Today (at the time of writing this email at 11:00 GMT), GBPUSD going north as a report showed U.K. services expanded at the fastest pace since 2006 as companies reported a surge in demand (based on Bloomberg).
The interesting thing I noticed is that in FM after UK Services PMI number came out better than expected, it only went up 4 pips. But then gradual move started to happen and then price went up 50 pips for the next 2 hours.
Would like to hear your perspective on why this kind of movement happen slowly not likegoing up in first couple minutes after number came out like usual.
Yes, my records show a whipsaw FM, then a move of +43 pips or so over the next two hours for GBP/USD , for the Services PMI on Sept 4, 2013.
As for reasons why such a delayed reaction happens, I am not sure. Sometimes, some delayed moves happen because of a temporary battle of conflicting scenarios. I am not entirely sure in this case. Sometimes, these delayed moved can happen even though there is no FM spike, or if there is a whipsaw FM. But you can usually try to think macro logically about what could happen.
Since it was better GBP data (according to my records), it should have gone up +20 to +30 pips or so. When it didn’t do that, it could be a potential inefficiency, since you can buy GBP and go long, even though it didn’t spike up yet and have the stronger GBP data and intraday macro players and sentiment supporting your trade. Because if it did spike up, it would have tripped topside stops, and would have been potentially overbought from an intraday perspective.
This would be the type of news trade called the “significant sentiment shift setting tone for the day.” Where the market may or may not do a FM spike, but it sets the tone for the next 30 min – 2 hours or so, or if it is a big shift, for a ODVE or MDMM, etc. There doesn’t always have to be a FM spike to signal a trade. Sometimes you can just interpret information flow and news and ask yourself for example for a bullish trade “hey, why isn’t the market going up? It should be going up. This piece of information flow/news will probably cause the market to rise, and even though it hasn’t risen yet, it gives me an attractive opportunity to get in at a decent price”
Sometimes there is just a delayed move. I also saw it happen with Crude oil both today when the higher U.S. ISM Non-manufacturing PMI came out higher, and on Sept 3rd, where the higher U.S. ISM Manufacturing PMI came out. In both cases, Crude oil did not make a FM spike higher, but kind of chopped around for a few minutes, then started a decent intraday rise over the next few hours, etc. You can just try to use common macro sense: for example for Crude: “higher US data, Crude can go higher today, so make sure I don’t short it.” Similar situation with the GBP where the stronger data caused a delayed reaction.
My macro model has been telling me to make sure I don’t buy the Fresh intraday highs and topside stops in GBP/USD, since there is typically macro exhaustion. (As you can see a similar thing happened on Sept 3 where it tripped topside stops above 1.5600, then fell back, and also again today on Sept 5, where it tripped stops above 1.5650 and then fell back.) It has been like that for the past week or two. Alternatively, you could have also faded the tripping of the topside stops in GBP/USD for an intraday play.