A busy morning for USD Traders

Several economic indicators were released today, some of which have greatly impacted the USD this morning. Today, I will mainly focus on the impact of the news releases on the USD/JPY pair. There were three main indicators that resulted in the upward movement of the USD/JPY pair: Nonfarm Employment Change, Personal Spending m/m, and ISM Manufacturing Index.

 As shown by the chart above, most of the indicators came out to be better than expected. As a news trader, one should keep in mind of the possible spikes and false movement that might occur soon after the news is released. For instance, as shown in the USD/JPY graph below, the release of a higher than expected NFE resulted in a high initial spike and soon followed by an extremely low drop. However, traders should hold on to the position for at least 15 minutes after the announcement to ensure the general public drives the pair up as well. From experience, the initial movement soon after the news release can be accounted to big banks acquiring news releases prior to the public. Traders should also be careful when deciding when it would be appropriate to close their position. Many times, traders hang on too long to a position and tend to forego the profits they had initially made. I marked an area on the graph pointing out the possible exit areas.

From the graph, we can see that there are 2 open positions and 2 news releases. The ISM manufacturing index was released at 10:00 am while the NFE and Personal Spending was released at 8:30am. It is important to exit the position from the first news release before anticipating a position from the second news release.

All in all, since the NFE, Personal spending, and ISM manufacturing Index numbers came out to be better than forecasted, we can see an upward movement line in the USD/JPY pair.

The View:
 

By Sumant Yerramilly
June 1, 2007