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 edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Japanese Yen trades just shy of 157.00 versus the USD
The Japanese Yen weakens across the board after BoJ announced its policy decision. A shortlived spike in the Yen may be testament to an attempt by the Japanese authorities to intervene. US PCE Price Index shows higher-than-expected inflation but does little to impact USD/JPY which almost touches 157.00.
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.
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