Any other factors that move a currency other than news?
I found that some time when there is no economic data are released for a currency pair, the price of that pair still move quite a lot and quite volatile.
Some time, even when there is some economic data are released, the price of the currency pair move in opposite direction or just did not move, it seem like there is some other factors that are affecting the movement of a currency.
Anybody here can list down any possible factors that may affecting the price of a currency?
I subscribed to this thread in hopes someone would answer it considering I thought it was an excellent question, but I guess people have better things to do like drink margaritas on the beach with their trading earnings lol. I'll help you out with what I know because I believe it is a great question, and I like to help other new traders. This is something I would have asked in the beginning because it's something I'm curious in myself and it really deserves a detailed explanation. Anyways, If you can't trust the news then what other factors can you trust? Not many.... but the thing is it doesn't matter.
I've come to the conclusion that currencies are all hinged off one another and when a few are consolidated one has to be at the tipping point of volatile for no great reason other than importing and exporting between countries doesn't stop. Since currencies aren't like stocks, but pairs, their short or long bias are all relative. Down is up to one country so volatility ensues rapidly without haste.
There are virtually infinite factors that shape currencies but I believe the main driver is technical patterns of stop loss clusters being hit. I've seen a lot of crazy things with currencies like EUR/USD rallying on declining US unemployment figures and nfp which is something it should do the exact opposite. After that I never trusted the news even the most important releases like nfp. All news equals to me is random volatility.
I basically trade currencies on technical patterns like breakouts, continuations, and reversals and let the volatility work in my favor by letting price move as far as possible in my direction before exiting.
Last edited by Itchymoku; January 15th, 2014 at 10:43 PM.
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The question here is closely related to the one of the major exchange rate puzzles that scientific world is also struggling with. That is, why volatility in FX market is much bigger than the changes in fundamental data expects.
Microstucture theory has some interesting viewpoints in this matter, and it suggest that not only public information (like news etc.) causes the volatility but also private information, which is dispersed across the FX markets by dealers quotes , affects FX markets volatility. Dealer get this private information from the order flow that he receives. Of course this is much deeper thing and should be read carefully if you find it interesting.
The order flow itself contains important information about investors expectations about the future. This private information may also contain rumors about central banks interventions, which has found to be one of the things that affects volatility. Also traders like to ride with the trend and this may cause speculators to join in the markets even thought there is no actual reason for exchange rate moves and therefore strengthen the volatility. The final reason that i have found about what causes exchange rate volatility is speculative "betting" about future news announcements.
My opinion is that volatility in FX market is summary of many factors and the underlying driving force, when there is no news announcemets is really hard determine. I agree with Itchymuko that almost every currency pair in FX market is somehow linked to another and by that the volatility disperses across the market.
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If there is no news... The market just flows naturally on human emotion.
If there is good news and the market is at resistance, it shoots upward a bit then breaks down hard. If the market is at support and there is good news, it rallies for a long time.
If the market is at support and there is bad news it shoots downward a bit, then rallies up hard. If the market is at resistance and there is bad news it falls for a long time.
Well, that's basically it. It's more complicated through because you have to factor in longer term momentum and stuff. Also, news being "good" or "bad" doesn't mean good or bad in a "logical" sense. It means, was the news better or worse than most traders and investors with big money were expecting?
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