Why does the market sometimes move down after positive news?

[broberson]

This has happened to me over and over again. I’ll see a positive report come out and theoretically that country’s currency is supposed to move higher with the report, but instead the market actually brings the currency down. Can anyone explain this? Is there something I’m missing?

[topchess]

This might be due to a close number, rumors of another actual release, or a detailed report inside the headline.

[dunny]

Originally Posted by broberson

This has happened to me over and over again. I’ll see a positive report come out and theoretically that country’s currency is supposed to move higher with the report, but instead the market actually brings the currency down. Can anyone explain this? Is there something I’m missing?

Hahaha…sorry I’m not laughing at you, I’m laughing with you because this has happened to me to. I’ve heard the saying, “Buy the rumor, Sell the news” but I’m not exactly sure what it means. I just know it has something to do with this phenomenon. I’d also like to hear an explanation on this.

[ready]

it may be because there's another piece of news comming out at the same time, but it's probaly because it's linked to another peice of news like the fed's intrest rate(probaly the only one). if you lost money on the cpi, the reason is probaly this.

http://www.forexfactory.com/forexfor...ad.php?t=11330

a bunch of other things like personal spending and ppi is probaly like this too. i don't have much of a clue on what other things myself.

[PipDiddy]

It all depends on market consensus expectations. If a positive report is released that normally would cause the currency to appreciate, this usually means the outcome was already priced in the market. Remember, the market is always looking ahead, so if for example forecasted retail sales is a .5% increase and the number comes out at .5%, it's a positive report but I wouldn't be surprised if the currency falls because this is what the market had been expecting and traders had already positioned themselves ahead of time and are now taking profit.

[berlinlife06]

As Pipdiddy said, I think it is a "look into the future" and the real experts are the ones that make money. I think it is harder to forsee something like that in FX but on stocks trading, for example, that's why inside information is a crime! Ask Martha Stewart!

[4xfanatic]

Well here is one reason why this happens: Sometimes if there is a big expectation that something is going to come out positive a lot of the market participants will go long way before the news even comes out. This is the “Buy the rumor” part. Keep in mind that there are A LOT of buyers because everyone seems to be saying that this particular report is going to be positive. So everyone keeps going long which causes the price to rise before the actual report. At the same time, the fewer traders who are bearish are waiting for a time to sell the pair so they see the price continue to rise and wait so that they can sell at the best possible price.

Now here’s the kicker. The news comes out positive, just like expected. Since there are no more buyers left, they begin to start taking their profits which effectively turns them into sellers. As the price starts to drop, the sellers who were waiting to get in the market also begin selling and it causes a snowball reaction. This is where you get the “Sell the news” part of the saying.

[palba]

You should read “Warrior Trading” by Clifford Bennett. He has a good explanation of why this happens. In goes along the lines of what 4xfanatic said.

[ready]

if this was true wouldn't they start selling before the news report?

[allinger]

Originally Posted by ready

if this was true wouldn't they start selling before the news report?

If you're bearish you wouldn't want to mark down price against your own selling, right...

And on top of the above posters, lets not forget the insiders - anything that is put out in a report is most likely known or "known" or suchlike by the insiders.