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Trader Savvy Newsletter

November 16 , 2006

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Trade Club

Name: Marilyn McDonald

Company: Interbank FX

Learn More About Today's Author
Favorite Movie: Anything by Miyazaki

Trade Club

There are two rules in Trade Club:

  1. The market doesn’t make any sense.
  2. Even when it seems like it is making sense, the market doesn’t make any sense.

As we all know there are two camps in the analysis world: the Technical guys and the Fundamental guys (I am using guys loosely as we all know there are a pretty good percentage of us female traders lurking around.)  I come from a primarily technical background but since my induction into the forex market I have been dabbling more and more into the fundamental side as well.  You really can’t be a forex trader for more than 5 minutes (especially on the first Friday of every month) without being impacted by news and economic data in one way or another.

So about two weeks ago I notice the EURUSD heading down to that lovely support level of 1.270 and decide to go long (in a big way).  I had been pretty successful trading that pair in the 1.270 – 1.290 range and figured it was heading towards the bottom and I could cash in a bit (hubris, I know…  darn those Greek gods).  One day later, the Euro was looking even better at 1.2675… 
and being over confident like I am I went long again. 

Then along comes Non Farm Payroll, Friday the 5th of Oct…  Let me pause here and talk about fundamental announcements.  There are tons of you crazy news traders.  You sit there with your finger on the mouse hyped up on adrenaline like news junkies.  The market during news times is as wildly unpredictable and mercurial as a girl at that time of the month (yes, I can say that… because I am a girl) and you people love this!  You thrive on the thrill of the hunt.  Personally, I am a chicken…  I don’t like watching news, it makes me tense.  Plus, I think that the market is insane (the premise of my rant today).  Back to Non Farm Friday…  so, the consensus this particular Friday is for between 120k – 125k jobs.  I have been to all the news sites.  I have read all the analysts predictions.  So I wake up to the actual number of 51k. 51K!!!  This has to mean doom for the USD right???  Unemployment is a mere 0.1% lower than expected and hourly earnings are 0.1% lower than expected.  This is BAD data for the USD (BAD in capitals).  So, pleasantly pleased I open my charts.  With in an hours time the EUR has dropped below 1.26 into the 1.25 range.  I know, I know…  everyone has some random opinion on why this happened.  But let’s take a look at the cold hard facts.

Oct 3 – Buy the EUR/USD 1.2734
Oct 5 – Buy the EUR/USD 1.2711
Oct 6 – Non Farm Consensus 120k, Actual 51k.  Shortly after Non Farm EUR/USD 1.2598.  Buy the EUR/USD 1.2671 (I know, I know… don’t keep buying on the way down…  I call this trading like a girl.  Here is my logic – “Oh!  The Euro is on sale!  I will buy some.”, “Oh! The Euro is even cheaper now!  I will buy some.”, etc.)
Oct 11 – FOMC Minutes.  Boy was I hoping Bernanke would say something and send the market into a tailspin.  No luck.  Eur/USD at 1.2497 (what the heck!!!)
Oct 12 – Trade Balance Consensus -$66.5B, Actual -$69.9B  This HAS to be bad, right??  EUR/USD at 1.2519 (not bad enough I guess)
Oct 13 – Friday the 13th has always been a lucky day for me so I had high hopes…  Retail sales consensus 0.1%, actual -0.4%,
ex-auto consensus 0.0%, actual -0.5%
Mich Sentiment – Prel. Consensus 86.5, actual 92.3 (what is up in Michigan???)
Business Inventories – consensus 0.5%, actual 0.6%
EUR/USD at 1.2482

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At this stage I admit I am stumped.  I have been given a dozen different explanations and personally think they are all rubbish.

Oct 17 – PPI consensus -0.7%, actual -1.3%
Net Foreign Purchases consensus $53.0B, actual $116.8B
Industrial Production consensus -0.1%, actual -0.6%
Capacity Utilization consensus 82.2% actual 81.9%
EUR/USD at 1.2552

Oct 18/19 – so we get pretty good data for the USD…
Housing Starts – consensus 1650k, actual 1772k
Initial Claims – consensus 310k, actual 299k
The EUR/USD at 1.2603

We are now sitting on a resistance level that used to be support.  Personally I am hoping for a good push through so I can regain some dignity and equity.  I believe fundamental announcements can and do move the markets in dramatic ways. I also believe that technicals play a LARGE part in this game because let’s face it… when you sit down and look at it, sometimes the market just does not make any sense.

About Today's Author

Marilyn has worked in the trading and financial services industry for a number of years, currently with Interbank FX and prior to that at Reuters working with MetaStock. She has a strong advertising and marketing background. She loves to travel and has lived in a number of different countries but now resides in Utah with her son, a tank full of fish and two cats.

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