Should You Take News Releases Into Account in Your Trading?

Good afternoon! Traders often argue whether or not they should take news into account when trading. There is an opinion that when working in older periods, you cannot pay attention to the release of even important news, their impact is minimized. Whether this is so and whether it is worth taking the news into account in your trading, we will try to figure it out today.

To analyze the impact of news on the American Dollar currency, I wrote a special adviser in which I entered the dates of all news that were designated as important in all news calendars. At the same time, I have highlighted each news so that you can trace its impact on the charts of all major currency pairs from 2012 to the present day. I collected the following data:

- minimum price change after the news was released – how many points did the price minimally move after the news was released;

- maximum price change - how many points the maximum price moved after the news came out;

- average change - how many points the price moved after the news was released on average;

- number of returns - how often the price returned to approximately the level it was before the news (+-10% of the price change itself after the news was released).

- I conducted research for news in the United States and considered their impact on such currency pairs as USDCHF, GBPUSD, EURUSD, USDJPY, USDCAD, AUDUSD, NZDUSD;

- the time for considering the impact of news on the price is 6 hours after its release.

This survey is an attempt to measure consumer optimism. It is based on data from a survey of 5,000 American households to gauge reactions to the current situation and the extent of consumer hopes or doubts about the future. The index has been calculated since 1967. At first it was equal to 100. It has limited effect on the market, since it may not reflect the real state of the economy. However, it has traditionally been used to forecast employment trends and the overall health of the economy. An increase in index values ​​is a positive factor for the development of the national economy and leads to an increase in the dollar exchange rate. Its value is usually published after the 20th of every month.

USDCHF

Minimum change - 6 points

Maximum change - 155 points

Average change - 34 points

8 times out of 93 the price returned - 9%

GBPUSD

Minimum change - 9 points

Maximum change - 140 points

Average change - 35 points

7 times out of 93 the price returned - 8%

EURUSD

Minimum change - 16 points

Maximum change - 125 points

Average change - 37 points

7 times out of 93 the price returned - 8%

USDJPY

Minimum change - 9 points

Maximum change - 145 points

Average change - 33 points

12 times out of 93 the price returned - 13%

USDCAD

Minimum change - 9 points

Maximum change - 140 points

Average change - 36 points

5 times out of 93 the price returned - 6%

AUD/USD

Minimum change - 9 points

Maximum change - 121 points

Average change - 29 points

7 times out of 93 the price returned - 8%

NZDUSD

Minimum change - 9 points

Maximum change - 117 points

Average change - 28 points

7 times out of 93 the price returned - 8%

As can be seen from the data above, on average the price reacts rather sluggishly to the release of this news - the average price movement in any direction is about 30 points. And yet, in some cases, news can cause a movement of 120-150 points. Moreover, quite often, within 6 hours after the news is released, the price returns back to the level before the news (on average in 10% of cases).

Durable goods include goods with a service life of more than three years. These include: cars, furniture, etc. In this case, an order is considered an intention to purchase goods now or in the future, confirmed by legal documents. In order to highlight the variability inherent in military and transport orders, indicators are separated from this indicator that do not take into account orders for the defense industry (Durable goods orders excluding defense) and transport orders (Durable goods orders excluding transportation). This indicator is important for the market, as it gives an idea of ​​​​the confidence of consumers of these products in the current economic situation. Since durable goods are quite expensive, an increase in the number of orders for them shows the willingness of consumers to spend their money on them. Thus, the growth of this indicator is a positive factor for economic development and leads to an increase in the exchange rate of the national currency. Its value is published in the fourth week of each month.

