My fundamental analysis... was wrong

So I’m very new to this, and was just glancing at an economic calendar about a half hour ago, and noticed that the BoE was about to announce any interest rate changes to the GBP. So i opened up a chart and took a quick look at the GBPUSD just to get a feel for it. I put a Pivot point indicator on the chart and noticed that it was already trading well about the PP and was very near the R1 value. Come the announcement of the internest change, they kept it at 0.5%, so I eagerly after seeing this opened up a short position assuming that the GBP would tumble down somewhere close to the PP, yet instead it roared up to 1.6000, and that’s 75 pip (of fake money :wink: ) down the drain.

Can someone explain this to me please!?

p.s. to the mods, I posted this in the GBPUSD forum too, not sure if that is against the rules or not, but it seemed fitting to both. :stuck_out_tongue:

Personally I would just not trade the news, and certainly not by following just one headline, there are too many variables in the background that can affect things in one direction or another. There is always another trade out there, so I just avoid trading on top of news stories. The most reliable way to trade is in line with nice, clean trends, and news stories tend to produce blips. Playing the long game, for me it makes more sense to avoid the news stories and trade a purer market.

To take the other part of your question, I was surprised that the pair jumped that far on the announcement, as it has been pretty clear for several weeks that interest rates were going to be held at their current level for a while, it would have made no sense to raise them now. So perhaps the pair leapt as the rates being held at the current level indicates to the market that there is no new panic or jumpiness in the UK economy, that the recovery is steady (if not spectacular!). There have been some poor numbers in the US recently, so ‘steady as she goes’ was, perhaps, enough to cause the pair to rise as they did.

But on that second part of my answer there will be many on here who know more than I do: I would just avoid trading the news, no need to risk the gains you can make in a clean market.

Hope this helps.

GBP rose up as the BOE decided not to expand their QE program. Given that the BoJ announced a QE expansion recently and that the Fed are almost definitely going to expand theirs at their next meeting there had been some speculation that the BOE might also follow suit (some members of the BOE had mentioned it last week) in a market-wide coordinated venture. Markets had priced this possibility in and when the news came today that QE was staying as is (for now anyway) GBP strengthened as a result. If the BOE had announced that they were expanding their QE GBP would have fallen fairly significantly. Well… probably… and maybe only for a short while. Nobody wants to buy and hold USD right now.

Thanks for the reply guys!

After some pondering and googling - I understand! I think I’ll take your advice and just try to avoid significant economic events as it seems the market can take unexpected (to me haha) turns that would significantly burn me!

I’m still in the very early stages of learning forex, so thanks for helping me figure it out a bit more!

The Fed going on about upcoming QE has made a lot of fundamental analysis semi-redundant at the moment. It’s completely distorting the whole market… which if you’ve been selling USD has been great. Practically a one-way bet. How Geithner and the rest can give out to other countries about intentionally devaluing their currencies with a straight face is beyond me.