 to the next bit which is basically New Zealand dollar and the surprise hike and the Australian dollar hawkish hold yet we had the Australian dollar kind of set off pretty much after the speech as well as the New Zealand dollar pretty much went to the heavens on maybe an hourly candle and then it was traced all the way back yeah now why good news but bad price action I don't really like to look at things in terms of good or bad but I'm referencing and if any of you have read his book it's a book by Brent Donnelly called you know what I've forgotten the name of it now it's gone from my head it's called it's called the art of currency trading right it's called the art of currency trading and so what I'm going to do is I'm going to share this book let me know if you can see it can you see this can you guys see it yeah brilliant the art of currency trading have a read if you haven't bought it already I highly advise you do and if you you know you've bought it and you've read it once I highly recommend that you read it you know from time to time to kind of refresh yourself and I remember this you know within the book and it's a common I would say it's a common problem it's not not something that's common but it happens from time to time right and it's explained by Brent Donnelly who was a I think a market maker for HSBC and in the book he talks about why would a currency rally on bad news and I'm just I'm just going to read this out it should hopefully shouldn't take too long but it gives it the context and he explains it better than you know I could right so why would a currency rally on bad news there are all sorts of reasons for counterintuitive moves in FX after news and economic releases but the two main ones are the underlying details of the release are not consistent with the headline release yeah so a strong headline but weak details and number two supply and demand not news determine FX rates right and it basically let's look at the two separately and so reversal for a good reason so headline and the details do not match and I'll read this it's only going to take maybe five five minutes to read right and it says it says when when there's a reversal for a good reason the headline yeah and the details do not match so in a situation the reversal makes sense the initial headline looks extremely bullish or bearish but there are details or mitigating factors that offset the headline release and there's an example in it and I don't really miss you unless you really want me to read the the example do you want me to read the example quickly it's probably maybe a couple of pages yep all right in the coir really yeah so it says September 10th 2014 traders wait nervously for the Australian jobs release the market has been expecting a big fall in the Aussie dollar for months and the currency is extremely resilient any sign sorry I'm just letting Ken in so any sign of economic weakness is likely to open the door for the sellers while longs of praying for strong data to keep their profit and loss afloat the Aussie dollar is trading at 9160 the market expects the Australian economy to add 15 000 jobs and economists forecast a range from minus 5k to plus 35k so that's the range right so they expected to add 15 000 that's the range um traders in New York are eating their dinner with one eye on the conversation at the table and another eye on their smartphones fx apps uh fx app while traders in Singapore Sydney Hong Kong and Tokyo hunch over their keyboards everyone watches the seconds tick off until the number is finally set to come out three two one the number hits the screens the result kaboom 122 000 jobs right and it was expected at what 15 000 jobs the strongest jobs number in the history of Australia that's a massive number right Aussie dollar spikes 60 pips instantly from 91 60 to 92 20 and shorts cover in panic paying off paying any offer they can algos go limit long Australia to capitalise on their calculations that show such a huge beat means Australia oh the Aussie's dollars should go up at least one percent so buyers are frantic and the Aussie dollar trades wildly back and forth between 92 and 92 20 for 90 seconds or so trying to find an equilibrium then after about three minutes wait what's this full panic on the trading floor as a new red headline hits the wires so Australian Bureau of Statistics says methodology change has distorted jobs data in other words the release is meaningless most of the shorts have already been obliterated and anyone who is long is now badly caught traders in a position of strength see an incredible opportunity to get short on the Aussie dollar as Aussie dollar goes down down down check out the chart in figure 10.7 and this is a 10-minute chart of the Aussie dollar around the Australian employment report 10th of September and 11th at the 2014 so you can see it goes up then all of a sudden the headline comes out and they fade the strength fade the strength they fade the news so this type of scenario provides a tremendous opportunity for profit to anyone who is paying attention and is ready to act quickly and forcefully look at how the Aussie dollar went straight down after the spike falling 1.5 percent over the next few hours so that's really one of the scenarios which can cause you know a great headline but the details may not you know be may not support the headline right or the headline might be a bit too too bullish or too bearish and the devil is in the details hence the reason why I always say regardless and I've been saying this for years regardless of the headline you know just wait and read the data because um you know sometimes yes we get you know massive numbers but even if we get massive numbers we always have some sort of pullback if it's caught the market offside you'll typically have a pullback and as long as the fundamentals haven't changed if they have changed you can kind of assess from there and so um I haven't traded the news and pressed buy or sell on the news in a very long time it's been I can't remember the last time I did maybe over a year um now where I've actually pressed buy or sell maybe even longer than that and so um you know I always say the devil's in the details so just wait for the news to come out let it you know settle and again there are times this is just my opinion by the way I can't tell you what to do but just my opinion and um you know if it's good numbers you can always get in at some point anyway I know we want to get in at the absolute lows but there's always going to be a pullback at some point anyways and then the second thing is there's a reversal for no reason right and this happens oh quite a lot and I say quite a lot but um it happens from time to time uh the other type of reversal on news is more confusing it occurs when the news is unambiguously bullish or bearish and the market goes a logical way at first but then reverses for no uh understandable