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Curious Observation

 
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ramonattia

Curious Observation

 

Hi,

After carefully observing the EUR/USD behavior during economic data releases, I have noticed that it almost every time reacts inversely to the news event.

In other words, if the release is favorable for the USD, the charts move in the opposite direction.  For example, in todays GDP announcement that reflected very positive growth figures for the US economy, the EUR/USD pair was bullish when it should be bearish on account of the common knowledge that the USD should be stronger.  Keep in mind that I am not referring to the initial reaction which is very volatile and actually goes in both directions.  I am referring to the longer term reaction where you can observe  a very certain rally in the EUR/USD as opposed to what happens with other currencies and what should be the common reaction

Can someone explain why this happens?  I have observed this phenomenon now for the past few months and it is present even in interest rate announcement as well as any other USD data releases.

Thanks

Fri, 07/27/2018 - 12:07pm
 
eca

Hi,
interesting.
Maybe it is just short pullback and next week USD will be again on the way even higher.
Maybe traders were just simply following indicators.

Also I guess that is not only economic data what caunts.
Besides it is summer time when many professional trades are on vacation.
Nice day!

 
rscarr63

Interesting observation. I have not spent much time on analyzing trends in reference to economic data but I know I have to. Your post has me curious.
I have been wondering over the last month if the whole system is dyslexic. I say this because of how many times when I think the trend is going to go one way it goes another. I'm starting to think that up is down and down is up.
Because of this behavior, I have spent the last month testing many indicators to try and get a better read on directional trends.
Thanks for the post.

 
MarketTango

Romanattia, I am looking at the EUR at 1 pm est Friday and it is is @1.1660 The pair at midnight for the day was at 1.1649 I would not call this a bullish move. It actually hasn't went anyplace.

Your remark makes me believe that you are looking at only the smallest of time frames. Where the larger time frames drive market.
Just prior/during and moments after news announcements, the market swings both sides in an effort to take all the liquidity from the market. Often short term swings on both sides are taken out. Big money needs liquidity

If I were looking at this pair today I would notice that on a Daily and 4hr chart the pair has reached support after trending lower all week. I would look at the $ chart and see that it has been trending High all week. Pairs tend to retrace some at the end of the week.

The reports on the $ today were neutral or in line with expectations.

I find that the market is finicky around news, therefore unpredictable. However if you wait< I suggest 1 hr> Then the market may have given a clue as to it's direction.

As traders we analyze to determine where we think the market may go and see if we can hitch a ride. So we have opinion and expectation. This is how we anticipate the market. However we don't trade our analysis, we trade price action. The daily chart is what big money uses to trade. That is where their decisions are made. The rest is just the execution of that plan and they will carry a book on both sides of the market.

Price is the only tool that tells where it is going.

Keep studying the market and price action as you have. Trade what is in front of you.

~MT

 
BC David

I've been curious about this as well. Thanks for your observation, and for the replies.

 
ramonattia

Thanks all for your replies, they are all very helpful

MarketTango, you are right, I do look at the 1m, 5m, 1h, charts and base my actions on what they are showing as I am inclined to do a lot of scalping, in both directions.

However, if you look at this pair today in the H1 chart you will see1 large bullish candle, followed by a medium sized one since 7:30 am (GDP release time), so that leads me to conclude that the reaction was bullish when it should have been bearish (strong GDP hence strong USD). No significant bearish moves. This is what is curious to me. Even the H4 chart has a very large bullish candle...

Food for thought?

 
Rookie

Maybe this will help draw the picture. Can you see the correlation between the two like charts?
Not much left to discern.

Mo food for thought with images.,

5m comp.JPG
 
bcroft

When the Fed intervenes with changes in interest rates that make the U.S. dollar stronger, the value of the EUR/USD cross could decline due to a strengthening of the U.S. dollar compared to the euro. Think of it as a formula:

Value of Pair=Euro/USD.

Value increases when the EUR rises or the USD falls.
Value decreases when the EUR falls or USD rises.

Look at a heat map of currency pairs. You will see which direction you might expect it to go. This has helped me a great deal. I attempt to trade those stronger pairs against the weakest pair.

 
ramonattia

bcroft,
you have just mentioned something unknown to me... how do you trade one pair against another pair? I dont see any charts for this?

 
Rookie

coralated vs non-coralated.
https://www.mataf.net/en/forex/tools/correlation

 
ramonattia

RNM, helpful tool
Still waiting for bcroft to answer on trading one pair againsta another pair, how is this done?

 
triguylm1

One thing about currency pairs and economic news, economic policies and other current market inputs; is that price tends to stay in a price range most of the time, since market sentiment is based more on future expectations, than on past results, such as latest interest rate compared to expected interest rate increase.