USDCHF

Minimum change – 11 points

Maximum change – 110 points

Average change – 31 points

3 times out of 36 the price returned – 9%

GBPUSD

Minimum change – 19 points

Maximum change – 161 points

Average change – 47 points

5 times out of 36 the price returned – 14%

EURUSD

Minimum change – 11 points

Maximum change – 166 points

Average change – 44 points

2 times out of 36 the price returned - 6%

USDJPY

Minimum change – 10 points

Maximum change – 74 points

Average change – 30 points

4 times out of 36 the price returned – 12%

USDCAD

Minimum change – 9 points

Maximum change – 114 points

Average change – 36 points

3 times out of 36 the price returned – 9%

AUD/USD

Minimum change – 12 points

Maximum change – 92 points

Average change – 33 points

2 times out of 36 the price returned - 6%

NZDUSD

Minimum change – 8 points

Maximum change – 95 points

Average change – 33 points

3 times out of 36 the price returned – 9%

As you can see, this news has the greatest impact on EURUSD and GBPUSD, in some cases provoking a movement of up to 160 points. On average, a movement of 44-47 points can be expected for these two currency pairs. Other currency pairs most often react to this news by moving around 30 points, in rare cases reaching 90-100.

The unemployment rate shows the percentage of the number of unemployed people to the total working-age population. It comes out simultaneously with the "Nonfarm payrolls" indicator. Has a significant impact on the market. Typically, an analysis of the unemployment rate is carried out in the context of figures reflecting the value of the Nonfarm payrolls indicator. For example, an increase in the value of the “Nonfarm payrolls” indicator with an increase in the unemployment rate indicates an increase in unemployment in the agricultural sectors of the economy, etc. Given the expectation of an increase in basic interest rates, a decrease in its value leads to an increase in the dollar exchange rate. It is published, as a rule, on the first Friday of each month simultaneously with the "Nonfarm payrolls" indicator.

Jobless Claims shows the week-over-week change in the number of people filing for unemployment benefits. Published every week on Thursdays. These figures do not always reflect the real picture of events. They are sometimes distorted by short-term factors such as federal or local holidays. This indicator can give an idea of ​​how the Nonfarm payrolls indicator will come out next time. For example, if the value of the "Jobless claims" indicator consistently decreases over the course of a month, then there is a high probability that the value of the "Nonfarm payrolls" indicator will be high. Has limited impact on the market. A decrease in the number of applications for unemployment benefits is a favorable factor for the growth of the dollar.

USDCHF

Minimum change - 12 points

Maximum change - 291 points

Average change - 38 points

5 times out of 115 the price returned - 5%

GBPUSD

Minimum change - 14 points

Maximum change - 213 points

Average change - 46 points

16 times out of 115 the price returned - 14%

EURUSD

Minimum change - 12 points

Maximum change - 244 points

Average change - 44 points

8 times out of 115 the price returned - 7%

USDJPY

Minimum change - 11 points

Maximum change - 276 points

Average change - 37 points

9 times out of 115 the price returned - 8%

USDCAD

Minimum change - 11 points

Maximum change - 118 points

Average change - 34 points

4 times out of 115 the price returned - 4%

AUD/USD

Minimum change - 15 points

Maximum change - 136 points

Average change - 33 points

6 times out of 115 the price returned - 6%

NZDUSD

Minimum change - 11 points

Maximum change - 128 points

Average change - 32 points

7 times out of 115 the price returned - 6%

On average, this news does not have a significant impact on the market, but very rarely significant movements exceeding 250 points are possible. This does not apply to USDCAD, AUDUSD and NZDUSD - these three currencies practically do not react at all to the release of this news.

The interest rate at which banks place available funds in accounts with the US Federal Reserve System to other banks overnight (overnight - for one day, literally, “through the night”). The US Federal Reserve controls the level of the federal funds interest rate through transactions in government securities. The decision to change the interest rate is made by the Financial Markets Committee, part of the US Federal Reserve System, based on which other financial organizations (commercial banks) set their interest rates on loans and deposits. The interest rate is one of the most important mechanisms by which the country's economy is regulated. In particular, issues of economic growth rates and inflationary pressure are regulated precisely through the interest rate. The market reaction to interest rates is one of the strongest. In fact, the Fed's decision on how the base rate will change is a key point in the markets determining which way to go next. All economic policy directly depends on what interest rate is present at the moment.

