Forex News and Reports

Trading the moment of the NFP relaese is hit and miss, trading the momentum of the NFP is a better bet.

The volatility of the 1st Friday of each month that NFP is released is not just down to the number of jobs created, this is a complex release that has four components that Traders must be aware of:

1. The actual number of jobs reported as being created this month; July’s number is expected in at 125k, and is an average of analysts’ figures that range from 300k to 20k. The High to Low difference in opinion is enormous.
2. The revision to the previous month’s number; Probably as important as the new number, the revision can add 50k to the previous amount, and that is what creates the volatility as Traders re-align their previous thoughts on what happened four weeks ago.
3. The Employment Rate; Currently at 4.5% is one of the lowest in the world and has stayed between 4.5-4.6% recently. Any move outside this area would be dramatic
4. Average Hourly Earnings; Looking at coming in around 0.4%, this is the number that the Fed stated was causing it concern as an inflationary read.

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Measures the number of new jobs created in the previous month, excluding the farming industry. A rising trend has a positive effect on the nation’s currency. The number of new jobs being created is one of the most important indicators of the economy’s health because consumer spending, which is highly correlated with labor conditions, makes up a large portion of GDP. This report is the first of the month that relates to labor conditions, making it susceptible to big surprises.

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Each month, excluding January, the Reserve Bank of Australia (RBA) Board meets to set the nation’s short term interest rate (i.e., “cash rate”). The Board announces the decided rate shortly after the meeting, and when there is a change in rates they also releases a statement that contains the economic conditions that effected their decision. A rising trend in interest rates has a positive effect on the nation’s currency. Short term rates are the paramount factor in currency valuation; traders look at most other indicators merely to predict how interest rates may change in the future. High interest rates attract foreigners looking for the best “risk-free” return on their money, which can dramatically increases demand for the nation’s currency. The decision on where to set interest rates depends mostly on inflation. The primary objective of the central bank is to achieve price stability; when inflation rises above an annualized rate of approximately 3%, they will respond by raising interest rates in an attempt to bring prices down.
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How Will The Markets React?
Interest rate announcements are always important for the foreign exchange market. With the Bank of England, this upcoming rate decision will be market moving regardless of whether they decide to raise interest rates or not. After having raised rates in May and then leaving them unchanged in June, the BoE is expected to lift rates from 5.50 to 5.75 percent tomorrow. Of the 60 economists surveyed by Bloomberg, 52 or 87 percent of them are calling for an interest rate hike. This almost unanimous view puts the “surprise” element of the event risk to the downside. Therefore if the Bank of England leaves rates unchanged or raises rates and then issues some very neutral language in their statement, we could see a far larger move in the GBP/USD than if they do exactly what the futures curve is pricing in, which is to raises rates and remain hawkish. According to futures traders, the BoE could bring rates up to 6 percent by the end of the year. The recent movements in the currency, bond and stock markets indicate that British pound and Gilt traders are expecting higher rates while stock traders are not.

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Each month the Bank of England (BOE) Monetary Policy Committee (MPC) votes on where to set the nation’s short term interest rate (i.e., “bank rate”). Shortly after each vote, the MPC releases a statement that contains the outcome of their vote, a brief commentary of the economic conditions that effected their decision, and most importantly, clues regarding the outcome of future votes. A rising trend in interest rates has a positive effect on the nation’s currency. Short term rates are the paramount factor in currency valuation; traders look at most other indicators merely to predict how interest rates may change in the future. High interest rates attract foreigners looking for the best “risk-free” return on their money, which can dramatically increases demand for the nation’s currency. The decision on where to set interest rates depends mostly on inflation. The primary objective of the central bank is to achieve price stability; when inflation rises above an annualized rate of approximately 2%, they will respond by raising interest rates in an attempt to bring prices down.

Measures overall economic health by combining ten leading indicators including average weekly hours, new orders, consumer expectations, housing permits, stock prices, and interest rate spreads. The index is published monthly by The Conference Board, a leading private US research group, but traders tend to pay little attention because the components that make up the index are reported at an earlier date.

The main economic law of supply and demand is that markets that offer the highest return to investment will attract more investors and capital. These markets are those where the nations offer the highest rates and in this way they will create the most demand for their currencies.

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From Wikipedia, the free encyclopedia

The PMI is a composite index that is based on five major indicators including: new orders, inventory levels, production, supplier deliveries, and the employment environment. Each indicator has a different weight and the data is adjusted for seasonal factors. The Association of Purchasing Managers surveys over 300 purchasing managers nationwide who represent 20 different industries.

A PMI index over 50 indicates that manufacturing is expanding while anything below 50 means that the industry is contracting.

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When the open price and the close price are equal, they are calle Doji Lines.Doji lines can have shadows of varying length.

• Long-legged - has long upper and lower shadow - indecision
• Gravestone - has only a long upper shadow,no lower shadow - bearish
• Dragonfly - lower shadow,no upper shadow - bullish

The principle of Contrary Opinion holds that when the vast majority of people agree on anything, they are generally wrong.

A true contrarian, therefore, will first try to determine what the majority are doing and then will act in the opposite direction.

On balance volume (OBV) is a technical analysis indicator based on a cumulative total volume. Volume on an up day (close higher than previous close) is added and volume on a down day is subtracted.

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The resolution ao all prices patterns(the breakout point) should be accompanied by heavier trading activity if the signal given by that breakout is real.

In a downtrend, the volume should be heavier during down moves, and lighter on bounces.

• The total number of outstanding or unliquidated contracts at the end of the day
• The total number of derivatives contracts traded that have not yet been liquidated either by an offsetting derivative transaction or by delivery

Volume is the number of entities traded during the time period under study.

Example : One registered market participant on Nasdaq buys 100 shares into inventory from another registered market participant or from one of its clients. In either case, it is counted as 100 shares.

Confirmation refers to the comparison of all technical signals and indicators to ensure that most of those indicators are pointing in the same direction and are confirming one another.

Divergence refers to a situation where different technical indicators fail to confirm one another.

Topping patterns are shorter in duration and are more volatile than bottoms.Price changes are more frequent and more violent on tops.

Bottoms have smaller price ranges, but take longerto build.

For this reason it’s easier,less costly and less risky to identify and to trade bottoms.

Volume is more important on the upside.The completion of each pattern should be accompanied by a noticeble increase in volume.

This technique was developed by Edson Gould and is an adaptation of the idea of dividing the trend into thirds.The  difference from the percentage retracement concept is that the speed resistance lines(speedlines) measure the rate of ascent or descent of a trend.

There are three different classifications of trend :

• major
• secondary
• minor

There are three trend directions :

• up
• down
• sideways

What determines the significance of a trendline?

The answer is : the longer it has been intact and the number of times it has been tested.

The more significant the trendline, the more confidence it inspires and the more important is its penetration.

The correct drawing of a trendline should include the entire day’s trading range.

1. The averages discounts everything
2. The market has three trends
3. The averages must confirm each other
4. Volume must confirm the trend

Volume should expand or increase in the direction of the major trend.Dow considered volume a secondary indicator. He based his actual buy and sell signals entirely on closing prices.