Stanislav Bernuhov
Common Sense Trading
In today’s article, I will continue talking about trading around the major news announcements. As you remember from the previous article, reading market sentiment is more important for a short-term trader rather than trying to analyze long-term fundamentals.
Now, as I’m writing this article, it’s 2 hours left before the ECB interest rate decision. What about the current price action? We see that it grows.
How do you think - why the price of a currency pair (an asset) grows in a face of uncertainty? There may be a very simple reason: it goes “North” due to expectations of a more hawkish monetary policy than expected. In fact, it doesn’t matter what would really happen, but expectations are what really matters since they create speculations.
I bet that when the real decision is released to the public, the price will sharply go down (at least, for a current day). That’s an implementation of an old adage “buy the rumors, sell the news”.
How to trade this situation?
The prediction (or better said, anticipation) of a certain event doesn’t automatically open an opportunity for a good trade. The former requires to provide a decent entry point and a short (and reasonable) stop-loss.
As a variation of a good entry may be the situation if (when) the price breaks previous days extreme before the news announcement like it is shown on the picture.
That’s just an example, not a trading suggestion. In your trading, you should develop a set of your own “signature” setups which work for you and which you understand well.
Good luck and have a good day ahead!
Trading the financial markets is associated with increased level of risk. Past performance is not indicative of future results. All materials are provided for educational purposes only and by no means may serve as a trading or investment advice.
Editors’ Picks
EUR/USD flirts with daily highs, retargets 1.1900
EUR/USD regains upside traction, returning to the 1.1880 zone and refocusing its attention to the key 1.1900 barrier. The pair’s slight gains comes against the backdrop of a humble decline in the US Dollar as investors continue to assess the latest US CPI readings and the potential Fed’s rate path.
GBP/USD remains well bid around 1.3650
GBP/USD maintains its upside momentum in place, hovering around daily highs near 1.3650 and setting aside part of the recent three-day drop. Cable’s improved sentiment comes on the back of the Greenback’s irresolute price action, while recent hawkish comments from the BoE’s Pill also collaborate with the uptick.
USD/JPY edges up above 153.50 with all eyes on US CPI figures
USD/JPY appreciates above 153.00 but remains on track for a 2.4% weekly loss. Trading volumes remain subdued on Friday, ahead of the IS CPI release. The Yen remains supported by hopes of a stable government and calls for further BoJ tightening.
Editors’ Picks
EUR/USD: Yes, the US economy is resilient – No, that won’t save the US Dollar Premium
Some impressive US data should have resulted in a much stronger USD. Well, it didn’t happen. The EUR/USD pair closed a third consecutive week little changed, a handful of pips above the 1.1800 mark.
Gold: Metals remain vulnerable to broad market mood Premium
Gold (XAU/USD) started the week on a bullish note and climbed above $5,000 before declining sharply and erasing its weekly gains on Thursday, only to recover heading into the weekend.
GBP/USD: Pound Sterling remains below 1.3700 ahead of UK inflation test Premium
The Pound Sterling (GBP) failed to resist at higher levels against the US Dollar (USD), but buyers held their ground amid a US data-busy blockbuster week.
Bitcoin: BTC bears aren’t done yet
Bitcoin (BTC) price slips below $67,000 at the time of writing on Friday, remaining under pressure and extending losses of nearly 5% so far this week.
US Dollar: Big in Japan Premium
The US Dollar (USD) resumed its yearly downtrend this week, slipping back to two-week troughs just to bounce back a tad in the second half of the week.
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