Contradiction between Fundamental & Technical analysis??! | Forex Factory

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Contradiction between Fundamental & Technical analysis??!

  • #1
  • First Post: Dec 16, 2007 12:24am Dec 16, 2007 12:24am
while making a back test on 1H (GBP-USD) chart, i found a strong contradiction between issued economic news & the graph movement, especially at 14-NOV-2007 15:30 (GMT+2).

the three issued news were so important and should drag the dollar price down, but unfortunately, every thing goes in the opposite direction (UP). the three economic news are:

-PPI m/m
-Retail Sales m/m
-Core Retail Sales m/m

Note: the news result were RED, but the dollar price goes UP !!!!!!!!!!!

is there any explanation for this weird case??

attachment: Economic news + 1H chart for 1 day only (14-NOV-2007 15:30 (GMT+2))
Attached Image (click to enlarge)
Click to Enlarge Name: Calendar.JPG Size: 64 KB
Attached Image
  • #2
  • Dec 16, 2007 12:39am Dec 16, 2007 12:39am
"market 'digestion' "
  • #3
  • Dec 16, 2007 12:42am Dec 16, 2007 12:42am
what does "Market digestion" suppose to mean?
  • #4
  • Dec 16, 2007 12:45am Dec 16, 2007 12:45am
You might want to familiarize yourself with "Northern Rock" to understand why the pound underwent a severe selloff in Nov.
  • #5
  • Dec 16, 2007 1:08am Dec 16, 2007 1:08am
Quoting Trader KGB
You might want to familiarize yourself with "Northern Rock" to understand why the pound underwent a severe selloff in Nov.
what is "Northern Rock"???
  • #6
  • Dec 16, 2007 1:27am Dec 16, 2007 1:27am
Quoting tarek200_jo
what is "Northern Rock"???
Wiki. The big news was in Sept, but the pound has been under pressure ever since.
  • #7
  • Dec 16, 2007 1:55am Dec 16, 2007 1:55am
Quoting Trader KGB
Wiki. The big news was in Sept, but the pound has been under pressure ever since.
Lol....the pound under pressure since Sept? Yet it broke all time highs against the dollar in Nov? And last week it gained almost 70 pips against the euro.

I love your fundamental analysis. It is very funny

Here is an article written by Kathy Lien from DailyFX

British Pound Sinks to 2 Month Lows
This week, the lack of meaningful UK economic data made the British pound completely vulnerable to dollar strength and weakness. Today was a perfect example of that dynamic as the pound came under pressure from nothing other than dollar buying. Next week, the tables should turn as we expect much more important UK numbers. The data on the UK calendar includes consumer prices, the minutes from the last monetary policy meeting, the current account balance, mortgage approvals, money supply and retail sales. The Bank of England minutes will be particularly interesting because even though the BoE lowered interest rates for the first in 2 years earlier this month, the statement was not dovish. The fate of the British pound will be dependent upon how soon the BoE will cut interest rates again, if at all.
  • #8
  • Dec 16, 2007 2:03am Dec 16, 2007 2:03am
Quoting tarek200_jo
while making a back test on 1H (GBP-USD) chart, i found a strong contradiction between issued economic news & the graph movement, especially at 14-NOV-2007 15:30 (GMT+2).

the three issued news were so important and should drag the dollar price down, but unfortunately, every thing goes in the opposite direction (UP). the three economic news are:

-PPI m/m
-Retail Sales m/m
-Core Retail Sales m/m

Note: the news result were RED, but the dollar price goes UP !!!!!!!!!!!

is there any explanation for this weird case??

attachment: Economic news + 1H chart for 1 day only (14-NOV-2007 15:30 (GMT+2))

Ok lemme try to explain. It is not a given that cable will strenghten if positive economic data is released in the UK. Or that USD will strenghten on good NFP numbers. It is all about the expectation and consensus. Take for example last NFP. It is all about the consensus. If the number is within the consensus range then you wont see a lot of currency strengthening. But if number is below consensus range then it will get hammered or above consensus range then it will strengthen.

Released on 12/7/07 For Nov 2007 Nonfarm Payrolls - M/M change Actual94,000 Consensus65,000 Consensus Range-10,000 to 100,000 Previous166,000 http://premium.econoday.com/graphics/misc/spreader.gifUnemployment Rate - Level Actual4.7% Consensus4.8% Consensus Range4.8% to 4.8% Previous4.7 %
Average Hourly Earnings - M/M change Actual0.5% Consensus0.3% Consensus Range0.2% to 0.4% Previous0.2 % http://premium.econoday.com/graphics/misc/spreader.gifAverage Workweek - Level Actual33.8hrs Consensus33.8hrs Consensus Range33.8hrs to 33.8hrs Previous33.8 hrs
  • #9
  • Dec 16, 2007 2:04am Dec 16, 2007 2:04am
Quoting Time
I love your fundamental analysis. It is very funny
I was thinking of EURGBP.. I don't follow the pound in detail.
  • #10
  • Dec 16, 2007 3:00am Dec 16, 2007 3:00am
Quoting Time
Ok lemme try to explain. It is not a given that cable will strenghten if positive economic data is released in the UK. Or that USD will strenghten on good NFP numbers. It is all about the expectation and consensus. Take for example last NFP. It is all about the consensus. If the number is within the consensus range then you wont see a lot of currency strengthening. But if number is below consensus range then it will get hammered or above consensus range then it will strengthen.

