FX EUR/USD behaviour today!!

[SlowlyButSurely]

Hi there, I am new to this forum and am starting out in learning to trade.

For now i use the FX as a learning tool as i can access the tools and charts for free and i focus on the EUR/USD pair as it has good movement throughout the day.

However...

Today i was left completely baffled by the pairs behaviour. It started out sensibly, with the news that Spanish bond yields rose above 6% the EUR took a tumble to a record 2month low of 1.2995

But then...it rebounds to 1.3142, which was higher than when it opened. So why is this? This makes no logical sense to me...why would the Euro rise on bad news when spain looks to perhaps default? then again i am new to this so any knowledge you can share with me on this would be appreciated!!

I would have gone short due to the news, and made profit, and perhaps long on the sign it was going to rally upwards to correct itself, but i would never have thought it would keep going and perhaps would have gone short at a high point, thinking it would regress some more to level out to an appropriate price.

 

[wackypete2]

US retail sales numbers came out at 8:30am New York time. That sparked the rise upward.

You are only looking a 1 piece of news. FX rates are sensitive to various news events and volumes of hot air coming out of politicians mouths.

Today i was left completely baffled by the pairs behaviour. It started out sensibly, ...

Par for the course my friend. You're in the same boat as all of us retail traders. Forex isn't the easiest market to trade.

Peter

 

[Nigel-P]

Hi SlowlyButSurely, fundamentals are hard to trade as retail traders because usually we are the last to hear the news. It's also important not to make a definitive causal link with price action you are seeing and the news you are reading which may or may not be there. News people always feel that they have to give a reason for market action and they are not always correct e.g. "euro lower on reports of poor German factory orders". It's not necessarily true.

In relation to the rip higher in the euro yesterday, it could be due to a variety of reasons, for instance a classic short squeeze driven by bears alarmed that price couldn't stay longer than a few minutes under 1.30, there has been talk of rapid repatriation of euro by asset selling European banks (particularly stressed French ones), decent US retail sales as Pete said above, etc., or a combination these and a possible myriad of other factors. Was an ok retail sales number worth 150 pips? Maybe, maybe not. Plus, without getting too conspiratorial, there are a lot of very powerful global interests that are very keen to support the euro, which might be part if the reason it's not at 1.15 instead of 1.30, given the state of Europe.

Speaking only for myself, firstly I find it better to use fundamental analysis firstly to look at the longer term picture to see where price may be heading in a general sense. Applying fundamental analysis to intraday price action is incredibly difficult to do accurately as a retail trader in my opinion. We are just not equipped to do so, given that banks, etc have algorithms reading newsfeeds and making orders in milliseconds. Secondly it can be confidence building to use fundamental analysis to corroborate what is already happening on the chart. If price is moving down, Spanish bonds yields are up and I am short, well all's good. But if my fundamental interpretation is to the downside, yet price is moving up and I am scratching my head, shorting on the presumption that "price can't go any higher because of x news", which I have read somewhere on the internet is very very dangerous. It's why retail traders are on the wrong side of the market most of the time. As a retail trader, never fight the chart!

Good luck with your learning

Nigel

 

[SlowlyButSurely]

Hi, thanks for your replies guys.

Interesting really, i suppose i have a lot to learn. I just thought that the fact Spanish and Italian bond yields were fairing so poorly would mean a weaker EUR. and that the US data showing positive growth would strengthen the USD. Perhaps it will be more of a gradual decline so ill keep an eye on things.

That said i presume you are correct that we hear the news last, and that their are a lot of large institutions that can cause small pockets of volatility, it makes sense. Ill just keep studying and monitoring things and hopefully it will all start to click into place the more i learn about the markets in general.

Also thanks for the advice concerning fundamentals, i presume to be a good retail trader you need a mixture of fundamentals, technicals and market sentiment?

 

[Nigel-P]

Also thanks for the advice concerning fundamentals, i presume to be a good retail trader you need a mixture of fundamentals, technicals and market sentiment?

I would add psychology, self-discipline, emotions, money management, risk v reward to that list. I only started to see consistency in my trading when I had spent a lot of time and perseverance dwelling on these topics.

Being knowledgeable about fundamentals and technicals is all very well, they may make you a decent analyst, but once you have capital at work in the markets different factors come into play.

Analyse how you behave after a loss, how you react to success, what impact do these factors have on your subsequent trading decisions. Can you stick to rules, do you have the discipline to keep a diary?

By all means take time to learn methods of how to enter and exit the market, but without having a good understanding of your own mental strengths and weaknesses your learning will be stunted. How you enter and exit the market should compliment your personality.

Mark Douglas would be seen as a good author in this area; personally I found Steve Ward's stuff to be useful too. Denise Shull is another one.

Jessie Livermore and Jack D. Schwager are good reads.

All the best

Nigel

 

[The Leopard]

Hi there, I am new to this forum and am starting out in learning to trade.

