But here's the thing: the market cares about new information and not known information. The market is constantly in flux pricing and repricing future expectations based on the incoming information.
Such changes don't happen that often and that's why a trader's biggest strength is patience. You need to sit on your hands until that new piece of information that changes expectations comes out and gives you the opportunity to extract money from it.
The first Israel attack against Iran was new information and the market reacted immediately with big moves as it priced a geopolitical risk premium. After that we just consolidated because the only thing the market cares about regarding the Middle East is oil supply. That's because oil prices can have a big impact on growth and inflation.
On the last day of the Israel-Iran conflict we also got a change in stance from Fed's Bowman. She's been a hawkish voter for a long time but that day she delivered some dovish comments and even opened the door for a rate cut in July if inflation were to be muted. If she had delivered the usual hawkish comments, the market wouldn't have cared because it would have been a known information. But she completely changed her stance going from hawkish to dovish.
Bowman's comments triggered a selloff in the US dollar and the bearish momentum remained strong for days as the market priced in a potential third cut by year-end with some probabilities of a cut in July already.
Most traders give back money to the market in such rangebound times. Waiting for new information that changes underlying expectations is what saves from such rangebound times and increases the profits over time. Anyone can make money in the markets, but very few can keep it.
The last thing I would add is to stop focusing on the present because the present is already in the price. Always focus on the future (6-12 months ahead). Always ask yourself how this thing could change the future? Because that's where the market will be heading to. The NFP report tomorrow is not important per se, what's important is how it's going to change the Fed's stance. The NFP is the present, how the data could impact the Fed's judgement is the future.
This article was written by Giuseppe Dellamotta at www.forexlive.com. Read More Details
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