Forex Signal (Tue September 14 2010, 4:30am NY Time EDT) - 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 2.9% Previous 3.1%
ACTION: GBP/USD BUY 3.2% SELL 2.6%


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 3.2%, which is above BOE’s inflation target, we will BUY of GBP/USD. If the Inflation number decreases to 2.6% 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
Risk aversion has strengthened on the back concerns over global economic recovery. GBP and EUR has been taking the blunt of this risk aversion movement, and this CPI release may either provide support or add more fuel to the already struggling GBP.

With BOE (Bank of England) future monetary policy direction still remain uncertain, this CPI release may not have a profound effect unless we get a significant less than expected release. The reasoning behind this analysis is that market is expecting Inflation to remain high in UK as evidenced by the recent figures... a sharp drop off in today's release may finally bring some sellers into the market, and we should be looking at the 1.5000 level for support.

Additional Thoughts
GBP's overall long-term (6 months) is still bullish as economic recovery is taking foothold in UK. I'm not looking to SELL GBP for any long periods of time and I'll definitely pay attention to support levels for possible LONG entries on reversals.

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,


 
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peti305

Wealthified Representative
Messages
198
wtf

Hello,

I'm pretty new & noob here and I have a question about this GBP CPI.

The actual number was better, even the core CPI was better, so there wasn't any conflict.

I watched the market and just before the numbers came out there was a down spike with 30 pips, and right after when the news came out there was an up spike with about 45 pips because of the positive results.

I don't understand why was the down spike ?? Everybody thought it will be a worse number or what?

Despite this things even without safe deviation I made 11 pips with the retracement strategy :)

Thank you for the great service Henry, and keep up the great work!

Peter
 

peti305

Wealthified Representative
Messages
198
-- Stop-hunting from the market-maker.
But I counted the 45-50 pips of the up spike from the bottom of the 30 pip down spike.

The pre-release price was about 1.5415 than down spike to 1.5385 then up spike to 1.5437.

Am I the only noticed this? So the real spike was only from about 1.5415 to 1.5437 ?

If yes, well, I use FXOpen demo acc with metatrader, so theyre scam ?
 
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Vladon

Private, 1st Class
Messages
34
The pre-release price was about 1.5415 than down spike to 1.5385 then up spike to 1.5437.

Am I the only noticed this? So the real spike was only from about 1.5415 to 1.5437 ?

If yes, well, I use FXOpen demo acc with metatrader, so theyre scam?
I did say that it was a stop-hunting from the market-maker, not from your broker.

The price action you described was seen at many, if not all, brokers, but nevertheless
it was a typical stop-hunting from the market-maker, that is from the very huge ever-hungry
shark, which can afford to control the way GBP/USD quotes. :) (Yes, it does exist. :))
 
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