Surprise versus consensus: the number alone means nothing

[Fairman]

Surprise versus consensus: the number alone means nothing

A strong jobs figure is not automatically good for the dollar. What matters is the comparison against expectations. A print of 200,000 jobs is bullish if the consensus was 150,000 and bearish if it was 250,000.

For scalpers, this means that reacting to the headline without checking the forecast is guesswork. The initial move often reflects the surprise, but components such as revisions, wages, and unemployment can change the story within seconds.

Algorithms parse the data in milliseconds and move price before a human can read the numbers. Retail traders cannot compete in that first instant, and trying leads to chasing.

The better approach is to wait for the algorithmic dust to settle, then assess how the market interprets the release. If price moves in a direction and holds after a few minutes, a trade in that direction has a clearer basis.

Keeping a record of the surprise value and the reaction pattern shows whether the first move tends to hold or reverse for the pair.

Has the first move after a release proven more reliable than the second, or the other way around?

[Amanhasnoname]

I used to open a trade within seconds of a release and found that I was usually buying the first spike and getting out near the low of the pullback. The turning point was keeping a simple table: the forecast, the actual number, the direction of the first five minute move and the direction after thirty minutes. After around twenty releases of nonfarm payrolls and CPI, the pattern was clearer than any opinion I had.

The first move matched the thirty minute direction only about half the time, and when revisions or wages contradicted the headline, it was lower. The cases where price held its direction for ten minutes with a normal spread were the only ones I traded, usually with half my usual size.

I also stopped using the headline comparison alone and started reading the sub items on the day, even briefly. A strong number with a downward revision to the previous month was one of the cleanest reversal setups in my notes.