Last Updated: Jul 27, 2014 03:49PM CDT
Fundies are Fundamental Announcements, which can be news events such as press conferences, bankers’ statements, etc, or specific data releases such as Non-Farm Payroll, Interest Rate decisions, and so on. We track the high-impact fundies only, based the grade assigned by Forex Factory (www.forexfactory.com/calendar.php).
Released fundies can be positive, negative, or neutral. Positive means the actual data for the fundie was better than the forecast released prior to the fundie. Negative means the actual data for the fundie was worse than the forecast released prior to the fundie. Neutral means it was either the same as or minimally different from the forecast released prior to the fundie.
The market builds in the forecasted result as part of their decision making process when trades are placed. Thus, if a fundie release is markedly different from what they have built into their decision, they must quickly react and price that data into their open positions. This can cause very quick, volatile moves in the pairs affected by the fundie, which is why new traders are instructed to get flat (be out of all trades which may be affected) before a fundie. Once the fundie effect has been shaken off, the market will often return to the same structural plan it had been working on prior to the fundie.
Example: Non-Farm Employment Change July 3, 2014.
Previous: 224K, forecast 214K, actual 288K. The forecast was for 214K new jobs to have been created in the past month. Since the market made trades based on a result of 214K but the actual was higher at 288K, this is a “dollar positive” fundie. If you think of the pairs, say USD/JPY, a positive fundie will drive the USD price up and the JPY price down. However, on the NZD/USD the NZD will go down as the USD goes up. It’s like a scale or teeter-totter. The USD side reacts in the direction of the fundie, whether a given pair goes up or down depends on which currency is the base pair.
On June 6, 2014 the previous was 282K, the forecast 214K, and the actual was 217K. That variance between 214K and 217K was not large enough to require any adjustment in the built-in decisions, so it was a neutral fundie.
All pairs have fundies at multiple points during the week and it is the trader’s job to know when they are taking place and to take the appropriate action. ProAct has a great tool to remind you of the fundies which can be set to audibly alert you as they are released, but in your time zone. That tool is the Fundie Control Center described in a separate knowledge base question