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?
This might be due to a close number, rumors of another actual release, or a detailed report inside the headline.
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.
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/forexforum/showthread.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.
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.
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!
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.
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.
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.
And let’s not forget the revision figures. When a report comes out there are generally revisions of the previous month’s figures that come out at the same time that can influence things in a surprising manner
The course that i’m study atm has explanation that sound resonable to me.They say Market make a news not a news make a market and they explane:
If we have a strong market and bad news come but market still get strong that mean that market all ready know this news and this can’t move it from his direction.In case that good news come to a strong market news weight amplify cause it just confurm a strenght of market and give it more fuel.Same refer for a weak markets.
You need to know on what kind of market you are at moment if you know main direction of matrket that you trade you can be calm about news.
Remember ? Trend is your frend 
Trend is direction of a market.
Best Reguards
Vladimir.
There aren’t any “insiders” in forex, unless you count the central banks, and they certainly aren’t trading the data releases.
I know:( .This happened to me on Jan 19,2006 when the UK Retails Sales came in 2Xs higher than the consensus and the Cable tanked. Here’s an explanation from the guys over at Dailyfx.com. May shed some light on how the large playas throw down:confused: In retrospect the candle the day before was a hanging man and the stochastic was about 79.8. If I had stuck to the candles I would have taken profits too. Go figure.
[B]UK Retail Sales (December)
Actual: 1.1%
Expected: 0.5%
Previous: 0.2%%
How Did the Markets React? [/B]
UK Retail Sales handily beat expectations printing at 1.1% versus 0.5% forecast, but almost all the markets reacted negatively to the figure as the good news was well anticipated and profit taking overwhelmed the fundamentals. Bonds rose, the pound fell and equities corrected mildly. The health of the UK consumer is well established, but markets bid up most of the instruments in days prior to the release and traders used today�s results to lock in gains made this week.
Hi guys I am very new to forex. Just starting at the KG class and browsing the forums. About the question of the author of this thread is there any fundamental or other means of knowing whether or not the market has already taken the outcome of the news or consensus in the price of the currency atleast to some extent? Cos the author says it happens only sometimes I think it may take it into account the news sometimes and then when the positive news comes out the currency drops and other times it continues to rise on the news. In other words is there a way to know when a currency is overpriced as in stocks(PE etc) As I said I am a newbie and if this question doesnt make much sense excuse me. Thanks.
In a nutshell, no.
You might be able to figure out what the likely reaction of the various market participants is if you are really clued in on the fundamentals and have bags of experience, but you’ll never get it right all the time. There are too many players, all with different goals which means they all have different ways of assessing and reacting to the same economic news releases.
As has already been stated, in general the market will have already taken into account the expected number of what the news release might be prior to its release. What the market’s reaction will be to how different the actual release is compared to the expected release depends on many factors: how much of difference there is, how all the participants were positioned before the news release, how they want to be positioned after the news, etc. And all these factors shift and change over time.
Because of what seems to be a growing trend in news releases, myself and my trading partner started some time ago to make our trades on news releases ONE MINUTE AFTER! the report comes out.
As I read it on another forum, the initial reaction to a news release is a “knee jerk” reaction to/from traders. The LATER effects are BROKERS trading actual prices.
Seems to work. But, then again, you never can tell with Forex, right?
i don’t quite understand this. if you were buying on the rumor, couldn’t you lock in profits by selling just before the news release? why wait after?