Henry Liu
Former FPA Special Consultant
- Messages
- 473
We’ll be trading the UK Consumer Price Index (CPI) release at 4:30am NY Time today. We’ll be looking at the yearly release figure and the market could react with lots of volatitility as CPI is the basic measurement of Inflation, therefore expect to see more exaggerated moves if we get a huge surprise release. Here is the forecast:
4:30am NY Time UK CPI y/y Forecast 3.1% Previous 3.1%
ACTION: GBP/USD BUY 3.4% SELL 2.8%
The Trade Plan
We are looking for a safe deviation of 0.3% for SELL and 0.3% for BUY. If the Inflation number increases to of 3.4%, which is above BOE’s inflation target, we will BUY of GBP/USD. If the Inflation number decreases to 2.8% or less, we’ll look to SELL GBP/USD. Historically, even with a slight difference of 0.1%, market usually overreacts. If our deviation is hit, there is a strong possibility that the market will move 50 pips immediately.
We'll be looking to trade this release using my after-news retracement method. We'll wait for the release, wait for market spike, then wait for a decent retracement before jumping in. For more information on my trading methods:
Henry's News Trading Methods.
The Market
EURUSD is consolidating from recent gains and it is likely to keep GBPUSD under pressure as market reevaluate current levels. With GBPUSD reaching above the 1.600 psychological and technical level, the upside potential for the pair is rather limited.
Furthermore, BOE's ambiguous stance on monetary policy will turn buyers away as traders wait for better insights in the upcoming MPC Meeting Minutes... Market will most likely fall into a holding pattern following the broader markets, such as the equity and fixed income.
Additional Thoughts
With CPI remaining above the 3% target, if we see it trending up, BOE may have to lean on hiking rates soon, or at least dial down talks for stimulus. This would significantly boost GBP demand. However, if we get 2.8%, then it would increase expectation for stimulus, thus weaken the Sterling significantly.
Pre-news Consideration
I believe we should stay out of the market before the release.
DEFINITION
“CPI, Consumer Price Index, is a statistical estimate of the movement of the prices of goods and services bought for consumption purposes by households. Its computation uses price data collected for a sample of goods and services from a sample of sales outlets in a sample of locations for a sample of times and estimates of the shares of the different expenditures in the total covered by the index which are usually based upon expenditure data obtained for sampled periods from a sample of households Wikipedia).” It is also known as the “True Cost of Living”.
Historical Data & Chart For UK CPI y/y
Thanks,
4:30am NY Time UK CPI y/y Forecast 3.1% Previous 3.1%
ACTION: GBP/USD BUY 3.4% SELL 2.8%
The Trade Plan
We are looking for a safe deviation of 0.3% for SELL and 0.3% for BUY. If the Inflation number increases to of 3.4%, which is above BOE’s inflation target, we will BUY of GBP/USD. If the Inflation number decreases to 2.8% or less, we’ll look to SELL GBP/USD. Historically, even with a slight difference of 0.1%, market usually overreacts. If our deviation is hit, there is a strong possibility that the market will move 50 pips immediately.
We'll be looking to trade this release using my after-news retracement method. We'll wait for the release, wait for market spike, then wait for a decent retracement before jumping in. For more information on my trading methods:
Henry's News Trading Methods.
The Market
EURUSD is consolidating from recent gains and it is likely to keep GBPUSD under pressure as market reevaluate current levels. With GBPUSD reaching above the 1.600 psychological and technical level, the upside potential for the pair is rather limited.
Furthermore, BOE's ambiguous stance on monetary policy will turn buyers away as traders wait for better insights in the upcoming MPC Meeting Minutes... Market will most likely fall into a holding pattern following the broader markets, such as the equity and fixed income.
Additional Thoughts
With CPI remaining above the 3% target, if we see it trending up, BOE may have to lean on hiking rates soon, or at least dial down talks for stimulus. This would significantly boost GBP demand. However, if we get 2.8%, then it would increase expectation for stimulus, thus weaken the Sterling significantly.
Pre-news Consideration
I believe we should stay out of the market before the release.
DEFINITION
“CPI, Consumer Price Index, is a statistical estimate of the movement of the prices of goods and services bought for consumption purposes by households. Its computation uses price data collected for a sample of goods and services from a sample of sales outlets in a sample of locations for a sample of times and estimates of the shares of the different expenditures in the total covered by the index which are usually based upon expenditure data obtained for sampled periods from a sample of households Wikipedia).” It is also known as the “True Cost of Living”.
Historical Data & Chart For UK CPI y/y
Thanks,
Last edited by a moderator:
