When you look at the forex economic calendar, there are easily 15-20 daily economic data releases relating to the major currencies USD, CHF, CAD, EUR, JPY, GBP, AUD and NZD. If you know when and how to enter the market, trading news can be a very profitable strategy! Forex market react the most to the release of the US economic news.
This is not surprising given that US is the largest economy of the world and is the worlds major trading partner. This is the main reason why the US economic news announcements have the greatest potential to influence other countries economies and their respective currencies. An initial part of the news straddling strategy is to pick out the various market moving announcements that can have a big impact on the forex market.
The release of unemployment figures, interest rate decisions, inflation, consumer confidence, trade balance, home sales, industrial production, retail sales, manufacturing and business sentiment figures is of significance to the market especially if it relates to US or Euro zone.
These news releases are usually made around 12:00 GMT or 13:00 GMT. It is morning in US and the European markets are still open at this time. You should note the dates on your trading calendar if you want to trade these economic news releases. You should also note the time of that economic data release other than the dates. Many economic reports are released once a month.
News straddling strategy is an intraday trading strategy. It maybe more advantageous to focus on the more volatile currency pairs! It tries to take advantage of the high amount of volatility that is usually generated with the news announcement.
Since the US economic news is the most market moving, the news straddling strategy should be applied on currency pairs that involve the USD. Some good candidates for this strategy are the currency pairs GBP/USD, EUR/USD, USD/JPY and USD/CHF.
Certain currency pairs among the majors respond better than others when it comes to trading major economic news release. The four major pairs ERU/USD, USD/CHF and GBP/USD tend to be better candidates than USD/JPY as the European markets are usually open at the time of US news release. However, the Asian markets where the Japanese Yen is mostly traded are closed by that time.
Economic News Straddling strategy is only employed upon the release of significant scheduled news. Moderate to very high price volatility can be expected during the time of the news release. We can expect to profit from the resulting sharp market moves.
For this strategy, you should mostly concentrate on the EUR/USD pair based on its superior liquidity compared to the other major currency pairs. This strategy requires very nimble and fast entry and exit because currency prices usually respond very quickly in a knee jerk reaction to a move in one direction and may correct themselves very quickly.
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