Darma,
It would be helpful to plan our actions. What will we do when the situation goes THIS way and what will we do when the situation goes THAT way? Including the reasoning, of course.
That way, when things don't go along with OUR expectation, we should've got ourselves prepared for the worst. Of course, things can get worse than the worst.
Baruch,
Now that you mentioned it, most members here probably just doing speculative trade. There are REAL trades, the real, physical demand for one currency to another. These REAL trades, actually, that I believe drive where the market moves. This, of course, includes large funds. Individual traders who play small lots may not influence the overall market at all. Only our brokers know whether our trades actually traded in the interbank market. Which, given the old-time statistical fact that most people lose in this kind of speculative business, the brokers will profit better to pocket the money themselves rather than dispatching it somewhere else.
Anyway, REAL trade such as M&A activities (mergers and acquisitions) between MNCs usually won't rely too much on payroll data. I could hardly imagine if corporate A in U.S. that wants to buy corporate B in U.K. will say, I'll wait for payroll data before I exchange the currencies, who knows the payrolls will be good and I could get the pound cheaper. Heck, what if he/she missed? The whole acquisition process will be jeopardized. Rather, such event usually dealt with a less risky means, such as buying forwards. So, the transaction is not dictated by merely economic data, but rather, by business needs. But we, speculative traders have no such need for the physical form. So, economic data and other external events are more important.
It is not economic data that solely leads the way. If that's the case, USD/JPY should've been below Y105.00 by now. The GDP growth gap between US and JPY was so big that the pair didn't deserve to rally towards 112.00 a week ago.
What? Rate differentials? Yeah, that'll explain. But why GBP/USD, EUR/USD, NZD/USD, and AUD/USD dropped when it is crystal clear that UK, EU, NZ, and Australia have bigger interest rates than the one in US?
What? The Fed's gonna hike so interest rate gap will narrow? Yeah, sure. That works for EUR/USD, NZD/USD, and AUD/USD. That's not the case with GBP/USD. Interest rate is expected to rise this week by at least 25 bp. Some even getting ecstatic to expect a 50bp rise.
So, what's the cause? Simply the market is still in love with dollar. It's more of "favor" issue than economic issues. Yen's strengh has been dampened too, by this "I love dollar-syndrome". Why would the market suddenly prefer the dollar? Uncle Greenspan talked it up a few weeks ago.
Hmm... got too lenghty. I guess that's all for now.
Good luck and good trade!
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