2021-10-21 18:48:50
Underestimation of other factors
The Fed discount rate and report on the US employment are thought to be one of the most influential factors for currency pairs that include the US dollar. As well as a report on the US oil reserves, gasoline stockpile and the number of shale oil drilling rigs. At first glance, this could be an efficient strategy.
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For example, at the time of positive reporting on the labor market is published one might open a long position lasting about an hour. But this does not always work. Even despite the growth in jobs number, it is necessary to analyze data on unemployment, changes in average hourly wages, etc.
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Another example: the EUR/USD exchange rate depends on not only the US economic data, but on the ECB reports as well. If the first data have been already anticipated by investors and coincide with their expectations and the ECB statistics turns out to be unexpected (doesn’t match the forecasts), then the ECB statistics, thought to less influential than the US economic reports, will outweigh and support the EUR value.
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How to avoid the trap:
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Assess everything in the complex, ranging from geopolitics and macroeconomic indicators, ending with industry data and statistics of a single company. Estimate the central bank policies in all the countries as well as economic statistics to trade in the foreign exchange market.
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Analyze the industry state in general.
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Do not hurry. If the price for some reason has gone in the opposite direction after the statistics release, you’d better close exit the trade and wait. On December 6, 2013, after the release of a very strong NFP report, the EUR / USD rate declined, but then the trend reversed. According to analysts, such a reaction to a strongly positive report was the first time since 2000. Nobody knows why. It is possible that large investors played against the market.
FOREX COMMUNITY: http://amp.gs/j1Pcr
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