Forex Signal (Tue January 18, 2011 4:30am EST NY Time) UK CPI y/y

[Henry Liu]

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 3.3% Previous 3.3%
ACTION: GBP/USD BUY 3.5% SELL 3.0%

The Trade Plan
We are looking for a safe deviation of 0.3% for SELL and 0.2% for BUY. If the Inflation number increases to of 3.5%, which is way above BOE’s inflation target, we will BUY of GBP/USD. If the Inflation number decreases to 3.0% 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
Medium forecast by Bloomberg expect CPI y/y figure to be around 3.3%. With inflationary pressure remaining resilient on top of VAT tax increases, market is definitely expecting a stronger release today.

Additional Thoughts
GBP is likely to remain slightly bullish benefiting from pre-news sentiment of this release and the rather bullish sentiment of Euro. Therefore, we should be paying attention to any possible "buy on rumor, sell on news" market condition.

Pre-news Consideration
I think there should be some pre-news buying of Sterling today, therefore if GBPUSD drops to support levels, I'd go LONG before the schedule.

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,

 

[mootonandy]

Thanks a lot for this Henry. I was wondering how we can be sure if the retracement has finished - I was thinking we could use CCI hidden divergence but I am not sure.

 

[Andrew01]

This is the first time i have taken an interest in your trade alerts> I have just watched your video on trading Non-Farm Payroll using retracement method. It is fantastic. Thanks for helping out and more power to your elbows

 

[Maluco]

Henry is amazing I have to say... but to this date I can't get it right on "when" to get in and realise when retracement has ended.

I reckon it comes with experience.

 

[PipDog]

Try This

Henry is amazing I have to say... but to this date I can't get it right on "when" to get in and realise when retracement has ended.

I reckon it comes with experience.

2 methods to consider. First is having a percentage retracement in your mind, say 50%, then let that be your trigger and take what you get. The other method is the WAG...Wild Ass Guess.

Both will probably get you the same results over a year.

 

[tantric]

Many thanks Henry for your all job.Greetings and happy pips.Greg

 

[PipDog]

Henry is amazing I have to say... but to this date I can't get it right on "when" to get in and realise when retracement has ended.

I reckon it comes with experience.

OK, so here's how I did this one. I watched the news...big deviation, so, I expected big response. The spike was about 60 pips. I was denied trade on 2 accounts (GBPUSD) on the spike...tried to buy at around 1.5977...brokers say "no dice". So, on to the retrace trade.

I watched as it went to about 1.6040, then backed up to right below 1.6020. I had made my decision to jump in with 2 lots at that point with a 25 pip SL. It reversed at that point (some luck here). I took profit at 1.6035 and 1.6045.

Not rocket science, but not exactly shooting craps either...

 

[Maluco]

OK, so here's how I did this one. I watched the news...big deviation, so, I expected big response. The spike was about 60 pips. I was denied trade on 2 accounts (GBPUSD) on the spike...tried to buy at around 1.5977...brokers say "no dice". So, on to the retrace trade.

I watched as it went to about 1.6040, then backed up to right below 1.6020. I had made my decision to jump in with 2 lots at that point with a 25 pip SL. It reversed at that point (some luck here). I took profit at 1.6035 and 1.6045.

Not rocket science, but not exactly shooting craps either...

Good one man.
I did well too. Deviation was right on!

 

[mootonandy]

I was going to try and do it on the 5 min chart but saw no clear signal. Is it not just easier to trade the spike if you can or is it not possible to get your order in quick enough?