USDCHF

Minimum change – 9 points

Maximum change – 319 points

Average change – 48 points

3 times out of 42 the price returned – 7%

GBPUSD

Minimum change – 6 points

Maximum change – 203 points

Average change – 55 points

2 times out of 42 the price returned - 5%

EURUSD

Minimum change – 9 points

Maximum change – 190 points

Average change – 57 points

3 times out of 42 the price returned – 7%

USDJPY

Minimum change – 6 points

Maximum change – 202 points

Average change – 38 points

5 times out of 42 the price returned – 12%

USDCAD

Minimum change – 12 points

Maximum change – 108 points

Average change – 40 points

5 times out of 42 the price returned – 12%

AUD/USD

Minimum change – 6 points

Maximum change – 264 points

Average change – 52 points

6 times out of 42 the price returned - 15%

NZDUSD

Minimum change – 6 points

Maximum change – 198 points

Average change – 58 points

3 times out of 42 the price returned – 7%

As can be seen from the statistics offered above, the interest rate really matters for the movement of the currency - the average price change after the release of this news can be expected at least 50 points, and in some cases it reaches 200-300 points. The only exception is the USDCAD pair. I don’t know what this is connected with, but this is a fact – the average change is 40 points with a maximum of only 108.

Detailed report of the Federal Reserve Monetary Policy Committee meeting regarding the interest rate decision released two weeks earlier. The publication of the report may provide insight into the regulator's future monetary policy. Has a strong influence on the market.

USDCHF

Minimum change – 9 points

Maximum change – 285 points

Average change – 35 points

9 times out of 99 the price returned – 9%

GBPUSD

Minimum change – 11 points

Maximum change – 220 points

Average change – 42 points

11 times out of 99 the price returned – 11%

EURUSD

Minimum change – 14 points

Maximum change – 209 points

Average change – 39 points

5 times out of 99 the price returned - 5%

USDJPY

Minimum change – 6 points

Maximum change – 298 points

Average change – 36 points

6 times out of 99 the price returned - 6%

USDCAD

Minimum change – 8 points

Maximum change – 122 points

Average change – 32 points

6 times out of 99 the price returned - 6%

AUD/USD

Minimum change – 15 points

Maximum change – 264 points

Average change – 35 points

6 times out of 99 the price returned - 6%

NZDUSD

Minimum change – 6 points

Maximum change – 193 points

Average change – 36 points

3 times out of 99 the price returned - 3%

Indeed, the impact of this news on the market is no less powerful than the decision on the interest rate. Once again, USDCAD remains on the sidelines for mysterious reasons.

It is the sum of all goods and services produced by local and foreign companies. It is the main indicator reflecting the state of the national economy. GDP is expressed as an index relative to the previous period of reference. Has a significant impact on the market. GDP growth leads to an increase in the exchange rate of the national currency. After the release of preliminary data, this indicator is recalculated twice more.

USDCHF

Minimum change – 9 points

Maximum change – 172 points

Average change – 42 points

4 times out of 55 the price returned - 8%

GBPUSD

Minimum change – 14 points

Maximum change – 222 points

Average change – 60 points

2 times out of 55 the price returned - 4%

EURUSD

Minimum change – 13 points

Maximum change – 218 points

Average change – 59 points

1 time out of 55 the price returned - 2%

USDJPY

Minimum change – 8 points

Maximum change – 173 points

Average change – 36 points

5 times out of 55 the price returned – 9%

USDCAD

Minimum change – 12 points

Maximum change – 155 points

Average change – 37 points

5 times out of 55 the price returned – 9%

AUD/USD

Minimum change – 10 points

Maximum change – 142 points

Average change – 46 points

5 times out of 55 the price returned – 9%

NZDUSD

Minimum change – 12 points

Maximum change – 144 points

Average change – 46 points

2 times out of 55 the price returned - 4%

The release of this news has a fairly strong impact on currency pairs such as EURUSD and GBPUSD, causing movements of an average of 60 points. The impact on NZDUSD, AUDUSD and USDCHF is of medium strength – 40-50 points. USDCAD and USDJPY react sluggishly on average – 36-37 points. At the same time, the maximum possible market reaction to the release of this news is in the range from 150 to 220 points for all currency pairs.