So since US is raising interest rates several more times this year, compared to European interest remaining steady for now. Then that puts bearish pressure on the US dollar, thus EUR/USD is bullish market sentiment.

Hope that makes sense.

It's more about future interest rate decision "News"

That's my 2 cents.

 
lrluis

Hi Ramon,

You stated << "EUR/USD pair was bullish when it should be bearish on account of the common knowledge that the USD should be stronger" >>

I think this forum will agree that the strong US GDP will possibly lead to higher interest rates, which should strengthen USD against non-USD assets. Some fiscal policies favor a weak US Dollar in order to boost exports, which have carried the GDP higher since 2015

Triguy is right. There is bearish pressure on the greenback. With the the looming retaliatory tariffs from China, there is a strong case for a falling dollar.

This is my theory on the bullish EUR/USD.

 
ramonattia

Thanks all, I´m starting to get it know...

Still need bcroft to answer on how to trade one pair against another, never heard of it...

 
zoranbegonja

On daily time frame the EUR/USD pair is in side ways movement.
I guess that market is expecting to break bullish to form monthly high lower than the last.

 
Rookie

EURUSD,
The sentiment from investing.com would agree on the Summary: Strong Buy Strong Buy Strong Buy Strong Buy
and indeed it has gone up for the last 6 hours at about a 30% angle following the outer BBand.
That said the DXY of which it is a quote cross is still very sideways. with the CCI signal line just meeting the -1oo line heading south. Implying the crosses will go up.

But remember this is the close of the London and shortly will enter into NY overlap and some news. Meaning there may be and often is a reversal around 8 am EST.

 
earthaug

There are so many factors other than whatever data comes out that impacts the eur/usd. Just because some data is released that seems to be pro usd, you still have to factor in what other data may be impacting the EUR. And remember it is all about how the data impacts the direction of the USD. Not uncommon for the eur/usd to go up with some positive USD news because of what impacts EUR. Also, sometimes short term impacts are overcome by long term impacts.

If it were simple this business would be easy:-) It is a struggle for everyone!

 
Rookie

Sorry earthhaug, it is we the traders that make it hard not all the extraneous noise meant to distract we few.
Sometime this weekend I will post an updated summary in my RWN thread with data of course.

You wrote, "It is a struggle for everyone!" indeed and once the light goes on one must stay sharp to stay with the market changes.
But the struggle gets easier with every trade after that. I am to prove that over the next few months and without any greater risk to the fund or my trading.

 
Rookie

BTW I see you just got funded, Congratulations, Welcome to the funded family.
Now your next goal is to stay steady as she goes until you reach the 10K funded level.
After that, it will be a habit!

 
triguylm1

Hey RNM!

How funny you mention Level 2 funded account of $10,000.00. This is the level one gets 70% of profits earned. So, one earning just 1.5% per day "ave"; then is earning $3,468.55 x 70% = $2,428.00 per monthly pay check.

So, for you fellow bees looking forward; it's just a matter of time until one reaches the higher funded levels, since the increase into the next funded level is "3" consecutive months of profitable trading.

My goal doing this part time has always been 1.2% profit per day, So about 24% per month (1.2% x 20 days = 24%)

Lately I increased to 1.95% ave. per day, so last month was 38%, still part time.

I look for ranging market conditions just as trending condition has reached the 90 day pivot H/L.

That way I have a very high probability of success, since the market will continue to test S/R for several days and sometimes several weeks at a time.

I keep showing this recent example here, but I think it provides a visual reference of what I'm talking about:

C Swing Trade System 2018.PNG Capture 10K account.PNG
 
chaffcombe17

Going back to the original question of why markets frequently move inversely to the direction you might expected.

The most common reason is that a lot of traders have anticipated the 'good' or 'bad' news, and are already positioned in that direction. Once the news is out these positions need to be closed and there is a race for the exits. This is the underlying basis for the classic old saw 'buy on the rumour, sell on the news'!

This brings us to consensus. You will see against pending news events a consensus figure. This is generally what a bunch of economists are forecasting the number to be. If the resulting news is close to consensus there is normally either no reaction or the reaction above. However, if the consensus proves to be way off, that will typically cause a major move, as everyone has to reevaluate their positions.

 
CirrusSageRL

@triguylm1

Do you have a thread more about your trading style detail? I am very interested in it.

 
triguylm1

Yes, I have 7 systems I use on a 24 hour basis; that makes me a "Day Trader" LoL

Just because the market is always changing, So depending on consolidation phase vs expansion phase

or trending phase vs ranging phase;

or high volume conditions vs low volume etc.

I prefer the ranging markets, because they tend to last about 10 days on average. Depends on financial new coming out as to when I change systems, also depends on market sentiment if I need to use one direction trading system.

