Forex Signal (Tue February 15, 2011 4:30am EST NY Time) UK CPI y/y

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 4.0% Previous 3.7%
ACTION: GBP/USD BUY 4.3% SELL 3.6%


The Trade Plan
We are looking for a safe deviation of 0.4% for SELL and 0.3% for BUY. If the Inflation number increases to of 4.3%, which is way above BOE’s inflation target, we will BUY of GBP/USD. If the Inflation number decreases to 3.6% 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 4.0%. It does seem that combined with one-off taxes and rise in commodities, inflation is currently out of control in UK.

Governor King will have to send an inflation letter to Osborne explaining why the current inflation is above 2.0%, and we are expecting abundant use of the word "temporary"; however, with inflation out of control and consistently pushing to the upside, BOE may not have a choice but to act sooner than later...

Additional Thoughts
We will probably see the first wave of market reaction immediately after the release, then more reaction followed by the Inflation letter... I'd definitely hold on to my position until then.

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,


 
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rebarca91

Recruit
Messages
2
I'll sell GBPUSD
enter: 1.6130
stop loss: 1.6200
limit: 1.6000

I see this like good oppotrunity. by rebarca
 

PipDog

Corporal
Messages
140
OK....Why?

I'll sell GBPUSD
enter: 1.6130
stop loss: 1.6200
limit: 1.6000

I see this like good oppotrunity. by rebarca

OK, you went short on GBPUSD. How does this relate to this news item?

Not saying it won't work out...why bring it up in the context of trading news events?
 

RahmanSL

Major
Messages
2,534
Why go in "Short" on GBP/USD at 1.6130??????

Plenty of opportunities to have gone in at 1.6150 and above level.

I am sitting on 1.6150, 1.6152, and 1.6156 all with 1.0 lot size with TP set at 1.6025
Could have taken 20pips or so profits a few times, but didn't...I'll wait it out to see if market will trend downwards.
 

njennings

Recruit
Messages
3
Thanks

Made about 20 pips on this. Thanks again Henry.

What is the reason you don't advise riding the spike?
 

RahmanSL

Major
Messages
2,534
Almost all signal adviser will say: If so-and-so happened then go "Long"...but if so-and-so goes the other way, then go "Short".

Ultimately, it's up to us Traders/Users to dissimulate which is which and go in with a trade....and a prayer.

If it makes sense to us, by all mean make your trade. If you disagree, then don't follow the signal/adviser.

If we depend solely on signals/analysis provided by "Gurus/Experts" to trade, then we are not traders, but mere followers/robots who will be completely lost without these leads.
 

Billmon77

Recruit
Messages
4
On Henry Liu

I'm agree with you RahmanSL. Henry Liu took the time to give a heads up from what he thought may happen. All he is telling us is to take a look and decide for yourself. The only ones that can cause the outcome is yourself.
 
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