Forex Signal (Friday October 21, 2011 NY TIME 7:00am EDT) – CA Core CPI

[Stavro D'Amore]

Hello team,

we have CA CORE CPI due today please find my trade plan below.

CA Core CPI m/m
Forecast 0.2%
Previous 0.4%
Pair to trade: USD/CAD

Numbers we need: BUY USD/CAD -0.1%
SELL USD/CAD 0.3%

Economical Impact: Critical
Typical Result: Good for currency
Occurrence: monthly, about 20 days after the month ends


About our Triggers:
CA Core CPI is forecasted to arrive at 0.4%. If we get -0.1% or lower I will look to enter a LONG position on USD/CAD and if we get 0.3% or greater I will go SHORT on USD/CAD. Should this report be triggered, we can expect to see about 50pips on the initial spike. We also have CPI m/m due to come out the same time and I cannot see this being a conflict.

NOTE: we are trading Core CPI.


What is it? Why does the market care?

The Core Consumer Price Index (CPI) measures the changes in the price of goods and services excluding food and energy. The CPI measures price change from the perspective of the consumer. It is a key way to measure changes in purchasing trends and inflation in Canada.

Consumer prices account for a majority of overall inflation. Inflation is important to currency valuation because rising prices lead the central bank to raise interest rates out of respect for their inflation containment mandate. The common way to fight inflation is raising rates, which may attract foreign investment.

A higher than expected reading should be taken as positive/bullish for the CAD.
A lower than expected reading should be taken as negative/bearish for the CAD.

Method I use to trade this:
Stavro D’Amore Trading Method
I will look for a 30% retracement in the original spike before entering a trade; I will close my whole position as soon as I hit the original high point of the first initial spike and place a SL at entry price. My TP level would adjust be just before a resistance level or if the chart decides to form a support level, looking at a 15 minute chart time frame.

I do recommend spike trading as an option if you are using a reliable broker and an Auto clicker.
Historical Chart and Data for CA Core CPI m/m

All the best

Stavro D’Amore

 

[PipDog]

About our Triggers: Should this report be triggered, we can expect to see about 50pips on the initial spike.


This turned out good, but it was interesting how the news was simply ignored by the market almost completely. This was a very good deviation, yet, there was no spike to speak of. Stocks and risk once again run the the show and the news is really just noise.

In this enviroment, with the FX markets taking cue from stocks so strongly correlated, you need to be very careful about simply trading on the news.

I am still short on about 25% of this USDCAD trade. Breakeven stop. Looking for at least 200 pips by mid next week if stocks continue to rally.

Anyone else catch this one? Stavro?

 

[Boko Maru]

About our Triggers: Should this report be triggered, we can expect to see about 50pips on the initial spike.


This turned out good, but it was interesting how the news was simply ignored by the market almost completely. This was a very good deviation, yet, there was no spike to speak of. Stocks and risk once again run the the show and the news is really just noise.

In this enviroment, with the FX markets taking cue from stocks so strongly correlated, you need to be very careful about simply trading on the news.

I am still short on about 25% of this USDCAD trade. Breakeven stop. Looking for at least 200 pips by mid next week if stocks continue to rally.

Anyone else catch this one? Stavro?

I got short at news of course, but when it was clear there was something wrong with the spike (i.e. price action was essentially ignoring the news), I got out with a small loss (-7 pips). But you're right; the move south seemed directly related to the risk appetite that started kicking in after the release rather than CPI. I doubt CPI had anything to do with it like you said; was just noise.

Congrats on getting a good profit out of it!

 

[PipDog]

Risk Was On

I got short at news of course, but when it was clear there was something wrong with the spike (i.e. price action was essentially ignoring the news), I got out with a small loss (-7 pips). But you're right; the move south seemed directly related to the risk appetite that started kicking in after the release rather than CPI. I doubt CPI had anything to do with it like you said; was just noise.

Congrats on getting a good profit out of it!

So, I thought with the markets all starting to look up, I would only take a sell on this one...and got it. But, the standard lot (conservative approach) I sold at the news I ended up with a bad fill and the wide spread. So, I waited it out until a few minutes later it reversed the spike completely so I sold another lot at a much better entry price. I took profit at 30 and 50 pips and I'm still holding a half lot. I'll probably try to buy it back at 1.000. We'll see if it gets there.

This is a weird reaction to the news. Looking for a sell, got it, but it didn't do much. It seems when the stock markets are leading the FX markets by the leash...risk is the whole story. Most of the FX news events are hardly making any movement. More like 'noise events'.

I am concerned anyone trading FX news in this type of enviroment, without considering what stocks are doing, is in a losing game.