News Trading or (Trade the news technique) is a term which we always hear, in this article We will describe how We see Forex News Trading and how We trade the news; I tried forex news trading for many years and discovered great things; how to use economic reports and forex news along with technical analysis.
In this article We will describe the most accurate and profitable FX techniques that each trader must use in his trades. First of all, we must use Technical and Fundamental analysis in our trades, we can’t rely on one without the other, we must use them both; Technical analysis analyses the history of the currency and predict the future price; each trader has a different forex strategy which he uses in analyzing the market, me too I have my own strategies and they are not hidden;
Let’s talk now about the fundamental analysis, I tried most of fundamental and news trading techniques but I didn’t find them worthy, it is real that releasing news can affect a certain currency, but how it affects the currency and when it deviates that currency, some economic reports make the currency jump 100 pips during the first split second of the time release – you must pay for this kind of service (getting the data in the second of the release)
In addition a report may affect a currency during the first 10 minutes or half hour but before it takes the right trend it can fluctuates up and down and may stop you out, many traders put entries above and below the price before 2 minutes of the release, and wait for the spike, but also it is not worthy method because it may happen that the news which deviate the currency doesn’t have enough power to hit the target or maybe the revision came opposite to the actual or the deviation between the actual and the forecast was not enough to enter a trade or maybe the report was released and the price was below a certain resistance which forbid the price to pass it, so you enter a LONG trade but you find that the price went up, then tests the resistance then turns back to the support level and stops you out.
I faced a lot of these problems and you will face it too if you don’t follow the right technique while trading the news. My technique is very simple and effective:
1 – Don’t trade all news trading reports, trade only those who create and define the direction of the trend (Interest rates, trade balance and NonFarm Payroll). Do not trade these news trading reports only because they are important it may happen that a report came better then expected but do not create a move. I enter a trade only if the actual data came much better or worse (good deviation) and the revised data came along with the actual data and there is no important conflicting report.
2 – The other normal news trading reports are also important; they are used to confirm or to close a trade especially when we are in the beginning of a specific trade; If you have just entered a trade and your current profit is between -20 and 20 pips and a specific report is released and that report affects the currency you are trading then we close it because this report has a good probability to stop you out. When you gain a good number of pips then you may not rely on normal economic reports and rely only on technical analysis and continue your trade until you hit your target.
Fundamental and news trading is a good technique but we must use it along with technical analysis, and we must take in consideration trading the important news reports, the deviation between actual and Consensus, the revised data, the conflicting news trading reports and the support and resistance levels.
Showing posts with label Fundamental Analysis. Show all posts
Showing posts with label Fundamental Analysis. Show all posts
Tuesday, March 9, 2010
Sunday, February 8, 2009
Dollar Steady after NFP
Dollar remains rather steady in early US session after another poor employment report from US. Non-Farm Payroll report showed -598k contraction in Jan, largest monthly decline since 1974 and much worse than expectation of -525K. Unemployment rate climbed to 16 year high of 7.6% in Jan, above expectation of 7.5%. Jan's figure also marketed the first time since records began in 1939 that job cuts exceeded half a million in three consecutive months. Unemployment rate in Canada rose much more than expected to 7.2% in Jan, highest level since 1003 and much worse than expectation of 6.8%. The job market contracted for the third consecutive months by -129k, exceeding any monthly drop on recrod and much worse than consensus of -40k. The Canadiand dollar is sold off immediately following the release and is also pressured with crude oil back below 40 level.
In the UK, industrial production plunged -1.7% mom in December following a revised -2.5% in the previous month. On yearly basis, the -9.4% plunge, worse than both consensus of -7.9% and -7.8% in December, was the biggest decline since 1981, Manufacturing output contracted -2.2% mom, after a fall of -3% in November. The -10.2% slump on annual basis was also the weakest figure since 1981. In November, the reading was revised lower to -8.3% from -7.4%. The data showed that the UK's recession deepened and BOE may need to further reduce its policy rate as well as adopt other quantitative easing measures. PPI data surprisingly rose more than anticipated in January with the core index, excluding food, beverages, tobacco, and petroleum products, rose 0.4% mom (consensus: 0.1%, December: 0.2%). On yearly basis, core PPI eased to 4.1% from 5% a month ago. Input PPI gained 1.5% mom in January following a revised 2.4% drop in December while output PPI rose for the first time in 6 months by 0.1% from a fall of 0.1% in December. On yearly basis, input and output PPI moderated by 1.5% and 3.5% from 3.5% and 4.6%, respectively.
