News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.



Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events


Economic Calendar

Economic Calendar Events

Free Trading Guides
Please try again
More View more
Real Time News
  • *Reminder: Weekly Strategy Webinar Tomorrow Morning at 8:30am ET on DailyFX!
  • According to GS, S&P 500 daily returns are positively correlated with flows. Over the last 3 months, flows have been strong, but the $SPX was flat (model predicted a 7% rally). When SPX returns and flows deviate, they tend to mean-revert in subsequent periods #trading
  • Risk management is one of the most important aspects of successful trading, but is often overlooked. What are some basic principles or risk management? Find out from @PaulRobinsonFX here:
  • Further your forex knowledge and gain insights from our expert analysts @ddubrovskyFX and @FxWestwater on JPY with our free Q4 market analysis guide, available for free today.
  • How does stock market liquidity benefit its traders? Learn more here:
  • A currency carry trade involves borrowing a low-yielding currency in order to buy a higher yielding currency in an attempt to profit from the interest rate differential. Find out if the carry trade suits your trading style here:
  • Looking for a new way to trade reversals? One of the most used reversal candle patterns is known as the Harami. Like most candlestick formation patterns, the Harami tells a story about sentiment in the market. Get better with trading reversals here:
  • Quarterly earnings from Netflix and Tesla, two big tech companies, will take center stage next week and could set the trading tone for the S&P 500 and the Nasdaq 100. Get your weekly equities forecast from @DColmanFX here:
  • Do you know the difference between investing and trading? Because while the goal might seem the same, they're very different things . Learn more here.
  • What is your forex trading style? Take the quiz and find out:
Guest Commentary: Two Cases When Trading News Events Goes Wrong

Guest Commentary: Two Cases When Trading News Events Goes Wrong

Yohay Elam: Forex Crunch,

Reaction to news events in foreign exchange trading is driven by expectations. A headline result that is below expectations leads to strength in the respective currency, while a headline result that is weaker than estimations results in a weakening of the respective currency.

Unfortunately, life isn’t that easy and there two general exceptions that traders should be aware of.

The Risk Factor

First, the US indicators tended to produce the opposite result for the dollar. The reason was the risk on / risk off mentality, whereas a weaker than expected US indicator leads to a strong US dollar (and a stronger Japanese yen).

The explanation is that a weaker US will lead the world down, and therefore, it is better to fly to safety – the safety of the US dollar. And when indicators exceed expectations, the world is set to improve as a whole, and no safety is needed and the dollar is sold. Risk is sought after.

This kind of behavior was seen for long periods of time in the period after the financial crisis. However, the never ending expectations for QE3 resulted in a return to “normal” behavior. Weak data raised QE3 expectations. Creating more dollars to buy bonds weakens the US dollar. And positive figures lowered the chances, strengthening the dollar.

If QE3 turns into reality (even though the Fed could take a different path), the question of QE3 will not exist anymore. So before QE4 will loom, we could see a swift return to the “abnormal” behavior.

Sell the Fact

The second exception is usually seen on a big event that has fewer possible results: an event such as a rate decision, where there is usually one main scenario. Of course, high expectations that don’t materialize lead to a disappointment. This is a natural fact of life.

There is another scenario, where high expectations do materialize. However, these expectations were priced in or even “over priced in” that any result leads to a sell off. This is often dubbed “buy the rumor, sell the fact”, and is relevant also when the event isn’t a rumor but a well-known scheduled and thoroughly debated event.

For example, a future rate cut in Australia may result in a rally for the Australian dollar if this event would be priced in. This is despite the usual behavior of a rate cut hurting the respective currency and despite reality meeting expectations.

Further reading: 5 Most Predictable Currency Pairs – Q3 2012

By Yohay Elam,ForexCrunch

Would you like to see more third-party contributors on DailyFX? For questions and comments, please send them to

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.