macro reason perhaps large buyers were waiting on their sidelines and want to use the sell-off following bad news to buy attractive levels uh when price reverses after big news the what is more important than the why if a currency is rallying hard after bad news don't worry too much about trying to figure out why it's rallying the fact is that uh sorry the fact that it is rallying on bad news is all the information you need counterintuitive reactions to data can give you an important information about the underlying supply and demand um and then rule eight is basically your effects is that it doesn't always have to make sense that's really important sometimes you know not everything is going to make sense and then it says the media's job is to tell the story around every market move yeah and even the best journalists cannot always come up with a coherent narrative it doesn't always have to make sense and it talks about um an example of that uh I can read the example it's only a few more pages if you want me to or do you guys get the do you guys get the um you get the uh the point yeah you guys get the point or do you want me to read it actually that's to say do you want me to read it yeah go on mark says all right then cool you got there first right so the setup um september 19th 2014 the market has been long dollar CAD since one dollar and now the pair is trading at 110 spot traders and hedge funds are keen to add to long dollar positions but if canadian cpi is out today and traders are nervous um a strong number could increase the odds of an interest rate hike by the bank of canada see how see this has been going on since 2014 anyone who says that fundamentals don't work right they're absolute bonkers anyways a strong number could increase the odds of an interest rate hike by the bank of canada and so a strong cpi is bearish for the dollar CAD makes sense right buying a CAD over the dollar the median economist forecast for core cpi is 1.8 with the lowest estimate of 1.5 and the highest at 1.9 so anything above 1.9 is a is big and above 2 is a blockbuster so new york traders put their starbucks somewhere safe so they won't get knocked over when they lunge for the buy or sell buttons while canadian traders do the same with their tom hortons dollar CAD traders around the world count down seconds as they wait for the data to hit the screens 3 2 1 result blamo the number comes out and it's 2.1 higher than the highest forecast dollar CAD immediately plummets from 109 80 to 108 95 but then suddenly there's one wave of buying then another wave and another and less than four hours later dollar CAD is all the way up sorry all the way back to unchanged figure 10.8 chart shows so that was similar to what we saw today on the on the New Zealand dollar right and the New Zealand pairs all right so 10 minute dollar CAD chart around the release of cpi number september 18th 19th 2024 there was no fundamental or macro reason for this reversal in price this is a classic bad news good price setup there was a very there was very bad news for the dollar CAD but it could not hold on to losses and reverse nearly immediately for no known reason this is bullish price action I don't know about that but yeah now look at figure 10.9 to see what happened after you can see in the first chart that the dollar CAD rallyed right back to the news pivot level the 109 80s the news pivot became resistance for a few hours and then it broke zoom zoom dollar CAD trended higher to 1070 and so that was where we were before prices kind of came down then it went you know further up right 30 minute dollar CAD chart showing what happened in the days after the cpi release September 18th 23rd 2014 always be on the lookout for moments when things don't move the way you would expect them to this is counter intuitive price action this counterintuitive price action can provide clues as to future direction to economic releases are just one type of news trading opportunity now let's look at another central pet meeting it's okay so what's interesting as well right what's interesting this goes back to in fact what I was saying in with regards to the auctions yeah and prices remaining in auctions now what you will find what you can find is that for example this I don't know what obviously happened further on but let's say for example it's a 30 minute chart but let's say as we know the market trades in auctions yeah so this was the move here of course went to the downside then reversed yeah now the banks could probably maybe have possibly forecasted an absolute high for the dollar CAD as being somewhere around there and that might be what was that 110 109 109 so 109 110 that's maybe about 150 pips 160 pips right that's a 160 pit move right in and in when it when it comes to like auctions am I right about that 109 yeah to 110 to one yes about 160 170 pit move right so but in the grand scheme of things yeah if we know that banks trade in auctions and and providing that obviously you know there wasn't any any news that was you know stronger for the for the dollar right this is probably just clearing out a whole load of potential stops above it dragging traders into hot water drawing traders going going going long yeah reaching the top of the actual auction yeah and then potentially you know to the downside and again I don't know what happened fundamentally but I've seen this happen several times over the past with the years that I've been trading where you get really good news or really bad news and prices actually go beyond that right and let's say for example this might have been a an interest rate hike yeah an interest rate hike for the cat right and it's positive for the cat now anything if prices go above that you have to consider that to be bargain price especially especially if for example the dollar is not hiking rates yeah if it is hiking racing you've got two central banks that are hiking rates then it's probably within the realm of the market just pricing in what the exchange rate is between the two banks and it looks like a massive move on a 30 minute but if you was to zoom out and probably look at that on a maybe a a daily timeframe chart it might just count as maybe two you know or three daily candles right that might be one day that might be one day another one day that's it and it moved 160 pips that's nothing yeah and so yeah it's all about just understanding where the auction is and just where it might be and within the realms of possibility yes you can get some good news unexplained you know price action after that news but does that mean that A fundamentals don't work and B that you know you're wrong about you know the trade idea these things do happen it's nothing we can do about it as long as we you know mitigate the risks to the downside for example when we're losing and we don't you know leverage too much what we're looking for then is just opportunities to potentially