trendz
Ok guyz you make fair comments on this one especially as i am fairly new to forex. I am just trying to understand the market dynamics. I do believe however that positioning in the market has alot of value, maybe not the retail side then?
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Definitely for sure the positioning of the specualative wholesale market players is something that influences the market at times. I will often look at that report when data releases such as non farm payrolls are due. What you tend to find in this sort of situation is that the bigger the positions that are out there in the market, the more lopsided the response to surprising data is.
So if the whole world is long EUR/USD, and some poor US data comes out, more often than not the reaction will be relatively muted. This is for two (completely related) reasons.
1) A paucity of EUR buyers: Everyone already has the right position on, so no need for panic buying.
2) An abundance of sellers: Any spike is likely to be at least partially capped by these same longs taking profit.
Of course, if the US data that comes out is GOOD, then the reverse situation applies, and usually with a much more pronounced reaction.
So in summary, I would use this data to have a guess at the 'weak side' of the market, and plan accordingly. Hardly rocket science, but maybe something for the newbies to think about.
GJ