Help a noob understand what happened here (fundamental analysis)

Beginner Questions
1

Hello everyone, I’m a relatively new trader who is trying to familiarize himself with how the fundamentals affect the day to day price movements.

While going through the economic calendar and comparing it to previous chart movements, I noticed that one event seemed a little odd. On the 15th of feb 2018 (utc +11 time), several figures came out that would seem like bad news for the USD (or at least that’s how I interpreted it). As soon as the news hit, it spiked about 0.5% in the direction of the USD on all USD pairings, and then reversed to start climbing in the expected direction against the USD for the next few days.

here’s a pic Imgur: The magic of the Internet

What would be the most logical explanation for the instant spike in the direction of the USD?

Sorry if this is a silly question. It’s still early days for me, and I’m just trying to get a good feel for how everything works

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I use fundamentals a lot and your right fundamentals make FX markets move in one direction or another. It looked to me that the Euro was in an uptrend already, when the CPI came out for USD, it brought it down quickly. it looks like maybe a 5minute chart or 15 minute not sure you have 6 hrs spread out with around 24 candles in between. Anyhow, since it is a shorter time frame it is understandable to have such a bar, it happened rather quickly but the trend resumed quickly so the bears weren’t to concerned with the CPI as you notice retail sales weren’t to impressive, so the strength of the fundamentals did not have much effect, just enough for a quick bear move then a recover. I also noticed that the USD was gaining some strength just before the news event, I call it fundamental, I use news as a major event like Geopolitical, but you will also notice that there were higher forecasts for retail and it didn’t happen. Looks to me like traders were anticipating strength in the USD but it didn’t happen so they recovered or turned bullish since the forecasts did not fill as anticipated. As far as CPI it is important but retail sales are probably more important. On the other hand retail sales and CPI go hand in hand. I have found that most of the time after a news event or fundamental event markets will recover quickly.

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Well I don’t know more than you do, but your pic is showing 4 reports coming with first 2 of them better than expected and the last 2 showing worse than expected.
The first two was CPI reports which raised expectation that the fed will raise it interest rate 3 times this year or more, that I think the probable cause of the eurusd going south about 50 pips.But when people realised that the other two reports were worse than expected they started to sell usd, which is in line with the long term trend.
On the other hand from technical point of view.It could be Stop hunters come to play. Where bigboys need to get into the market with large, very large position.they need the market to absorb their Buying, without to many different price. So at first they sell eurusd to push the price down where the most stop loss where placed.When It reach that point ( in this case is the round number)then they start buying. So the price went up.

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[quote=“Jokondo20, post:3, topic:142308”]
Where bigboys need to get into the market with large, very large position.they need the market to absorb their Buying, without to many different price. So at first they sell eurusd to push the price down where the most stop loss where placed.When It reach that point ( in this case is the round number)then they start buying. So the price went up [/quote]

Maybe you are right, but I doubt this is the case here, at least. No single bank trading room or fund manager could do that alone and I seriously doubt the “big boys” would be sufficiently coordinated to instantaneously create such a move jointly. The forex market is so large, it is not the same thing as moving the price of a single share, for example.

It is worth remembering that data releases such as CPI and retail sales (and other important releases like NFP) are complex data comprising a number of different individual components. When the data is released there is a series of reaction stages that goes something like this:

##1) The headline data figure released:
“CPI surges 0.5% in January, triggers fresh worries about rising inflation”

Response: Retail/commercial traders all note: “hey that is bigger than expected!”

##2) Instantaneous trader conclusions/reaction:

“Consumer-price index leaped 0.5% in January to mark the biggest increase in five months, adding to recent worries about rising inflation. The cost of rent, clothes, gasoline, health care and auto insurance all rose”.

Response: Retail/commercial traders all note: "higher inflation? that means higher rates - buy the dollar!

3) The economists’ and analysts’ post-mortem:

Higher consumer prices in January, however, didn’t substantially alter the overall picture on inflation. The increase in the CPI over the past 12 months remained unchanged at 2.1%. After stripping out volatile gas and food, the more closely followed core rate of inflation rose 0.3% last month. The 12-month rate of core inflation was also flat at 1.8%. Inflation-adjusted U.S. wages declined by 0.2% in January.

Response: Retail/commercial traders all note: inflation impact discounted? - revert to prevailing trend - sell the dollar!

The normal trader response to data releases is to shoot first and check it out afterwards…

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Thank you for the very nice examples! I take it that trading within the first hour of a release can be a bit risky unless the news itself was really straightforward and clear to most of the public.

I completely left public emotions out of the equation, so that’s probably why I was confused.

You probably do. I’m still very new to this, and I might have been completely wrong in my conclusions when reading these stats.

Yeah I’ve definitely noticed that while going through the past economic calendar releases. Unless the news seems really unexpected and important (like interest rates), it only undergoes a very quick pump in either direction before resuming the normal trend it was on beforehand. Almost as if the news never happened.