FOREX THEORY
Market Expectations to News and Their Impact on Currencies
(Part 3)
Consensus Market Expectations
As the name implies, pricing in refers to traders having a
view on the outcome of an event and
placing bets on it before the news comes
out.
The more likely a report is to shift the price, the sooner
traders will price in consensus expectations.
How can you tell if this is the
case with the current market?
Well, that’s a tough one.
You can’t always tell, so you have to take it upon yourself
to stay on top of what the market commentary is saying and what price action is
doing before a report gets released. This will give you an idea as to how much
the market has priced in.
A lot can happen before a report is released, so keep your
eyes and ears peeled. Market sentiment can improve or get worse just before a
release, so be aware that price can react with or against the trend.
There is always the possibility that a data report totally
misses expectations, so don’t bet the farm away on the expectations of others.
When the miss occurs, you’ll be sure to see price movement occur.
Help yourself out for such an event by anticipating it (and
other possible outcomes) to happen.
Play the “what if” game.
Ask yourself, “What if A happens? What if B happens? How
will traders react or change their bets?”
You could even be more specific.
What if the report comes in under expectation by half a
percent? How many pips down will price move? What would need to happen with
this report that could cause a 40 pip drop? Anything?
Come up with your different scenarios and be prepared to
react to the market’s reaction. Being proactive in this manner will keep you
ahead of the game.
 Consensus Market Expectat...){kind=link}
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