Forex Signal (Thu March 17 2011, 8:30am NY Time EST) - US Core CPI m/m

Henry Liu

Former FPA Special Consultant
Messages
473
We’ll be trading US Core CPI m/m release today. CPI or Consumer Price Index, also known as the “true cost of living”, it is what drives Central Banks to raise/cut interest rate, therefore this release will be widely watched. Here’s the forecast for the CPI:

8:30am (NY Time) US Core CPI m/m Forecast 0.1% Previous 0.2%
ACTION: 0.3% BUY USDJPY / -0.1% BUY EURUSD

The Trade Plan

Our minimum tradable deviation for this release is 0.2%; if the release number (core) increases to a minimum 0.3% then we will BUY USD/JPY. If the CPI number decreases to -0.1% or less, we’ll BUY EURUSD. Historically even at a difference of 0.1%, market is likely to exaggerate its move, therefore if either of our tradable releases is hit, there is about 80% of chance market will move 50 pips within the next 90 minutes or so.

We'll be trading this release using our after news retracement trade method.

For more information on my trading methods:
Henry's news trading methods.

The Market
CPI is expected to remain steady but at a moderate rate. Market is currently slightly under pressure with inflation in both food and energy prices. If Core CPI were to jump to the upside then the market would probably react with demand for USD for the very short-term or about 2 hours.

If we do get a surprise in the inflation front, with recent encouraging growth in the housing market, improvement in the unemployment rate, and record high PMIs, market could speculate that the Federal Reserve may be addressing inflation issue sooner than later and leads to hike rates ahead of 4th quarter 2011.

Additional Thoughts
The best time to trade this release would probably be during the NY Equity market open at 9:30am as this release is not a strong market mover... unless we get a strong Retail Sales, it's probably best to stay out then.

Pre-News Consideration
There is no pre-news bias for this 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 Of US Core CPI.


Thanks,


 
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