Trade Examples
S&P 500 and Non-Farm Payrolls
Firstly, we will look at the effect of Non-farm Payrolls on the S&P500. Non-farm payrolls is the most closely watched indicator in the Employment Situation, considered the most comprehensive measure of job creation in the US. Such a distinction makes the NFP figure highly significant, given the importance of labour to the US economy. On a whole if the number beats expectations we are looking to buy the market and alternatively if the reading is worse we are looking to sell.
The market expectations for this figure were 181k. Below is a chart of how the S&P500 was trading prior to the release of the number.
The number came out at over 263k. What do you expect to happen?
Below is a chart of this market after the number has been released.
As you can see, the market has rallied higher moving approximately 25 pips after the number or about 0.6%. If you had invested $1m ($5000 trading capital typically required), the profit would have been a around $6000 in a matter of minutes, leaving you with 120% profit on your trading capital.
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Crude Oil and Crude Oil Inventories
Looking at the effects of Crude Oil Inventories on Crude Oil prices. The COI report is used to assess weekly US supply and demand for crude oil, gasoline, diesel, heating oil and natural gas. The report outlines activity in the energy sector, includes weekly energy supply and consumption rates. The energy markets tend to rise when inventories are falling, and fall when inventories are rising and are above the market consensus estimate.
The market expectations for this figure was 1.1M barrels. Below is a chart of how crude was trading before the release of the number.
The number came out at -4.0M barrels, which means a decrease in inventories by more than expected hence an increase in demand.
In this example we can see Crude Oil Inventories came out at -4.0M vs 1.1M expected. This read shows a decrease in inventories (increase in demand) and as such we can see the price of Crude rising from pre-data levels.
The market rallied by about 1% therefore if you had sold $1m worth of oil contracts ($10,000 trading capital required typically), you would have made about $10,000 in a matter of a few minutes, leaving you with a 100% profit on your trading capital.
AUD/USD and the Australian Interest Rate decision
Looking at the effect on the Reserve Bank of Australia Rate Decision on the Australian Dollar vs. the US Dollar. Changes in rates affect interest rates in consumer loans, mortgages, and bond rates. Since short term interest rates essentially reflect the return on holding a currency, rate decisions usually affect the exchange rate of the Australian Dollar. An increase in rates will see the Australian Dollar appreciate whereas a rate decrease will cause the currency to fall against its peers.
The market expectations for this figure were 1.25%. Below is a chart of how AUD/USD was trading prior to the release of the number.
The rate announcement came out shortly after and it was announced that rates were increased to 1.5%. How would you trade it?
In this example we can see the RBA increase rates 105% vs 1.25% expected. This quarter % increase causes the Australian Dollar to appreciate significantly against the US Dollar, an increase of approximately 50 pips.
The market has rallied by about 50 pips, therefore if you had bought $1m AUD/USD ($2,500 trading capital typically required), you would have made about $5000, providing a profit of 250% on your trading capital within a matter of a few minutes.
Gold and the US GDP figure
Looking at gold, over the US GDP figure. It is important to note that gold is considered a safe haven product, so if any economic data comes out worse than expected, you would expect to see traders buy gold as a flight to safety mind frame enters the market. A safe haven is a product that traders turn to when they think the economy is not performing well.
The GDP was expected at 3.6% QonQ. Here is a chart showing how gold was trading prior ot the data release.
The GDP came out at 3.5%. How would you expect the market to react?
As you can see the market has rallied higher, which would be expected as the data came out worse than expected, which would make traders feel the US economy is contracting.
The market rallied $15 over the next 25 minutes. if you had invested $1m ($10,000 trading capital typically), you would have made about $10,000 profit in a short period, leaving you with a 100% profit on your trading capital.
EUR/USD and impact of the ECB Press Conference
Looking at the effect of the Mario Draghi press conference on the price of the EUR/USD. Going into the ECB rte decision consensus was for there to be no change in interest rates. as expected rates were left unchanged at 0%. The main focus of the markets was the press conference which was scheduled to start at 13:30pm.
- Below you have the chart before the press conference started.
- During the conference, you hear negative comments about the Eurozone economy and rates. What would you look to do?
In this example we can see a strong rally in the Euro. The main focus of the press conference centred around comments that not all members of the ECB were in agreement with keeping rates unchanged, and even some in favour of negative interest rates.
This initially sent the Euro tumbling and then managed to recover and rally as below;
This would have allowed for a potential profit of 80+ pips, showing how the market sentiment can be driven by the monetary stance of central bank politicians.
If you had sold 1m EUR/USD ($2500 trading capital required typically), you would have made $8000 or 320% on your trading capital.