NFP What and Why?

Trading Discussion News and Economy
1

OK, so just asking myself why does the market go crazy when this NFP is released, like have you ever thaught about what really goes on and why?

I think is that it is a fact that when there is increased demand or supply of USD the FOREX prices move up or down.

Today the NFP was negative, so whoever just wants to sell all their dollars and get as much of other currency as they can. At the exact moment the report was realeased, I was watching the charts, 3 currency pairs specifically, but I guess there was movement in all of them. I watched how suddenly GPBUSD spikes up, USDJPY spikes down and AUDUSD spikes up.

How in hell does this happen… Like comon! Does it happen because of Forex trades or coz people go running to banks wherever they are and scream to the banker! Take all my dollars and give me as many Yens as you can!! quickly!!!

As banks are anyway closed in Japan and Australia at that time, I guess everything happens in FOREX. But… why all currencies?? Is it something like a chained action?? Like a lot of Stop loss hit or something.

Like I could understand EURUSD going up at this moment, If a lot of people or maybe a Grand coorporation puts a lot of buy orders in the EURUSD, so all other corporations who are trying to sell their euros are taking this buys, and price keeps increasing. But… are there so many pending orders there? Who puts them?

But then, also in the AUDUSD?? like… comon! who is holding all this orders? in all currencies available??

Also why?? Like ok… NFP… supose the report is positive. At the end of the day this would mean that there are more people working (outside of farms) and less people unemployed. So this means that more people have money to spend, so more businesses are doing good business. But… why does this create a demand of dollars??

So who cares if more people are working? (Inside the FOREX frame of course) Does like this Japaneese guy go to USA and spend all his money because more people have jobs??? WDF!!! I don’t think it’s because people from Australia think… great more jobs in the USA let’s go there and look for a job, when I reach I will change all my AUD into USD.

Please explain all this to me… coz I understand none! It looks like it’s all an excuse for me to get mugged!

Thank you! :33::33::33:

2

Why would anybody expect the markets to be rational?

An explanation is that NFP is crazy because its always been crazy and therefore that’s what people expect.

3

Crazy is what crazy does. I prepared myself for the NFP news and had my finger on the trigger to enter. Red candle on the 5 minute chart following news meant negative news to sell, and blue meant to buy. The exact time I was watching the USD/JPY and the EUR/USD chart the news triggered Blue candle on Euro and red candle on JPY. As a newbie never having this type of trade and seeing these candles zoom up and down quicker than the eye could see…I went crazy and started punching buttons. Then an alert from my broker showed up on my screen saying that I went over my margins and all positions would be closed. Flustered and wild eyed I wondered why, cause in my mind I knew that I should’ve been making a lot of PIPS. Well , guess what happened? In my haste of uncontrolled emotions and greed seeing dollars in my eyes, I made the biggest mistake ever in the history of Trading. I punched Buy for USD/JPY and Sell for EUR/USD. What a blunder!!Lesson learned…Next time use an OCO order and watch as the pips rain in. I need to find a job now so I can deposit more funds into my account for more trading and more lessons learned.

4

Traders have been reacting frantically to any report that could effect Bernanke’s stimulus plan.

The report on thursday was positive so traders took this as a sign the stimulus plan might be tempered.
If it is tempered the USD would go up because the stimulus plan was keeping it down.
Hence the drop in EUR/USD on thursday.

On friday we had the oposite reaction.

Might be an over simplification but that how i saw it :slight_smile:

5

You’re pondering one of the mysteries of life… welcome the club!

The movement you observed in the three pairs you were watching is easily enough explained. Let’s look at the pairs:
GBP/USD, USD/JPY and AUD/USD. You noticed that GBP/USD and AUD/USD spiked up while the USD/JPY spiked down.

Easy enough. The NFP relates to the strength/weakness of the USD. The NFP gave a negative reaction so any pair listed as the base currency (the first one listed in the pair) traded against the USD should go up, hence the GBP and AUD up against the USD.

Because the USD displayed a negative reaction it went down where it was the base currency, as in the USD/JPY.

That takes care of that.

When the US added so many jobs why did the markets react negatively? Because, buried in those numbers is the fact that so many more government jobs were added over the past two months than private sector jobs lost that the good news was actually bad news – the US economy is floundering and is being propped up artificially by government employment, further dragging the US economy down.

Making sense of those numbers in real time is simply beyond the grasp of 99.9% of retail traders, IMO. That explains the massive price swings in both directions you see during NFP releases.

Why do the folks in Great Britain, Australia or Japan care about the USD? Because it is, for better or worse, the world’s currency. It is my observation that currencies such as the GBP, AUD and JPY do not move a great deal on their own, usually. They really move based on their value relative to the USD and to a lesser extent the EUR and an even lesser extent the JPY. If the USD goes up then the rest tend to go down. If the USD goes down then the rest tend to go up. It is not an absolute but the general tendency is for this to happen. It is not the GBP, AUD nor JPY being traded at NFP, it the USD that is being traded.

So why are all currencies moving or spiking, as you put it, based on NFP? Forex is a multi-trillion dollar a day market. The top banks (accounting for the lion’s share of the market) are not going to place all of their trillions into just one currency pair and call it a day. They appear to spread it around among all the major currency pairs so you will see proportional movements occurring at the same time among all majors as well as their crosses.

Wasn’t the NFP good news? Why did the USD tumble? Wasn’t it bad news? Why did the USD go up? Here it becomes much more of a craps game. There are analysts expectations, surprise gains/losses, the mandatory revisions to the current NFP which will come out in two weeks time, institutions being pre-positioned because their own analysis tells them what to expect and the dirty little secret, insider trading (does anyone REALLY believe institutions are not hooked in to those petty bureaucrats at the Dept. of Labor in advance?).

Most on this site will tell you to stay away from trading during NFP releases because they are simply unpredictable. Sound advice, IMO. It is a way to not get “mugged,” as you put it :slight_smile:

Disclaimer: Feel free do disregard this post and not hurt my feelings as I am baffled by fundamentals – I am just trying to explain the fundamental analysis world of trading as I see it and deep down, I know that I really don’t have a clue!

6

You’ll find that strategy just as fruitless in the long run :wink:

7

Totally agree with you mate.

8

Nice comments guys!

This seems quite a good explation of the synched movement in all pairs and crosses. In that case, it’s clear that we retail traders have very little impact in currency movements. So this brings up my next thought…

The value of money. The FOREX battle. Let’s put it like the so awaited boxing match between Canelo and Mayweather this weekend at the MGM. But in this case, we have President Obama and his cutman Bernanke at the blue corner, and at the red corner, we have Kuroda and Co.

Or perhaps we should have Obama at blue and J. P. Morgan Chase at red. I don’t know who are the fighters, but image that Obama walked in the desert and found a magic lamp. And genie asked him… Mr. Obama, what price do you want for the EURUSD, and for USDJPY and for AUDUSD, etc etc for this year? What would Obama answer??

To answer this question, he might take in consideration mainly 2 factors, imports and exports. If the price is to high, bad for exports. If the price is to low, bad for imports (less buying power). Im not an expert, but this my be the for dummies version.

So, whatever the FED does, one of the reasons I guess it would be to be as close as this “ideal price” as possible. This would be easy, if there was no red corner. Some people help in the blue corner, maybe export economies that want the USD to stay strong because Obama is a very good customer. But in the red corners we may have other countries, or banks, or whatever. Do we have a true battle, or does Obama know what price will the EURUSD have on next month? Is the battle between governments and banks/large corporations who want to make money out of FOREX?

Maybe I’m confusing everyone here, but the point of this is… Would it help to know who is in each corner and what is their ideal price? Isn’t this the definition of fundamental analysis? If we knew the answer to this questions, I think that trading FOREX would be easy. We would just know that some is going to be pushing the price to the “ideal price”.

So let’s go guys! Who do you think is in each corner? and what are their ideal prices??

:slight_smile: Cheers!