Top 3 systems:

1. Trade the ladder loss "Silver 2" no loss greater loss than 20 pips. see below comment will make in a minute. or @

https://apiaryfund.com/forum/working-through-silver-ii?page=0#new

2. Hedging strategies for range bound market conditions: @

https://apiaryfund.com/forum/funded-profits-expectation-spread-sheet-250000#comment-[cid]

Hedge strategies work better when markets are range bound, so the idea is to continue to buy at the bottom and sell at the top. So that begs the question how can one pick the top and bottom? I think it's possible, I have had a few lucky cracks at it, but that's because I kept adding to a position in the market and landed an entry at the pivot high of the day.

So, the way to approach this system is to begin with a buy and a sell position near the middle of the trading range, or one may elect to simplify by using the 200 ema line for the entry point. As price enters a price zone near support add another long position or more positions if risk to reward ratio is above average.and tighten trailing stop on short position(s).

As price returns to the 200 ema line take profits, and reenter positions (Ladder strategy) both ways again. As price decides to run bullish and test resistance add another short position and begin to tighten trailing stop on long position(s).

So, each time price returns to the 200 ema, take profit, and every time price runs to Support or to Resistance, take profit and reverse position.

Please keep in mind monthly reports come out the first week of each month, so beware of larger runs during those events.

3. Day trade H/L pivot system first comment @:

https://apiaryfund.com/forum/approaching-1-year-apiary#comment-[cid]

`

 
triguylm1

Now the ladder loss Silver 2 system:

1. Using the D1 and H4 Charts determine the 90 day pivot high and low; this becomes your price range (about 350 pips)

2. Next set up 5 price zones (divide into ATR support and resistance)
a. Strong buy near pivot low
b. buy zone 15% to 33% of price range above.
c. Hedge zone near the 50% , the mean of the last 90 days
d. sell zone 66% to 85% of price range above
e. Strong Sell near pivot high

3. Use this 18 pip SL setting to ensure intermediate profit target goals, while 2nd position is the long term 300 pip target

4. Every 24 hours a new daily Pivot H/L is established, so determine which direction from the 90 day price range to enter trades
"Always enter 2 or 3 trades each time to ensure short term profit while letting 1 or 2 work for higher profit probability targets.

5. Enter market accordingly, wait 1 hour to move trailing stops to protect profits!

6. If stopped out, that is ok! because now price is forming a new lower or higher daily pivot price, "WAIT" for the pivot price to form.
then enter again at the better price entry, usually count on 30 pips lower than first attempt on pivot low entries going long, and like wise it should be about 30 pips higher on pivot high entries going short. Correct?

7. continue again with step 4, and if that fails enter again with a 30 pip better entry price. Eventually, then price will never make a new lower low, or a higher high. Correct? (90 day long term)

8. Market may test these prices again. but this is a 90 day target, not a five year entry.

Now, this works if you catch the next consolidation price near the S/R level (about 30 pips)

Doing the math: if one takes 3 losses of 18 pips each that's a total of 54 pips, vs entering market an additional 8 pips each for 24 pip advantage if price returns to first entry point, back to that first starting price point. It's only an advantage when price returns to start! Also, it's possible 1 or 2 of the 3 trades taken can book profit before the price runs against the positions.

If 1 or 2 of the 3 entries book profit before the pullback, then your basically scalping into a profitable day, even though market is running against the long term position. Eventually, the entry price is such a bargain, that price never returns to test the 18 pip SL. Target price should be 90 days or 300 pips for each position.

 
CirrusSageRL

@triguylm1

So you're saying I should try to identify a low or high on the D1 or H4 chart. If it slides against me, exit at 18 pips SL, count 30 pips afterward and enter again. Repeat until it hits 300 pips TP? The strategy is to use a very high risk:reward (1:15) to compensate reversal trading? I was also thinking recently I could achieve some reasonable success using a strategy with highly diverged risk:reward.

 
Ronconomics

@tryguylm1 might you share your compounding xls with me please?

 
triguylm1

I had shared this $2,500.00 compounding chart earlier on my thread "Funded Profits Expectation Spread Sheet @ $2,500.00"
located @:
https://apiaryfund.com/forum/funded-profits-expectation-spread-sheet-250000#comment-[cid]

Library 0.2, Also notice I take 3 positions each time so I can scale out with scalping profits along the way. Really nice during those choppy market conditions because the scalping profits really add up.

Any way if anyone is interested in my last 70 days of ave. daily profit percent of account it is included in my Excel compounding spreadsheet that Ron asked for. The spreadsheet allows one to enter any base fund amount and the desired profit percentage target desired, and the 5, 10, 15, and 20 day results will be calculated. like the example of the $10,000.00 fund amount above.

Compounding off $2,500.00 Account.PNG