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flyer · 28-09-2003, 10:55

You're correct in your assertion that the market doesn't always react positively, even when positive news is released. But generally speaking, if the reports are favorable, the currency will climb in price, and if the news is negative, the currency will decline in price. There's also the trend of severe volatility just before, and just after the reports are released.

Clearly, this overall volatility stems from an investor's prediction of a certain result in market reaction, then either buying (or selling) the currency pair refecting their personal expectations and sentiment. As you mentioned, it's quite difficult to predict market reaction to a set of economic reports, particularly if market sentiment is poor at the time. Typically, it's an overal "mixed" reaction, where many investors are buying, and many are at selling at the same time.

Given the above scenario however, it would seem likely that an FX investor could potentially profit both ways, trading whatever trend existed at that time. I've noticed a general consensus in optimistic predictions of reports, as many times the currency will advance slightly in price before the reports are released, almost assuming that it will be favorable, and have an inherent positive impact on the currency.

***For example:***

At 08:30 AM ET on 09/26/2003, the U.S. GDP Final report was released. Many were expecting a 3.1% consensus, yet the report came in better than expected at 3.3%. If you examine the charting of the EUR/USD, it's evident that the EURO advanced in value in the minutes prior to the release, then dropped significantly after the release.

This advance prior to the report's release was around 30 PIPS. However, the drop after the release was around 60 PIPS, as it was favorable to the USD's value. Being the optimistic person that I am, I see (2) clear opportunities to make money in this situation:

1) When this upward trend is noticed in advance of the report's release, a trader can open a long position in the EUR/USD, only looking for an 8-15 PIP profit.

2) Then, at 08:30, when the actual raw numbers are released, another trend begins, which clearly is much more defined. As the numbers are better than expected for the USD, a short position could have been initiated against the EUR, thus expecting it to drop in value. This is where one could be a bit less conservative on your profits, and possibly look for 20, even up to 40 PIPS in profit.

Now, understandably, this is just one example which may not reflect the outcomes of other similar situations, however, this seems to be the typical market reaction to the release of economic reports.

Any other comments or suggestions are welcomed.

flyer

28-09-2003, 10:55	#3
flyer level 1 Join Date: Sep 2003 Posts: 42 Downloads: 0 Uploads: 0 Rep Power: 0	Thanks eternalfuture ... You're correct in your assertion that the market doesn't always react positively, even when positive news is released. But generally speaking, if the reports are favorable, the currency will climb in price, and if the news is negative, the currency will decline in price. There's also the trend of severe volatility just before, and just after the reports are released. Clearly, this overall volatility stems from an investor's prediction of a certain result in market reaction, then either buying (or selling) the currency pair refecting their personal expectations and sentiment. As you mentioned, it's quite difficult to predict market reaction to a set of economic reports, particularly if market sentiment is poor at the time. Typically, it's an overal "mixed" reaction, where many investors are buying, and many are at selling at the same time. Given the above scenario however, it would seem likely that an FX investor could potentially profit both ways, trading whatever trend existed at that time. I've noticed a general consensus in optimistic predictions of reports, as many times the currency will advance slightly in price before the reports are released, almost assuming that it will be favorable, and have an inherent positive impact on the currency. *For example:* At 08:30 AM ET on 09/26/2003, the U.S. GDP Final report was released. Many were expecting a 3.1% consensus, yet the report came in better than expected at 3.3%. If you examine the charting of the EUR/USD, it's evident that the EURO advanced in value in the minutes prior to the release, then dropped significantly after the release. This advance prior to the report's release was around 30 PIPS. However, the drop after the release was around 60 PIPS, as it was favorable to the USD's value. Being the optimistic person that I am, I see (2) clear opportunities to make money in this situation: 1) When this upward trend is noticed in advance of the report's release, a trader can open a long position in the EUR/USD, only looking for an 8-15 PIP profit. 2) Then, at 08:30, when the actual raw numbers are released, another trend begins, which clearly is much more defined. As the numbers are better than expected for the USD, a short position could have been initiated against the EUR, thus expecting it to drop in value. This is where one could be a bit less conservative on your profits, and possibly look for 20, even up to 40 PIPS in profit. Now, understandably, this is just one example which may not reflect the outcomes of other similar situations, however, this seems to be the typical market reaction to the release of economic reports. Any other comments or suggestions are welcomed. flyer