In the trader's lexicon, sounding like "nonki", this payroll, according to which salaries are paid to employees, is a very strong indicator showing changes in the level of employment in the country. An increase in this indicator characterizes an increase in employment and leads to an increase in the dollar exchange rate. It is called "the indicator that moves markets." A rule of thumb is that increasing its value by 200,000 per month equates to a 3.0% increase in GDP. Published, as a rule, on the first Friday of each month. A large change (100-200 thousand) can cause very strong movements in the market.

USDCHF

Minimum change – 16 points

Maximum change – 154 points

Average change – 58 points

11 times out of 63 the price returned – 18%

GBPUSD

Minimum change – 17 points

Maximum change – 180 points

Average change – 66 points

12 times out of 63 the price returned – 19%

EURUSD

Minimum change – 16 points

Maximum change – 203 points

Average change – 70 points

9 times out of 63 the price returned – 15%

USDJPY

Minimum change – 13 points

Maximum change – 173 points

Average change – 56 points

5 times out of 63 the price returned – 8%

USDCAD

Minimum change – 10 points

Maximum change – 151 points

Average change – 54 points

7 times out of 63 the price returned – 11%

AUD/USD

Minimum change – 13 points

Maximum change – 203 points

Average change – 52 points

2 times out of 63 the price returned - 4%

NZDUSD

Minimum change – 18 points

Maximum change – 159 points

Average change – 48 points

6 times out of 63 the price returned - 10%

The release of this news should be taken into account even when working on daily charts. Moreover, on average, the price movement after the release of this news is within 50-60 points, and on all currency pairs. The maximum possible movement is within 150-200 points. Two features of the market's reaction to this news are interesting. Firstly, all the majors react quite strongly to the release of the news, as evidenced by the high value of the average price change. Secondly, quite often after 6 hours the price can be seen at the same level at which it was before the news.

ISM Manufacturing PMI - business optimism index, includes data on: orders, products, employment, inventories, delivery times, export and import prices. Determined based on a survey of managers of 4,000 companies. The overall index is calculated by weighing five indices: orders - 30%, products - 25%, employment - 20%, supplies - 15%, inventories - 10%. An index value above 50% is considered an indicator of growth in production activity; less than 50% indicates a slowdown in growth rates. As a rule, as the index approaches 60, investors begin to worry about a possible overheating of the economy, rising inflation and an increase in the Fed rate. When it drops to 40, talk of a recession begins.
The indicator's value is published on the first business day of the month and may precede the industrial production report published in the middle of the month.

ISM Non-Manufacturing PMI is an indicator that is calculated monthly based on a survey of several hundred representatives of the non-manufacturing sector. Answers are given based on a comparison of the current month with the last. Using questions without any numbers, they are asked to answer whether their level of activity is “better,” “worse” than last month, or “stayed the same.” Compiled from responses to non-production activity results, the indices show the rate and direction of change, if any, for each activity analyzed.
The indicator value at 50 points indicates that during the reporting period there was neither expansion nor contraction of the non-manufacturing sector. Exceeding this mark means growth in the sector. If the indicator is below 50, we can say that the services sector is experiencing a slowdown.
Often the value of this index is influenced by psychological factors rather than the actual state of affairs. Its value is published on the first day of each month. Has a significant impact on the market. An increase in the value of this index is a favorable factor for the growth of the dollar.

USDCHF

Minimum change – 11 points

Maximum change – 198 points

Average change – 41 points

6 times out of 58 the price returned – 11%

GBPUSD

Minimum change – 9 points

Maximum change – 183 points

Average change – 47 points

2 times out of 58 the price returned - 4%

EURUSD

Minimum change – 8 points

Maximum change – 222 points

Average change – 46 points

7 times out of 58 the price returned – 12%

USDJPY

Minimum change – 7 points

Maximum change – 189 points

Average change – 39 points

5 times out of 58 the price returned – 9%

USDCAD

Minimum change – 9 points

Maximum change – 135 points

Average change – 34 points

4 times out of 58 the price returned – 7%

AUD/USD

Minimum change – 10 points

Maximum change – 116 points

Average change – 33 points

5 times out of 58 the price returned – 9%

NZDUSD

Minimum change – 11 points

Maximum change – 110 points

Average change – 32 points

6 times out of 58 the price returned – 11%

As can be seen from the statistics, USDCHF, GBPUSD, EURUSD and USDJPY react more or less actively to the release of these indices, while the price moves on average by 40 or more points, up to a maximum of 180-220. USDCAD, AUDUSD and NZDUSD pairs react weakly, on average barely crossing the 30 pips mark, in rare cases showing movements up to 110-130 pips.

