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Ok now I am really confused

  • #1
  • First Post: Feb 3, 2006 3:03pm Feb 3, 2006 3:03pm
Ok here it is. My understanding is or was that when the NonFarm Payroll out there is a lot of movement and there was. Yet here is where I get confused. Everything I read made me believe that the NonFarm Payroll was going to come in much higher that expected, around 300K. So this would make the Dollar go up in value compared to the currencies traded against it. Now if the NonFarm Payroll comes in lower then that what was expected the Dollar would tank in comparision to the currencies traded against it. The Expectation or consences was 275k but I saw on other places 240k. The NonFarm Payroll came in at 193K what is way under expectation. So with my understanding the Dollar should have gone down in value in comparision to the currencies traded against it. Yet it did not it went up in value. I would have shorted the dollar but didn't because I slept through my alarm good thing for me. Can some help me and explain where I an wrong in my thinking?????????
Fdisk Please I just want a few pips. Is that too much to ask?
  • #2
  • Feb 3, 2006 3:34pm Feb 3, 2006 3:34pm
I don't think your wrong in your thinking but there is just a lot of other factors that make up the market. For one 193k is a good number of jobs created and two the revised number for the previous months was up. Plus the over all trend for the dollar for the past year has been strong. So markets tend to under react to negative news and over react to positive moves.

I saw this happen time and time in 2004 when the dollar tanked. There was plenty of good new around at times yet the euro zone sold the dollar over and over again.

Thus it is dangerous to play the initial reaction to news events.
  • #3
  • Feb 3, 2006 3:37pm Feb 3, 2006 3:37pm
Quoting fdisk
Ok here it is. My understanding is or was that when the NonFarm Payroll out there is a lot of movement and there was. Yet here is where I get confused. Everything I read made me believe that the NonFarm Payroll was going to come in much higher that expected, around 300K. So this would make the Dollar go up in value compared to the currencies traded against it. Now if the NonFarm Payroll comes in lower then that what was expected the Dollar would tank in comparision to the currencies traded against it. The Expectation or consences was 275k but I saw on other places 240k. The NonFarm Payroll came in at 193K what is way under expectation. So with my understanding the Dollar should have gone down in value in comparision to the currencies traded against it. Yet it did not it went up in value. I would have shorted the dollar but didn't because I slept through my alarm good thing for me. Can some help me and explain where I an wrong in my thinking?????????
fdisk and probably many others as well,

Let this be an important lesson [this time the tuition was $0, next time what?] in becoming a good trader. Be aware of news; don't listen to it when making a trading decision. ONLY LISTEN TO YOUR MODEL. News not only can, it ultimately WILL drive you nuts, if you base trading decisions on its release.

Here's what you eventually will read in the press this evening or tomorrow from the talking heads at the major houses.

The reason the dollar rallied, even though the headline NFP was lower than consensus, was due to 3 factors. 1) Revisions to Nov. and Dec. added about 80,000 jobs. 2) The actual unemployment rate dipped to 4.7%, the lowest in 5 years. 3) Almost 200k jobs is still good compared to the economic basket-case known as the Eurozone. In addition, you had rising yield spreads vs. the bunds which make dollars more attractive. If that's not enough, throw in the fact that spec positions at most houses were long euro's and you have a scenario that's ripe for a dollar rally, especially on a Friday.

Next month you could have exactly the same figures and the dollar could tank. I'm sure the talking heads will be able to come up with something to explain it, but last time I checked, the bank where I do business ONLY takes cash and for some reason I cannot deposit analyst BS.
vegas
  • #4
  • Feb 4, 2006 1:40pm Feb 4, 2006 1:40pm
Quoting vegas

(...)

The reason the dollar rallied, even though the headline NFP was lower than consensus, was due to 3 factors. 1) Revisions to Nov. and Dec. added about 80,000 jobs. 2) The actual unemployment rate dipped to 4.7%, the lowest in 5 years. 3) Almost 200k jobs is still good compared to the economic basket-case known as the Eurozone. In addition, you had rising yield spreads vs. the bunds which make dollars more attractive. If that's not enough, throw in the fact that spec positions at most houses were long euro's and you have a scenario that's ripe for a dollar rally, especially on a Friday.

Next month you could have exactly the same figures and the dollar could tank. I'm sure the talking heads will be able to come up with something to explain it, but last time I checked, the bank where I do business ONLY takes cash and for some reason I cannot deposit analyst BS.
Well, in my humble opinion, the three points you sum up, are not just some analyst BS, but plain facts. And exactly these facts happen to be highly supportive for the dollar.
  • #5
  • Feb 4, 2006 2:45pm Feb 4, 2006 2:45pm
Quoting fdisk
Ok here it is. My understanding is or was that when the NonFarm Payroll out there is a lot of movement and there was. Yet here is where I get confused. Everything I read made me believe that the NonFarm Payroll was going to come in much higher that expected, around 300K. So this would make the Dollar go up in value compared to the currencies traded against it. Now if the NonFarm Payroll comes in lower then that what was expected the Dollar would tank in comparision to the currencies traded against it. The Expectation or consences was 275k but I saw on other places 240k. The NonFarm Payroll came in at 193K what is way under expectation. So with my understanding the Dollar should have gone down in value in comparision to the currencies traded against it. Yet it did not it went up in value. I would have shorted the dollar but didn't because I slept through my alarm good thing for me. Can some help me and explain where I an wrong in my thinking?????????