Released on 12/7/07 For Nov 2007 Nonfarm Payrolls - M/M change Actual94,000 Consensus65,000 Consensus Range-10,000 to 100,000 Previous166,000 http://premium.econoday.com/graphics/misc/spreader.gifUnemployment Rate - Level Actual4.7% Consensus4.8% Consensus Range4.8% to 4.8% Previous4.7 %
Average Hourly Earnings - M/M change Actual0.5% Consensus0.3% Consensus Range0.2% to 0.4% Previous0.2 % http://premium.econoday.com/graphics/misc/spreader.gifAverage Workweek - Level Actual33.8hrs Consensus33.8hrs Consensus Range33.8hrs to 33.8hrs Previous33.8 hrs
what you've written is making some sense, but in 14-NOV-2007 the price movement was not minor movement because the consensus was in the expected range, but it was in the opposite direction with deep inclination.
my question is, How in the hell such moves happen?
  • #11
  • Dec 16, 2007 11:59am Dec 16, 2007 11:59am
..........................
Is there any more Explanations??
  • #12
  • Dec 16, 2007 12:13pm Dec 16, 2007 12:13pm
market do what he want to do, the only rules he have is that ones he create, and he can change them when he want to change, he is the boss..
  • #13
  • Dec 16, 2007 12:23pm Dec 16, 2007 12:23pm
Quoting tarek200_jo
my question is, How in the hell such moves happen?
this is very common that the price moves opposite what you'd expect during news releases. this is mostly because there are traders on the sidelines waiting to enter or add to their positions, and they use the negative news to get good price and liquidity. think about it...if you want to get long the USD with a HUGE position (ie you need lots of liquidity), when is the best time to do it?? when negative USD news comes out!!! and this is exactly what happens

another reason this happens is that the expectations of the market were different from the economist consensus (which is posted on most calendars as the "forecast"). this is not usually as significant as the first scenario i explained though.
Relax and be happy.
  • #14
  • Dec 16, 2007 12:31pm Dec 16, 2007 12:31pm
[quote=tarek200_jo;1761476]
Note: the news result were RED, but the dollar price goes UP !!!!!!!!!!!
quote]
ask FF team to color them green, (and the green ones to red)...,...

just kiding, ...why do u think color makes any sense here, u know how many times the us news were green and the dolar went down!!!....to many times...so why shouldnt now happen the oposite?!...
its just money
  • #15
  • Dec 16, 2007 12:33pm Dec 16, 2007 12:33pm
Quoting merlin
this is very common that the price moves opposite what you'd expect during news releases. this is mostly because there are traders on the sidelines waiting to enter or add to their positions, and they use the negative news to get good price and liquidity. think about it...if you want to get long the USD with a HUGE position (ie you need lots of liquidity), when is the best time to do it?? when negative USD news comes out!!! and this is exactly what happens

another reason this happens is that the expectations of the market were different from the economist consensus (which is posted on most calendars as the "forecast"). this is not usually as significant as the first scenario i explained though.
This also makes me think that these news trading events do not have the participation of the largest players. They are by nature highly volitile and not driven by institutions, because it would take too long to put on their postitions. With the high volitility is low liquidity and alot of noise.
  • #16
  • Dec 16, 2007 12:41pm Dec 16, 2007 12:41pm
Quoting smjones
This also makes me think that these news trading events do not have the participation of the largest players.
quite the contrary! the big players use the news events extensively to get good liquidity. there is no better time to go long the USD than when a really bad news is released.

i think what you meant here is that when the market spikes UP on good news, thats not the big players making the spike. and i agree with this. the big players are only using the news to make counter-momentum trades. if they tried to go long with a huge order on good news, that would be a slippage disaster!!
Relax and be happy.
  • #17
  • Dec 16, 2007 12:41pm Dec 16, 2007 12:41pm
Is this the Tarek of the Pinnacle Trading System?

  • #18
  • Dec 16, 2007 12:45pm Dec 16, 2007 12:45pm
Quoting merlin
quite the contrary! the big players use the news events extensively to get good liquidity. there is no better time to go long the USD than when a really bad news is released.

i think what you meant here is that when the market spikes UP on good news, thats not the big players making the spike. and i agree with this. the big players are only using the news to make counter-momentum trades. if they tried to go long with a huge order on good news, that would be a slippage disaster!!
So if I understand you, you are saying they are using the news as a sling shot to move a larger than normal order... Is this a reason why there often is a fade after the first move?
  • #19
  • Dec 16, 2007 12:47pm Dec 16, 2007 12:47pm
Quoting smjones
Is this a reason why there often is a fade after the first move?
exactly!!!!!

and this is exactly how i trade the news, i listen to the price action to figure out what is going on behind the scenes! and i always try to be on the same side as the big guys.

as you know, i call this the "human element"
Relax and be happy.
  • #20
  • Dec 17, 2007 2:33am Dec 17, 2007 2:33am
Quoting tarek200_jo
..........................
Is there any more Explanations??
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Polishing my crystal ball
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