Forex market loss? You may need to react to economic data!
does not have a universal formula in predicting how the market may respond to economic data, and there is no standard answer to why the market does this. What you usually see is the initial market reaction after the data is released, which is usually short but has a lot of fluctuations.
When market traders digest data or news reports for a while, a second wave of reaction will occur. This is when the market decides whether the news or data is as expected and whether it should respond accordingly. Is the results reported by
consistent with expectations or inconsistent? What does the initial reaction of the market tell us about the overall economy?
answers to these questions help us explain price trends.
Please note the modified data
We need to realize that economic data is possible. This is also the formal economic report release process.
Let's take the US monthly non-farm employment (NFP) as an example. As the name suggests, the report is released monthly, and the correction of last month's data is one of the many indicators released. Let's assume that the U.S. economy is declining. For example, non-farm employment fell by 50,000 in January, and the number of employed in February will be released soon. Non-farm employment data shows that the market generally expects that non-farm employment will drop by another 35,000 in February. However, February data showed that non-farm employment fell by only 12,000, which is much better than expected.
Meanwhile, January data was revised to reflect in February's non-farm report, which was revised to only 20,000 people down. Better than expected January data was revised up As an forex trader , you must be vigilant about data corrections.
If you don't consider the January correction data, you may take negative action against a further increase of 12,000 jobs in February. However, considering the January data is upward and the February data is better than expected, this may be a turning point in the recovery in confidence.
When you see the final data for January and the revised data, your view of the US market will be as pessimistic as before. Although employment remains declining, the decline has slowed down, which is a sign of stabilization of the labor market.
We not only need to determine whether the data will be modified, but also need to be vigilant about the size of the modified data. When we analyze the current data, the greater the correction, the greater its impact on the exchange rate trend. The modified data can help us determine if there is a change in the trend, or if the current trend has not changed, so we must pay close attention to the published data.
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