NFP - review

So how was your experience with the NFP last Friday? This time around it was not too exciting since the unemployment figures were bad just as expected, so no surprises. Looking at EURUSD, it went up just 58 pips within two minutes of the NFP report. It was definitely more exciting early last year before this financial crisis. The range of movement was in excess of 100 pips and it would move up and down within minutes, unlike the tame affair we are having nowadays.

What are the other market moving economic reports? Here are the top 8 for the US Dollar (and consequently the EURUSD) as given by Kathy Lien of FXCM.

1. NFP (Unemployment report)

2. Interest rates (Federal Open Market Committee or FOMC decision)

3. Trade Balance

4. Inflation (consumer price index, CPI)

5. Retail sales

6. Gross domestic product (GDP)

7. Current account

8. Durable goods.

Most of the US reports are released at 8.30am EST or 10.00am EST

What about the Euro? Similar reports to the above for the main EU countries are also significant and in addition, the European Central Bank (ECB) statements and German economic reports are also important. These are normally released at 0900 GMT.

As for the British Pound, the Bank of England (BOE) statements are critical in addition to those reports above. Most British reports are released at 0930 GMT.

The Tankan Survey (done quarterly) is a important report that greatly affects the movement of the Japanese Yen.

In addition to having an immediate effect on the Forex market, some of these reports will have a long term effect which will affect the general direction of the movement of the currency pairs affected. The study of such effect is known as Fundamental Analysis. Some traders specialise in this and they normally trade in longer terms such as days, weeks or even months. These are for the professionals as they have to withstand fluctuation of pips that move in the hundreds.

Fundamental Analysis is one of the two main branch of analysis carried out by Forex traders; the other one is Technical Analysis. Before we move on, here's a reprint of a poem I wrote earlier on the effect of the NFP sometime last year that has appeared in my other Blog in case you have not read it. Have fun. (There are some slight amendments.)

For Karaoke fans, this can be sung to the tune of Twinkle, Twinkle, Little Star and the title is "Twinkle, Twinkle, Currencies"

Prologue

Twinkle, twinkle N-F-P
What you get’s not what you see.
Where more is low and less is high,
When I see sell, you say it's buy.
Twinkle, twinkle N-F-P,
Please don’t bring me to my knees.

The reactions

Twinkle, twinkle E-U-R,
Like the plunging Niagara.
I’ve been praying for your rise,
I have paid a heavy price
Twinkle, twinkle E-U-R,
You will need some Viagara.

Twinkle, twinkle G-B-P
What a trick you played on me.
When I clicked sell, you took a bend;
Now I have to say amen.
Twinkle, twinkle G-B-P
Thanks to you, I’m all at sea.

Twinkle, twinkle C-H-F,
When you dive, there’s nothing left.
Lower, lower down you go,
I’ve been battered, blow by blow.
Twinkle, twinkle C-H-F,
You have put me in deep cleft.

Twinkle, twinkle J-P-Y,
On the downward path you fly.
All my profits, they are gone;
I’m better off to trade the won.
Twinkle, twinkle J-P-Y,
My poor pocket, you wring dry.

Epilogue

Twinkle, twinkle U-S-D,
How I wonder where you’ll be.
Up the charts you rise so high,
Oh as if you’ll reach the sky.
Twinkle, twinkle U-S-D,
I just wander, woe is me.

Ronald Kwok
http://ronaldkwok.atomicblog.hop.clickbank.net/