Switzerland's unemployment rate rose more-than-expected by 3.3% in January from 3% in December. Germany industrial production also dropped more than expected by -4.6% mom, -12.0% yoy in Dec.
RBA released its quarterly Monetary Policy Report overnight with downward revisions on GDP and CPI forecasts in the 12 months through June. The committee anticipated GDP will rise 0.25%, lower than the 1.5% projected in November. GDP will growth 0.5% and 2.5% in fiscal years 2009 and 2010 respectively. CPI is expected to gain 1.75% in the 12 months through June, also lower than 3.25% forecast in November. Despite the reductions, the RBA Governor Glenn Stevens stated there's upside risk to the growth forecasts and 'when demand returns, production will pick up more quickly than in past cycles'. In Japan, December's leading indicator is anticipated to have dropped to 79 from 81.3 in the previous month.
In the UK, industrial production plunged -1.7% mom in December following a revised -2.5% in the previous month. On yearly basis, the -9.4% plunge, worse than both consensus of -7.9% and -7.8% in December, was the biggest decline since 1981, Manufacturing output contracted -2.2% mom, after a fall of -3% in November. The -10.2% slump on annual basis was also the weakest figure since 1981. In November, the reading was revised lower to -8.3% from -7.4%. The data showed that the UK's recession deepened and BOE may need to further reduce its policy rate as well as adopt other quantitative easing measures. PPI data surprisingly rose more than anticipated in January with the core index, excluding food, beverages, tobacco, and petroleum products, rose 0.4% mom (consensus: 0.1%, December: 0.2%). On yearly basis, core PPI eased to 4.1% from 5% a month ago. Input PPI gained 1.5% mom in January following a revised 2.4% drop in December while output PPI rose for the first time in 6 months by 0.1% from a fall of 0.1% in December. On yearly basis, input and output PPI moderated by 1.5% and 3.5% from 3.5% and 4.6%, respectively.
Switzerland's unemployment rate rose more-than-expected by 3.3% in January from 3% in December. Germany industrial production also dropped more than expected by -4.6% mom, -12.0% yoy in Dec.
RBA released its quarterly Monetary Policy Report overnight with downward revisions on GDP and CPI forecasts in the 12 months through June. The committee anticipated GDP will rise 0.25%, lower than the 1.5% projected in November. GDP will growth 0.5% and 2.5% in fiscal years 2009 and 2010 respectively. CPI is expected to gain 1.75% in the 12 months through June, also lower than 3.25% forecast in November. Despite the reductions, the RBA Governor Glenn Stevens stated there's upside risk to the growth forecasts and 'when demand returns, production will pick up more quickly than in past cycles'. In Japan, December's leading indicator is anticipated to have dropped to 79 from 81.3 in the previous month.
Thursday, January 29, 2009
Dollar Mildly Lower Ahead of FOMC
Dollar is mildly lower again in Asian session as stocks are lifted by rumors of so called "bad bank" initiative from Obama administration. Under the initiative, US will create an institution, run by FDCI chief Bair, to remove toxic assets from bank's balance sheets. Yen is also mildly lower as Asian stocks climb modestly on the news. Though, the currency markets are generally bounded in tight range as focus is turning to FOMC rate decision in the US session.
Fed is no doubt expected to hold rates unchanged at the target range of 0-0.25% today. Though there are still a few areas that markets will focus on. Firstly, the Fed may discuss inflation targeting and even though FOMC might not adopt a target, the statement would probably emphasis Fed's strong intention to avoid deflation. Secondly, the committee's focus will probably further turn to quantitative easing. Thirdly, the statement will probably discuss further plans from Fed to purchase treasuries to boost lending. After all, FOMC might come as a non-event today and markets could stay directionless until Friday's Q4 GDP release.
Another focus today will be Germany CPI, which is expected to drop -0.3% mom in January following an increase of 0.3% in December, while HICP is anticipated to have contracted -0.4% mom in January after gaining 0.4% a month ago. Ease in inflationary pressure was driven by lower energy prices and further moderation in cost of food. Gfk consumer sentiments was unchanged at 2.2 in Feb.