Consumer Price Index (CPI) - Consumer Price Index. Determines the change in the level of various prices for a “fixed basket” of goods and services. When calculating the index, prices for imported goods and services are taken into account. The consumer price index is the main indicator of the level of inflation in the country. This index is analyzed together with the "PPI" (Industrial Price Index) indicator. If the economy develops under normal conditions, then an increase in CPI and PPI indicators may lead to an increase in the main interest rates in the country. This, in turn, leads to an increase in the dollar exchange rate, as the attractiveness of investing in a currency with a higher interest rate increases. Its value is published in the middle of each month (shortly after the release of the PPI indicator).

Producer price Index (PPI) - Producer price index. Determines the change in the price level for the “basket” of goods produced in industry. Until 1978 it was called the "Wholesale price Index". This index consists of two parts: input prices (semi-finished products, components, etc.) and output prices (finished products). The output price includes the cost of labor and provides an indication of the inflation associated with changes in labor costs. The industrial price index is considered more reliable if it does not take into account the food and energy industries. When calculating the index, prices for imported goods and services are not taken into account. Has a significant impact on the market. In anticipation of an increase in key interest rates, an increase in its value leads to an increase in the dollar exchange rate. Published every month, usually the week after the release of "Nonfarm payrolls".

USDCHF

Minimum change – 12 points

Maximum change – 339 points

Average change – 48 points

5 times out of 60 the price returned – 9%

GBPUSD

Minimum change – 17 points

Maximum change – 217 points

Average change – 50 points

5 times out of 60 the price returned – 9%

EURUSD

Minimum change – 12 points

Maximum change – 247 points

Average change – 59 points

7 times out of 60 the price returned – 12%

USDJPY

Minimum change – 6 points

Maximum change – 95 points

Average change – 33 points

8 times out of 60 the price returned – 14%

USDCAD

Minimum change – 9 points

Maximum change – 151 points

Average change – 37 points

2 times out of 60 the price returned - 4%

AUD/USD

Minimum change – 9 points

Maximum change – 148 points

Average change – 42 points

5 times out of 60 the price returned – 9%

NZDUSD

Minimum change – 10 points

Maximum change – 106 points

Average change – 36 points

3 times out of 60 the price returned - 5%

These indices have a really serious impact on the USDCHF, GBPUSD, EURUSD pairs. The average price movement for these pairs is from 50 points, the maximum is 220-340. USDJPY, USDCAD, AUDUSD, NZDUSD react much weaker - the average movement is up to 40 points and the maximum is 100-150.

The index shows changes in sales volumes in retail trade. Characterizes the level of consumer spending and demand. This indicator is divided into “car sales” and “everything else sales”. Since the number of cars sold is a very variable value, the most accurate information is contained in the part of the indicator that does not take into account “car sales”. The growth in retail sales is a positive factor for the development of the national economy and leads to an increase in the exchange rate of the national currency. Has seasonal dependence (Christmas, beginning of the school year). Published in the middle of each month.

USDCHF

Minimum change – 11 points

Maximum change – 188 points

Average change – 44 points

3 times out of 41 the price returned – 8%

GBPUSD

Minimum change – 19 points

Maximum change – 132 points

Average change – 42 points

6 times out of 41 the price returned – 15%

EURUSD

Minimum change – 11 points

Maximum change – 235 points

Average change – 54 points

3 times out of 41 the price returned – 8%

USDJPY

Minimum change – 13 points

Maximum change – 206 points

Average change – 36 points

5 times out of 41 the price returned – 12%

USDCAD

Minimum change – 9 points

Maximum change – 132 points

Average change – 34 points

9 times out of 41 the price returned – 22%

AUD/USD

Minimum change – 12 points

Maximum change – 128 points

Average change – 35 points

1 time out of 41 the price returned - 3%

NZDUSD

Minimum change – 14 points

Maximum change – 157 points

Average change – 32 points

4 times out of 41 the price returned - 10%

The release of this news does not significantly affect the price, in rare cases leading to a movement of more than 200 points. Most often, this movement is in the range of 40-50 points for USDCHF, GBPUSD and EURUSD and lower for other pairs, and the price in most cases rolls back at least half of the movement. It is also not necessary to take this news into account when trading on daily timeframes, but it is advisable - occasionally the movement can exceed 100 points, which is not the most pleasant event even for daily charts.

