Forex Signal (Tuesday August 16, 2011 NY TIME 4:30am EDT NY Time EDT) - UK CPI

[Stavro D'Amore]

UK CPI
Forecast 4.3%
Previous 4.2%
Pair to trade: GBP/USD
The numbers we will look for:
BUY GBP/USD if we get 4.5%
SELL GBP/USD if we get 4.0%


Economical Impact: High (will bring strong volatility)
Typical Result: Good for currency
Occurrence: Released monthly, about 15 days after the month ends


About our Triggers:
We will be looking for a deviation of 0.2% to BUY and a negative -0.2 to SELL. If our deviation is hit, there is a strong and concussive possibility that the market will move 50 pips immediately either way with a double spike before an initial retracement of 30%.

What is it?
The Consumer Price Index (CPI) measures the changes in the price of goods and services. This is one of the UK leading indicators, it will bring strong volatility in the markets should we get our deviations.

Why does the market care?
It is a key way to measure changes in purchasing trends and inflation in the UK. A higher than expected reading should be taken as positive/bullish for the GBP. This is considered the UK's most important inflation data because it's used as the central bank's inflation target. A lower than expected reading should be taken as negative/bearish for the GBP. One of the most common ways to fight inflation is raising the cash rates, which may attract foreign investment.

Method I use to trade this:
Stavro D’Amore Trading Method
Please be diligent trading this report as the core CPI figures are also out; however I do not expect the numbers to conflict.

Approximately 5 minutes prior to the news release I will be looking for a short term LONG position using GBP/USD pair.
I would be out of this LONG trade 1 minute before the actual release, or to avoid any spreads that should widen.

I will look for a 30-50% retracement in the original spike before entering a trade; I will sell half my 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 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 expect to be in this trade running for over just over 45 mins in total.

I do recommend spike trading as an option if you have an Auto clicker. Spike trading is great when there is great uncertainty in the markets; also the liquidity is very good at the moment if you are using an ECN broker.

Historical Chart and Data UK CPI

All the best

Stavro D’Amore

 

[Kamel Lebtahi]

Stavro, why don't you use much more volatile pairs like GBPAUD and GBPNZD that move much more than GBPUSD in this kind of release?

 

[Anthonia Taiwo]

Thanks Stavro. Please is there a particular way of measuring the percent retracement? As you said after 30 - 50% retracement in the original spike before we can enter a trade.

 

[samfx]

Hi, I am not sure if you saw my question from the other page on the (US Core Retail Sales). So I copied it and paste it here for you to see.

Starvo you said that :
"We are looking for a deviation on this trade of 0.6% to enter a LONG position on USDJPY and -0.4% to enter LONG position on EUR/USD".

My question is why we don't short USDJPY pair if we get -0.4% instead of buying EURUSD? It makes it more easier to trade the auto-clicker software and use one pair either buy or short depend on the deviation (forecast/actual).

Are you considering support/resistance level or the trend direction? and based on that you pick which pair(s) to trade? I am just guessing.

Thank you for the info.

 

[Stavro D'Amore]

Hi, I am not sure if you saw my question from the other page on the (US Core Retail Sales). So I copied it and paste it here for you to see.

Starvo you said that :
"We are looking for a deviation on this trade of 0.6% to enter a LONG position on USDJPY and -0.4% to enter LONG position on EUR/USD".

My question is why we don't short USDJPY pair if we get -0.4% instead of buying EURUSD? It makes it more easier to trade the auto-clicker software and use one pair either buy or short depend on the deviation (forecast/actual).

Are you considering support/resistance level or the trend direction? and based on that you pick which pair(s) to trade? I am just guessing.

Thank you for the info.

Hi,

Yes you can short JPY if you like; it was a better alternative to long Euro as it correlates opposite to JPY, with the Auto clicker software all you do is put the sell clicker to click on a BUY side on EURO pair.
Support and resistance is a price level below or above a FX pair that it has previously bounced off before. A FX pair making new all time lows does not have historical support below. You will never find an exact price that the currency pair has bounces predictably off every time. More often you will discover a price range that acts like support. Support and resistance are exactly the same lines; it just depends on which side of the line the price is currently on. If the stock is above the line, it is support; if the price is below the line, it is resistance. To find the support and resistance line, find the prices that the pair has hit from the underside and retreated from, and once on top of has bounced off like a trampoline.
To find the support and resistance, call up a 15min or longer chart on the desired Pair. Draw a line horizontally one the chart where prices hit and react.
I Hope this helps and sorry for not getting back to you sooner. Should you need further info please do not hesitate to contact me.
Thanks
Stavro D’Amore

 

[Calibillions]

Entry point?

Hi Stavro,

You said:

"approximately 5 minutes prior to the news release I will be looking for a short term LONG position using GBP/USD pair.
I would be out of this LONG trade 1 minute before the actual release, or to avoid any spreads that should widen.

I will look for a 30-50% retracement in the original spike before entering a trade; I will sell half my 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 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 expect to be in this trade running for over just over 45 mins in total."

So if we get out 1minute before the release, we enter after 30% retracement from the spike? And should the initial spike be hit again, I will sell half of my position, is that because there will be a retracement again?

Thank you so much.

 

[Stavro D'Amore]

Stavro, why don't you use much more volatile pairs like GBPAUD and GBPNZD that move much more than GBPUSD in this kind of release?

2 things liquidity and also you will be trying to catch a falling knife you will get cut, good for retracement bad for spike. The pairs you mention are more exotic to the majors also spreads a re wider in general.

 

[Stavro D'Amore]

Thanks Stavro. Please is there a particular way of measuring the percent retracement? As you said after 30 - 50% retracement in the original spike before we can enter a trade.

From the original price before the spike to the tip of the spike, I use estimation; I then quickly draw lines so I know the level, easier to look at 5 min chart on spike than enter on 15min

 

[Stavro D'Amore]

Hi Stavro,

You said:

"approximately 5 minutes prior to the news release I will be looking for a short term LONG position using GBP/USD pair.
I would be out of this LONG trade 1 minute before the actual release, or to avoid any spreads that should widen.

I will look for a 30-50% retracement in the original spike before entering a trade; I will sell half my 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 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 expect to be in this trade running for over just over 45 mins in total."

So if we get out 1minute before the release, we enter after 30% retracement from the spike? And should the initial spike be hit again, I will sell half of my position, is that because there will be a retracement again?

Thank you so much.

I could not tell you if there would be a another retracement again or if the spike would go higher, I wish I had that crystal ball, What I am saying is the likely case scenario that can occur, I like to be quick in a trade so if I’m in profit I take it and that’s usually the likely scenario.

 

[joshuabelanger]

Since I am new into this thread I don't know yet how to response on some issues. But despite of that I am happy to be here on this forum.