For now i use the FX as a learning tool as i can access the tools and charts for free and i focus on the EUR/USD pair as it has good movement throughout the day.

However...

Today i was left completely baffled by the pairs behaviour. It started out sensibly, with the news that Spanish bond yields rose above 6% the EUR took a tumble to a record 2month low of 1.2995

But then...it rebounds to 1.3142, which was higher than when it opened. So why is this? This makes no logical sense to me...why would the Euro rise on bad news when spain looks to perhaps default? then again i am new to this so any knowledge you can share with me on this would be appreciated!!

I would have gone short due to the news, and made profit, and perhaps long on the sign it was going to rally upwards to correct itself, but i would never have thought it would keep going and perhaps would have gone short at a high point, thinking it would regress some more to level out to an appropriate price.

You just learned a valuable lesson.

News does not move the market. Buying and selling does.

Try to think what is happening when the market suddenly collapses and just as suddenly shoots up again. Who is winning and who is losing? Why would price behave like that?

Institutions control the market. They are trading for countless reasons, and all are irrelevant to you. Look at what they are doing, and try to hitch a ride - that is all you should be aiming to do.

Economists, journalists and pundits who say "The euro fell because of blah blah blah" are fools. The euro falls because people sell it. It rises because people buy it.

Make those simple facts the focus of your studies.

Finally, why should the euro fall on bad news? Why should it rise on good news? There is no more reason to expect it to do so than there is to expect Saturn to leave its orbit and board a train from New Street to Euston.

Where news has any effect, it has nothing to do with whether the news is good or bad.

 

[Nigel-P]

Economists, journalists and pundits who say "The euro fell because of blah blah blah" are fools.

Absolutely agree. They are paid to churn out content with the primary objective of generating clicks. Accuracy, insight or quality are not on the list of priorities.

 

[wackypete2]

Exactly, just watch all the cheerleaders at CNBC

Peter

 

[VielGeld]

I might add 2000 hours of screen time to the list (as per Herr ChocoD's magnificent insight). Forget about any given reason why price should move, and rather look to context for an idea of where it is likely to go next.

You'll get it eventually. Just takes lots o' sitting there and just watching it move.

 

[iamnev]

EUR/USD 1.31 expiration today, almost hit it bang on at 3pm (10am over in the US)
moving on to the next options, hopefully we'll get some movement otehr than sideways from now on.
The German news took us up to the Daily Pivot also at 3pm and then we consolidated under that.

 

[brettus]

Hi there, I am new to this forum and am starting out in learning to trade.

For now i use the FX as a learning tool as i can access the tools and charts for free and i focus on the EUR/USD pair as it has good movement throughout the day.

However...

Today i was left completely baffled by the pairs behaviour. It started out sensibly, with the news that Spanish bond yields rose above 6% the EUR took a tumble to a record 2month low of 1.2995

But then...it rebounds to 1.3142, which was higher than when it opened. So why is this? This makes no logical sense to me...why would the Euro rise on bad news when spain looks to perhaps default? then again i am new to this so any knowledge you can share with me on this would be appreciated!!

I would have gone short due to the news, and made profit, and perhaps long on the sign it was going to rally upwards to correct itself, but i would never have thought it would keep going and perhaps would have gone short at a high point, thinking it would regress some more to level out to an appropriate price.

Stop trading fundamentals and start thinking like a retail trader and do the complete opposite. Where were the obvious short sellers in eurusd that day? Below the previous low. How strong was the breakout? It was a complete failure. Go long end of. Retail traders short through lows, you're long after seeing a failed breakout. Welcome to trading profitably. Even better open a twitter account and add any forex analyst, when you get a bunch of them calling the same trade, do the opposite.

 

[The Leopard]

Even better open a twitter account and add any forex analyst, when you get a bunch of them calling the same trade, do the opposite.

 

[SlowlyButSurely]

Thanks for all the feedback everyone, a tonne of great advice here so ill be sure to take it all on board (especially as you all agree on what is being said). I'll keep studying fundamentals etc but try to leave it out of my trading strategies and focus more on what's happening on screen.

ill keep you posted with some results next week to see how i fair.

 

[SlowlyButSurely]

Just to update everyone, i have been looking at price action for a while now, and im starting to get a feel for the way the market behaves and some signs. That said i have still been caught out a few times but i suppose thats normal so i will just continue studying and screen watching. I think that really i need to get some foundations set and then find my own patterns from the charts.

Anyway just to let everyone know how i was getting along and that your advice was well heeded.

 

[Mike Kshemaraja]

News is showing in the chart, in the price, before any release.

Focusing and understanding price action and the constant wars between the parts with its psychological effect supported by numerous screen time hours as Vielgeld already mentioned will give you the edge.

Trade only one pair in one time frame, smaller in my view is better, you learn faster and that is were the big guys are playing.

Easy? No. Doable? Yes.

Hope it help a bit.