What driving the movments

Hi Everyone,
Im pretty new to forex (comming from trading the FTSE, DAX and DOW) I am currently paper trading to get a feel for these markets. Can anyone give me a rough reason why there was a sudden movement on most of the pairs this morning at about 8am GMT? Im just trying to get a feel for what causes sudden movements like this particulary as the USD seemed to strengthen against some currencys but weaken against others?? Dose any one have any good bookmarked links to threads discussing what moves certain pairs?

Many thanks, and hopfully i can be of help to other in the near future.

I strongly suggest that you take a forex training course or two

can you recommend any in the UK?

I don't think its unnecessary to take a course. It tends to be very expensive. Read this forum, then read it again. I think it contains more information than any training course. Just my 2 pips.

The truth, which may take one a long time to find out trading, is that the FX market most of the time (almost all the time) mis-prices currencies...To make a long story short, the big swings you look at are due to market inefficiencies. Can you develop a way to take advantage of those inefficiencies? That's all we're trying to do.

Yeah.. I agree.. The market moves on human emotion, greed and fear. It moves on speculation about interest rates. All Mervyn King needs to do is suggest he may hike next time, and that will set speculators off buying pounds. Carry trades move all pairs to an extent. When they are going strong it tends to be bad for the USD and when they unwind the USD gains strength.

Cheers for the replys.
Am currently reading loads and certainly not planning to go live untill I have a much better feel for the markets.

How about the morons saber-rattling in Turkey, driving up oil, (currently at 86.73 a barrel) and just general panic-trading.

It is times like this that quite a few pairs can be bought cheaply, if you are patient, and wait for the panic to settle.

This of course, takes some chart time to recognize this.

But, my advice about wondering why: don't. It's actually not important.

Just let things settle, then place your trades, "Heat Of the Moment" was a great 80's song, not a trading mantra.

Clockwork

Tradingcube,

It was almost 3 months ago I started learning this market, I'm satisfied with what I am up to till now, don't go for such training courses, all of them are not necessary at all rather keeping you away from self-education which is the essence in learning this Market, Ive got 2 stuffs e-books which are good basics and extracts from a well-known fx community, these 2 e-books are enough to get a handle on the whole picture, me myself only studied the first one ignored the next lol but they're great! Lemme know so I will forward ya

mld

A good place to start is (where else but ) Wikipedia:
http://en.wikipedia.org/wiki/Forex
I think the link there to the Investopedia article is also reputable.

Re. this morning, I think (from scanning headlines) this morning's drop was related to global stock exchange weakness + Bernanke's comments + big drops in Citi profit reported yesterday, all of which tend to move the market towards risk reduction (i.e. away from prevailing speculative trends). For GBP in particular, note the lower inflation expectations which give less reason to think that the BoE will maintain interest rates, which in turn pushes money away from the GBP/JPY carry. Similarly last night the NZD economic reports, and even EU news. Overall, carry trade in Yen in particular has been a big driver (borrowing at low Japanese rates to invest elsewhere at higher rates, either in paper or stocks), which means the bigger pullbacks are more likely in JPY crosses. On other ccy's, an interesting divergence is happening on $/CAD, which usually trcks the price of oil this time of year - but while oil continues to make new highs, $/CAD is not making new lows. (It's way to early to make a call on a reversal though, AFAICS, it may just be a bit of an anomaly - JPY based spec investment seems proportionally higher in CAD than in the USD, so JPY strength often shows up by a greater change in CAD/JPY than in USD/JPY, which in turn leads to a bit of a rise in USD/CAD....)

interesting, thanks for your opinions

Hi Tradingcube

The 8am GMT spike that you talk about is likely due (at least in part) to the opening of the European markets. See:
http://www.forexmarkethours.com/
http://www.babypips.com/school/market_hours.html
(If you're new to forex, the whole babypips "School of Pipsology" is a great read: http://www.babypips.com/school/
included within my post here: http://www.forexfactory.com/showthread.php?p=1555556)

Anyway, back to your question about what drives the markets......

You might like to search the forum here for something like “News trading” to find information as to the extent that certain news events drive the markets. Here’s a great post by WHTenn to get you started: http://www.forexfactory.com/showthread.php?p=1635016
Don’t forget to use the “Similar Threads” links at the foot of each thread.

Some events like interest rate changes, FOMC, and NFP (non-farm payroll) seem to be capable of causing significant moves. You’re probably aware of the “forecast” and “actual” values in the FF calendar (http://www.forexfactory.com/calendar.php). One possible theory is that the change from the “previous” to the “forecast” value has already been factored into the price by the time of the announcement, but a difference between expectation (“forecast”) and the value announced (“actual”) is a surprise, and will frequently cause a spike in the appropriate direction. On the FF calendar, there is a little button/link to the right of each news event that brings up a raft of information and links about the event.

My simplistic understanding (I’m a newbie technical trader) is that one large reason is interest rate differentials between countries, which create inequities in supply and demand for the currencies involved. Countries raise interest rates to combat inflation, so inflation-related indicators can herald possible interest rate movements, and the market responds as traders take heed.

The following is an excellent read on economic indicators:
http://www.biz-analyst.com/library/e...indicators.pdf

Some further information courtesy of http://www.forexmentor.com/forex-faq-general.html
What “drives” currency prices? Currency prices are affected by a variety of economic and political conditions – most importantly inflation, interest rates, large market orders, and political climate. Furthermore, governments sometimes enter the Forex market to influence the value of their currencies, either by flooding the market with their domestic currency to lower its price, or conversely by buying it to give it a boost. This is commonly called “central bank intervention.” Any of these factors can cause volatile currency prices. However, the sheer size and volume of the Forex market makes it virtually impossible for any one entity to "influence" the market for any length of time.

And from http://www.fxacademy.net/forex_tradi...orex_intro.htm
2. What Drives the Forex Market?
Different countries use different currencies, however cross-border trade has to take place.
The Forex market is therefore a vehicle driven by the need to move monetary payments across borders and transfer funds and value from one currency to another. If the whole world used one currency there would be no need for the forex market.
For example if a US restaurant needs to buy Italian cheese it needs Euros to pay the Italian cheese maker so it must be able to exchange US dollars for Euros.
Likewise if the US restaurant makes the payment in US Dollars the Italian cheese maker must be able to change the Dollars into Euros. It’s as simple as that.

Felix (who incidentally is not well liked by a number of contributors here) makes, IMHO, some relevant points in Parts 9 to 11 in his thesis here: http://www.forexbastards.com/public/...trading_system
This may be particularly applicable to you, in that you are moving from trading the equities markets to forex.

Here are some more links:
http://www.ozforex.com.au/reference/factors.htm
http://media.wiley.com/product_data/...0470137649.pdf

The second link is particularly comprehensive. And of course you can Google countless more for yourself (“what drives forex”), just as I did.

Finally, and at the risk of sounding that I’m promoting my own invention, you might like to try downloading the Plot_News indicator from the following link: http://www.forexfactory.com/showpost.php?p=1642698
As shown in the screenshot there, this indicator will plot prior news events on your charts as circular objects. You can then hover your mouse cursor over an object to see what the news event was, and how the forecast and actual values differed. Then see graphically the effect that it had on price in the chart.

Hope this helps
David

thanks for you're time hanover some good stuff there.