Trade Balance is the ratio between the sum of prices of goods exported outside a given state and the sum of prices of goods imported into the territory of that state. Those. difference between export and import. If the sum of prices of exported goods exceeds the sum of prices of imported goods, then the trade balance is active (positive balance); if imports exceed exports, it is passive (negative balance). A positive balance (or a decrease in the negative balance) is a favorable factor for the growth of the national currency. Has a significant impact on the market. Its value is published on the third week of each month (usually Thursday).

USDCHF

Minimum change – 12 points

Maximum change – 151 points

Average change – 37 points

6 times out of 32 the price returned – 19%

GBPUSD

Minimum change – 16 points

Maximum change – 112 points

Average change – 51 points

3 times out of 32 the price returned - 10%

EURUSD

Minimum change – 15 points

Maximum change – 229 points

Average change – 51 points

4 times out of 32 the price returned – 13%

USDJPY

Minimum change – 11 points

Maximum change – 111 points

Average change – 37 points

2 times out of 32 the price returned - 7%

USDCAD

Minimum change – 12 points

Maximum change – 129 points

Average change – 41 points

5 times out of 32 the price returned – 16%

AUD/USD

Minimum change – 10 points

Maximum change – 117 points

Average change – 33 points

4 times out of 32 the price returned – 13%

NZDUSD

Minimum change – 9 points

Maximum change – 105 points

Average change – 31 points

3 times out of 32 the price returned - 10%

Judging by the statistics, the release of this news significantly affects only the EURUSD and GBPUSD pair - the average movement is more than 50 points. Moreover, only for EURUSD this movement can exceed 200 points. For all other currency pairs, the average movement does not exceed 40 points, and the maximum is 120.

Of course, how the price will react in this case greatly depends on what will be said by one or another politician. Still, I think some statistics can be taken into account.

USDCHF

Minimum change - 10 points

Maximum change - 135 points

Average change - 39 points

6 times out of 65 the price returned - 9%

GBPUSD

Minimum change - 10 points

Maximum change - 216 points

Average change - 49 points

4 times out of 65 the price returned - 6%

EURUSD

Minimum change - 12 points

Maximum change - 160 points

Average change - 49 points

4 times out of 65 the price returned - 6%

USDJPY

Minimum change - 7 points

Maximum change - 197 points

Average change - 39 points

6 times out of 65 the price returned - 10%

USDCAD

Minimum change - 9 points

Maximum change - 130 points

Average change - 30 points

7 times out of 65 the price returned - 11%

AUD/USD

Minimum change - 13 points

Maximum change - 169 points

Average change - 39 points

4 times out of 65 the price returned - 7%

NZDUSD

Minimum change - 13 points

Maximum change - 144 points

Average change - 39 points

5 times out of 65 the price returned - 8%

On average, the price does not react too strongly to speeches, meetings and conferences - from 30 to 40 points on average. At the same time, you never know what reaction there will be to this or that statement, which can lead to a price movement of 150-200 points in one direction.

As we can see from my little research, not all important news is really important. For example, the consumer confidence index on average does not cause a movement of more than 40 points. Some news, such as the trade balance, retail sales, various price indices and unemployment data are indeed worth considering, but only when dealing with certain currency pairs. But there are news, such as the Fed Interest Rate Decision, Gross Domestic Product and Nonfarm Payrolls, which simply need to be taken into account when working with any currency pair. I hope the information presented above will help you decide whether to look into news calendar and also which pairs and news are best to choose if you decide to engage in news trading.

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Best regards, Dmitry aka Silentspec
TradeLikeaPro.ru