See The Condition Of The Market And What It's Saying.


TopAsiaFX

I will be consulting this in connection with more spontaneous reaction from the market towards the release of economic data. Even when you anticipate and expect a certain release to produce an unstable reaction, how do you know which market to take after?
One of the more typical games in the rule book is "buying rumors, selling facts". We've all observed this happend many times on the market, but what does it really mean?
I will use up the Fed's latest decision as a good example of this. As we go into December, the market predicts the possibility of a Fed rate hike in the last meeting; fell from ~ 80% to ~ 65% ahead of the FOMC meeting.
It was the second best performing principal currency despite the fact that the market anticipated the Fed to change more dovish in their comments because they gave another rate hike.
Markets are gearing up for a "buy rumors, fact-selling" scenario when they buy dollars in anticipation of another rate hike but are preparing to sell dollars because the Fed turned more dovish.
However, there is a twist in the story when we walk in the week of the Fed's decision. The dollar was under selling pressure because the market then changed their focus and began to price the Fed a rather dovish to follow.
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