Why does it drop when it's good news? The real reason the market moves on "expectations" - Navi+ - GogoJungle | Auto Trading - Market Analysis

Why does it go down even though it's good news? The real reason the market moves on expectations rather than events

When you are just starting FX trading, many people wonder this at least once.

"Good economic data, so why did USD/JPY fall?"

"News is favorable, yet the market moves in the opposite direction..."

Have you ever experienced something like this?

In fact, it is not rare in the foreign exchange market.

The reason is that the market places emphasis not on "what happened now" but on "what was expected before."

For example, ahead of the release of the U.S. Consumer Price Index (CPI), the market would be

"expecting the result to be quite strong."

This expectation leads many investors to buy dollars before the release.

And even if the result turns out to be as expected, there is no fresh surprise in the market.

Then,

"It was as expected."

"Let's take profits here."

There are times when selling increases and USD/JPY falls.

In other words,

good news does not necessarily mean the price will rise.

This phenomenon is frequently seen in the current USD/JPY market as well.

Before major events like employment data, FOMC, or the Bank of Japan policy meeting, market participants price in various scenarios.

And at the moment the results are announced, the market instantly judges

"Did it beat expectations?"

"Was it already discounted?"

In an instant.

Therefore, if you only look at the content of the news, there are many moments where you feel

"Why did it move in the opposite direction?"

In fundamental analysis, understanding the difference between this "expectation" and "fact" is extremely important.

The market moves by anticipating the future.

That is why, when big news comes out, you should consider not only the content but also

what the market had anticipated beforehand.

This perspective is essential.

Also, in the market

"Buy the rumor, sell the fact"

is a famous saying.

This indicates that prices rise during the buildup of expectations, and when the actual material is released, profit-taking selling tends to occur.

Of course, this does not happen every time.

Nevertheless, it is a very important concept for understanding market psychology.

Going forward when looking at the USD/JPY market,

"Buy because the news is good."

"Sell because the news is bad."

is not a simple rule to follow.

Add the perspective of how much of that news was already priced in by the market.

By developing this forward-thinking approach, you will find it easier to understand price movements than before.

The forex market moves not by the news itself but by the expectations and psychology of market participants.