Why did the EURUSD move the way it did yesterday at 8:30?

Good morning.

Yesterday, when the US jobs report came out the EURUSD shot up from 1.21154 to 1.21800 in the span of a few minutes. This implies that the USD is weakening against the Euro, correct?

But I thought the US jobs report was fantastic, wouldn’t that imply that the dollar should strengthen against the euro?

I’m trying to understand exactly what happened there. If i was trading that major, I would have shorted the euro in expectation of a strengthening dollar and suffered a big loss.

Good Morning Cimber,

The volatile movement yesterday was due to NFPR(In conjunction with various other new releases)
(Personally, I use Forex Factory to view these news releases)

However, step away from the belief that positive news for a currency will in turn created a positive move.
Instead view this news releases as a time of day when you can expect volatile movement to occur.

Follow interest rates with currencies as price will reflect subject to an increase or decrease
Something to study for sure.

DM

Hi DM

Thanks for the reply. I’ve just gotten into this as a hobby, so I’m a novice for sure :smiley:

There was no correlation between the jobs report and the price movement then, because that time of day is when NY starts to trade and there is going to be a lot of movement?

Am I understanding what you are saying correctly?

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I think you’ve come in on a good basis.
You’ll pick it up with time; just be patient.

No, none
Although people will tell you otherwise but you’ve just found out yourself that it doesn’t always work so simply.

sort of- Moves usually occur in the London and New York trading times

Let me know if this makes sense

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Best thing is I am playing with funny money, and not my own cash. :smiley: Demo accounts are great.

The NFP was a ‘miss’ - i.e. the additional employed people (excluding farming) was + 559k vs expectation of 645k

The US economy is opening up and the market hoped to see greater numbers.

Ah - but there was a drop in the unemployment rate I hear you say.

That there was - but why?

May US non-farm payrolls +559K vs +675K expected (forexlive.com)

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People not looking for jobs, happy to live off the covid relief stimulus rather than slog away for 7.50 an hour would be my bet.

Aye, happens the world over - have seen that approach to life over the years but i take the view live and let live - many times I hate the slog but then again my tiredness is a contended one.

Back to NFP - it’s not a time to have a tight SL

Meantime in your learning curve have a peek at trading economics - gives us the bigger picture - e.g. the number of US guys looking for help from the Pandemic Unemployment Assistance scheme actually fell ,

Take care :slight_smile:
United States Pandemic Unemployment Assistance Claims | 2020-2021 Data (tradingeconomics.com)

I got the impression that this was a correction from the initial market optimism the day earlier? Am I off the mark?

Well, the rally in the EURUSD was timed almost exactly with the NFP report release, so I would think that the correlation implies causation in this case.

Totally. I believe the same too. What I meant was that I “speculated” the initial decline was the market being optimistic on the initial positive news release, which then corrected itself when it was known that it wasn’t all that with the NFP release.

I see you are someone trying to work out the market and what and why something happens. So Im going to presume you’re new to trading.

Look at the 4hr and 1hr chart before nfp. Where is the market moving?

Nfp numbers are expected 645k to previous 278k. what do you think institutions who trade fundamentals do?

They get all their analysts and brokers to see if they agree objectively. It’s a big difference so likelihood is its going to be higher than previous so usd is expected to be stronger than euro (or you can say euro is weaker). Therefore they buy usd in the expectation that the number will be higher.

If they buy usd when the numbers come out by then the cats out of the bag and everyone is buying so theyll get a bad fill or might not get filled. They position themselves in the market BEFORE the news so they can use the volatility to close their positions.

They have already sold eurusd in the expectation that the number will be higher. When the number is good, everyone sells eurusd and the institutions close their positions against all those sell orders. This then pushes price up.

It’s known as: buy the rumour, sell the news.

The second thing I’d like to say is and this is more important than all my reply above: do the babypips course!!

Long story short, EURUSD is still tanking and should continue it’s long overdue downtrend this week. Those NFP numbers were already priced in during the week which led to the sell off on the pair on Wednesday/Thursday and the rally on Friday just gave sellers another great price level to take new trades.

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Interesting AVSH

I see next week to close higher.

If May 12th low is taken I stand corrected otherwise expect bullish movement.

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I don’t know where EUR will be at the end of this week but I expect EUR to rise at least the first part of the week.

Hear, hear bro @darkmatter767. Now we FINALLY have confirmation of it’s direction :weary:

Since the USD and EUR are used as funding currencies for carry trades, what the markets are looking for are hints of any future changes to their respective central bank’s (CB) monetary policy that would lead to a rise in interest rates (which makes a funding currency more expensive and thus less attractive).

There are a series of actions that need to happen before CBs can even think about raising interest rates. For example, first tapering their large-scale asset purchases (LSAPs).

Any tapering would be considered “hawkish” because it moves the central bank one step forward in the long road that ends with an interest rate hike.

Also, since LSAPs are being tapered, that means less currency being created, which means less supply (in the context of “supply and demand”).

Current market expectations for tapering are that it won’t happen until next year or later. These expectations fluctuate based on data released And it is this constant shift in expectations is what causes prices to move.

Any economic data (such as NFP) that causes expectations to accelerate that timeline (for tapering) would be bullish for that currency. And vice versa.

One of the things that markets are looking for is who will taper LSAPs first? The Fed or ECB?

That said, there is never just one factor that influences price action.

Just to name a few:

  • risk sentiment (whether risk-on or risk-off),
  • foreign capital inflows searching for USD or EUR-denominated assets like equities, and
  • the current flood of liquidity that the Fed is trying to manage to prevent negative short-term interest rates due to a cash-collateral imbalance, seen by the massive surge in overnight reverse repos (ON RRP).

Trading (in any market, not just FX) is not that simple.

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