Let’s now see how to trade the news with a directional bias in a trading scenario.

Let’s go back to our example of the U.S. unemployment rate report.

Scenario: If the U.S. Unemployment Report showed improvement, why did the USD still weaken?

Earlier, we gave examples of what could happen if the unemployment report came in light with expectations, or slightly better.

In this scenario, let’s say the unemployment rate showed a surprising DROP.

Which is a good thing since that means more people now have jobs.

But you look at your charts and the dollar is FALLING!


Isn’t the dollar supposed to rise if the unemployment rate is dropping?

There could be a couple of reasons why the dollar could still fall even though there are more people with jobs.

Reason #1: Overall Economic Outlook Still Poor

The first reason could be that the long-term and overall trend of the U.S. economy is still in a downward spiral.

Remember that there are several fundamental factors that play into an economy’s strength or weakness.

Although the unemployment rate dropped, it might not be a big enough catalyst for the big traders to start changing their perception of the dollar.

Reason #2: Positive Employment Numbers Are Temporary

Perhaps it’s right after Thanksgiving during the holiday rush. During this time, many companies normally hire seasonal employees to keep up with the influx of Christmas shoppers.

This increase in jobs may cause a short-term drop in the unemployment rate, but it’s not at all indicative of the long-term outlook for the U.S. economy.

A better way to get a more accurate measure of the unemployment situation would be to look at the number from last year and compare it to this year. This would allow you to see if the job market actually improved or not.

The important thing to remember is to always take a step back and look at the overall picture before making any quick decisions.

Now that you have that information in your head, it’s time to see how we can trade the news with a directional bias.