when the NFP reports came out, i saw that gbp/jpy and gbp/usd tanked like mad. however the euros didn't move that much against the usd compared to the gbp pairs. i figured the euro would be more of safe haven for usd. having traded both of the worlds recently, today, i found that lot of profit was eaten up by my euro positions because of the spike up and down. again, i dont think im diversifying at all here as i keep betting on the wrong pairs...how to properly do this ? why do these move differently? i thought fundamentally, usd would weaken in similar manner against all other currencies. how do u predict which pairs will be hit most on news ? like on monday, USD New home sales, how can u predict which pairs would've been right to trade to avoid getting whipsawed? eur/usd or gbp/usd or usd/cad ?
I don't think the market reacts much to financial news, much less the Forex market where 99% are large financial institutions, and less than 1% is retail traders. The market ANTICIPATES news. The commonly stated reason is that large financial institutions have so good analysts, that they are very good at predicting. The conspiracy theory states that government economic agencies leak they reports before their release (for a bribe, of course). Whatever the reason, the market usually anticipates the news, seldom reacts.
yes, it al about expectation and people changing their behvior based on that expectation. however, is there someway to avoid getting whipsawed. like gbp is bearish already so trading this with usd would've been the best when usd reports came out ?
Here is a site that shows what has happened after previous economic news releases: http://www.forexnewspatterns.com
You should try to stay away from the currency that has the affect during the news. For USD it's not a good choice to trade any USD pair unless you want to gamble and try to predict the move. sg20