you know go short at some point at major levels and just following the plan right and so yeah that's pretty much how it ties into the you know auctions and understanding auctions and we saw that today on the on the Australian dollar and the New Zealand dollar right where I bet a lot of you were thinking to yourselves oh my days what's happened you know we had you know better than expected we had better than expected interest rate hike for the for the New Zealand dollar right surprise half point rate hike which was excellent news yet on a price chart you got the opposite happen where you had this I'll trade compare it with the New Zealand dollar right where you had this move to the upside and then to the downside and so again that is actually within the point I'm trying to make right here is actually within that auction yeah so potentially that rate hike was probably priced in also as well just from a supply and demand perspective one second you also remember this if there's not enough liquidity to the upside yeah meaning that there's not enough if you're a buyer and this comes into the supply and demand equation and liquidity yeah if you're a buyer you need enough sell orders at these orders right in order to facilitate the buying and if there's not enough liquidity this is what would be known as liquidity all these sell orders to facilitate you know the amount of buying that needs to be done now if there's not enough buy orders sorry sell orders above the market for there to be buyers then the market will seek the sell orders and the liquidity below the market yeah and can you imagine how much liquidity was below this price when there was a surprise there must have been a ton right there must have been an absolute ton of liquidity because everybody everybody was recording that person and stop video right there must have been a ton of liquidity below the market correct if everyone's going long on that surprise and it didn't follow through from a supply and demand perspective it was probably the fact that the market then wanted this or it could be a bigger narrative who knows but don't take it as you're wrong for going long on a surprise yeah don't take it as you you know you're you're you did the wrong thing because these things do happen and historically we've seen it happens right in 2014 it happened and so you know it's happened pretty you know several times since then and so it is what it is right you're buying actually as well when you think about the New Zealand dollar at what at highs the highs of this auction right the highs of that auction and you consider where everything is you're buying the New Zealand dollar right here who wants to buy the New Zealand dollar here I mean some people do and this could have easily have gone to the moon right this could have but ultimately it still wasn't the best place to buy it regardless objectively if that move would happen somewhere down here you can imagine the upside potential because that would have been at the bottom of the auction that would have been at the bargain that would have been expensive for the dollar but you know for the for the for the US dollar and a bargain price for the New Zealand dollar and it that's another really important point yeah the important point is I mean you can trade the newsmark you can definitely trade the news but what I would say is if you are just be careful about where you are as well that make that's a that's a really big point is that if you see prices trending you know to the upside before the news and then even you know then there's good news that comes out yeah for that same pair just be aware that the move has probably already been priced in to some degree yeah and yes prices can go higher but you could go lower before you go higher yeah um what would I say yeah just kidding no no no yeah but it can be dangerous and again I'm not here to tell anyone to not trade the news right because you know you could find a way and it's profitable but for me I've always just taken as it always but I've over the past maybe a year or two I've taken the opinion that I'd rather just wait for the dust to settle and then manage to get back in do you know I mean at at a later date as prices you know potentially come down right or come back to that area uh Daniel says I've been scratching my head about these types of moves so many traders uh still do ask the what yeah why what what the f I'm so happy I know about what liquidity hunting is yeah it brings sense and confidence and it does right and you're not always thinking to yourself you know I mean again no one's going to know what what it is at all times right these are market participants that are um you know there they're in their thousands loads of lots they've got their reasons for buying or selling etc but just know that obviously they're not infallible in terms of um you know bargains are bargains at the end of the day and if the um the New Zealand dollar they if they're projecting the New Zealand dollar to to be maybe a you know let's say for example the 66 cent area in the next maybe three to six months yeah then they know that you know any kind of pullback is going to be a bargain and prices might continue falling who knows but the point being is that even if it falls down to to this area here remember this area here from an auction perspective this is all being priced in yeah this is all being priced in and all you're doing is trying just just to look for where those potential higher highs are where the bargains are and from there you know where the setups are whether it's stock hunting whether it's cprs whether it's daily demand supply zones you know that's what you're looking for always wait for the pullback always wait for the pullback and try and resist the urge to potentially fomo if you can um right so with that being said uh i don't know if any of you have read the news but um yeah so uh don't think there's anything in here that that we don't necessarily know uh the i think the what it is is that um they from what i've read the rbnz probably are likely to hike one more time by 25 basis points but um it's not a guarantee or a given right because all central banks um are coming to a a hold or a pause in their rate hikes of course inflation you know if inflation persists yeah then um you know it will they would be forced to kind of hike and you can see here that inflation has kind of stayed around this uh this uh seven percent level just above seven percent so they're trying to um you know the official cash rate they're hiking hiking hiking to try and get this to come down so if it starts to come down naturally by the next um you know meeting or before the next meeting then it takes the chances off the table that they are likely to hike but you know the consensus is right now today that they are probably likely to hike at least one more time at their next meeting uh the rba rba low says