NFP was lower than expected by about 50k, however December was revised about 30k lower so it was actually a 230k increase in NFP. The revision is was caused the movement to be so dollar bullish.
  • #6
  • Feb 4, 2006 5:19pm Feb 4, 2006 5:19pm
I'm probably one of the more uneducated traders thats posts here in regards to financial education. I also have very little understanding about fundamental forces(although I have been learning) and really find news releases confsuing altogether. What I have noticed just from an observation point of view is that the moves that take place after news releases are some of the most unreliable ones. The movement is based purely on the emotional reaction by a multitude of traders. Trading is supposed to be done without emotion yet these are the days where traders throw out this advice and start to trade based on pure emotion or greed.



What I look for is what potential move or movement that I had been waiting on to happen that hasn't been happening because traders are waiting for news. Sometimes it's just a move that stalled overnight or one that has been waffling around for 2 or 3 days. What I find is that news many times will give that psycological push needed to finally complete this move. Last fridays action is a perfect example. Earlier in the week I had expressed that there was a good potential for the week being a bearish week(for fiber and cable) before any bullish move. I personally had thought it would have been weekly bearishness then a bull run on the news to finish out the week. When the bearishness was muted I personally took it as traders expecting the bullishness and preparing by opening longs at every bear run thinking they were getting good positioning. I also took part in this type of positioning but I was aware that the bottom of the bearinshness was still very much possible because the indicators I use weren't fully mature yet for the bear run to be done.

So when I look at the prospects during a news day I understand that it doesn't have to make sense at all. It's a bunch of traders breaking one of the golden rules of trading. I do look at the previous days movent, or lack of it, to get a gauge to what the potential technically is for movement. Then I like to wait out the initial fakeout period. As long as the fakeout period doesn't break any major key levels of resistance or support as soon as the move starts to reverse(I have reversal signals I use to make sure it's not just a small retracement before a continuation)and that's my signal to enter. I've been watching news days for over 3 years and it's my experience that the fakeout period is what the inexperienced traders get caught on and there seems to be a steady stream of new traders being caught on this same thing so fakeouts are becoming more common. If the movement continues on beyond this period it usually still offers opportunity to open in line with that move and catch part of the move. I'd rather wait and miss half of the potential movement to catch part of it than to jump in too early and get a loss.

As many news days as I've watched there is one thing I've learned, never underestimate the unpredictability of emotional traders en masse.
  • #7
  • Feb 4, 2006 7:28pm Feb 4, 2006 7:28pm
Quoting Pipsta
What I have noticed just from an observation point of view is that the moves that take place after news releases are some of the most unreliable ones. The movement is based purely on the emotional reaction by a multitude of traders. Trading is supposed to be done without emotion yet these are the days where traders throw out this advice and start to trade based on pure emotion or greed.
Right between the eyes. In my opinion, the best a serious trader could do is to stay out of the market when big news are due. Trying to trade those chaotic spikes is like trying to catch a falling knife.
  • #8
  • Feb 4, 2006 7:32pm Feb 4, 2006 7:32pm
This is an excerpt from a post I made last year after the Forex Expo
in Las Vegas. These are comments by one of the speakers, Ed Ponsi:

"For trading news, many traders make the mistake of basing their trades
on the headline number instead of taking into consideration the underlying numbers. For example, the Civilian Unemployment Rate drives the NFP.
The NFP is the single most devastating event for most traders "bar none"."

The forecasted civilian unemployment rate for 1/06 was 4.78%, the actual
was 4.70%, which was better than expected. The forecasted NFP was
275K, the actual was 193K, which is worse than expected. The dollar
rallied after NFP announcement yesterday. So at least in this situation,
Ed's comments regarding the driving force behind NFP held true.
  • #9
  • Last Post: Feb 4, 2006 11:54pm Feb 4, 2006 11:54pm
Quoting vegas
fdisk and probably many others as well,

Let this be an important lesson [this time the tuition was $0, next time what?] in becoming a good trader. Be aware of news; don't listen to it when making a trading decision. ONLY LISTEN TO YOUR MODEL. News not only can, it ultimately WILL drive you nuts, if you base trading decisions on its release.

Here's what you eventually will read in the press this evening or tomorrow from the talking heads at the major houses.

The reason the dollar rallied, even though the headline NFP was lower than consensus, was due to 3 factors. 1) Revisions to Nov. and Dec. added about 80,000 jobs. 2) The actual unemployment rate dipped to 4.7%, the lowest in 5 years. 3) Almost 200k jobs is still good compared to the economic basket-case known as the Eurozone. In addition, you had rising yield spreads vs. the bunds which make dollars more attractive. If that's not enough, throw in the fact that spec positions at most houses were long euro's and you have a scenario that's ripe for a dollar rally, especially on a Friday.

Next month you could have exactly the same figures and the dollar could tank. I'm sure the talking heads will be able to come up with something to explain it, but last time I checked, the bank where I do business ONLY takes cash and for some reason I cannot deposit analyst BS.
What Vegas said is right on. My opinion is that the market moves, not on news or fundamentals, but on the collective human perception of news or fundamentals. And that perception is a function of simple fear and greed. Who can predict that? No one. Forget the news and simply trade your system. Be aware of the NFP, but don't try to trade it.

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