As is usual in the currency markets, the initial reaction to any piece of news is to move in one direction, followed shortly afterwards by a move in the opposite direction. For those of you who are frequent traders, this presents an opportuinity each and every time. Whilst it does not happen on every occassion, it occurs more often than not, and therefore with suitable stop losses in place, allows scalpers the opportuinity to trade on market news.
One of the classic news annoucements is ofcourse the NFP or Non Farm Payroll, which is announced on the first Friday of every month in the US. The data is only released after a total lockdown, to prevent any pre-release via phone, email or text. The pair move in one direction, followed shortly afterwards by a siginificant move in the opposite direction. The reason stated by traders is often that this is because their is an intial reaction to the news, followed by a more considered and opposing view once the market has had time for the data to be analysed. I have only one word for this – RUBBISH – the reason is happens is that it provides a wonderful opportunity for stops to be taken out before prices move in the opposite direction. The same occurs in the stock market, day in and day out, week in week out.