Australian CPI dropped -0.3% in 4Q08, the biggest decline in 11 years, but less than expectation of - 0.4% decline. On yearly basis, CPI slowed from 5% to 3.7%. Westpac released a report showing leading economic index plunged -1% in November. These data evidenced Australian economy is heading for the first recession since 1991 and RBA will very likely cut interest rate in the meet next week.
Technically, Dollar index is still trading with a soft tone today and intraday bias remains on the downside. Sustained trading below the channel support will argue that whole rise from 77.69 has completed. More importantly this will leave such rise in corrective structure (at least not clearly impulsive). In other words, it will imply that such rise from 77.69 is merely a leg in the consolidation that started at 88.46, which is still in progress. That is, in such case, another test of 77.69 could at least be seen before resuming the medium term rally. Break of 81.19 cluster support (61.8% retracement of 77.69 to 86.81 at 81.17) will confirm this case. Though support from the current level and break of 84.59 minor resistance will indicate that rise from 77.69 is still in progress for retesting 88.46 high.
Fed is no doubt expected to hold rates unchanged at the target range of 0-0.25% today. Though there are still a few areas that markets will focus on. Firstly, the Fed may discuss inflation targeting and even though FOMC might not adopt a target, the statement would probably emphasis Fed's strong intention to avoid deflation. Secondly, the committee's focus will probably further turn to quantitative easing. Thirdly, the statement will probably discuss further plans from Fed to purchase treasuries to boost lending. After all, FOMC might come as a non-event today and markets could stay directionless until Friday's Q4 GDP release.
Another focus today will be Germany CPI, which is expected to drop -0.3% mom in January following an increase of 0.3% in December, while HICP is anticipated to have contracted -0.4% mom in January after gaining 0.4% a month ago. Ease in inflationary pressure was driven by lower energy prices and further moderation in cost of food. Gfk consumer sentiments was unchanged at 2.2 in Feb.
Australian CPI dropped -0.3% in 4Q08, the biggest decline in 11 years, but less than expectation of - 0.4% decline. On yearly basis, CPI slowed from 5% to 3.7%. Westpac released a report showing leading economic index plunged -1% in November. These data evidenced Australian economy is heading for the first recession since 1991 and RBA will very likely cut interest rate in the meet next week.
Technically, Dollar index is still trading with a soft tone today and intraday bias remains on the downside. Sustained trading below the channel support will argue that whole rise from 77.69 has completed. More importantly this will leave such rise in corrective structure (at least not clearly impulsive). In other words, it will imply that such rise from 77.69 is merely a leg in the consolidation that started at 88.46, which is still in progress. That is, in such case, another test of 77.69 could at least be seen before resuming the medium term rally. Break of 81.19 cluster support (61.8% retracement of 77.69 to 86.81 at 81.17) will confirm this case. Though support from the current level and break of 84.59 minor resistance will indicate that rise from 77.69 is still in progress for retesting 88.46 high.
Friday, December 26, 2008
Markets are Calm
The markets were closed yesterday as a result of the Christmas Day Holiday as currently trading is stable as major economies are closed due to the Holiday yet the Asian markets are running. The dollar slid in the markets as investors continue to fear the deepening of the recession in the U.S. economy while spending was pared during the holidays adding further to the misery they currently face.
Although the European markets are closed yet we see that the euro is rising based on the dollars weakness. The pair trades at 1.4051 while recording a high of 1.4072 and a low of 1.3988. Using the MACD indicator on a four-hour chart supported by 5 and 20 days we see that the direction is to the upside while on the one-hour chart the momentum indicators show us that the pair is trading in an overbought area and that there is strong momentum in the markets.
The pound like the euro is rising against the federal currency while the Bank of England is closed as a result of Boxing Day Holiday. The GBP/USD is currently traded at 1.4768 while recording a high of 1.4794 and a low of 1.4715. For the pair we see a support at 1.4714 and a resistance at 1.4795.
As the Asian markets are open we see that the Japanese economy released its industrial production for the month of November coming in at -8.1 percent from the prior month of -3.1%, which marked the quickest rate in 55 years. The released data caused the yen in the markets to become pressured as the USD/JPY currently trade at 90.45 between the support of 90.21 and the resistance of 90.81 while recording a high of 90.84 and a low of 90.31.
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