Here is a basic plan to trade US Core Retail Sales and Core CPI releases scheduled for tomorrow at exactly 8:30am NY Time.  Because of the schedule conflict this week due to early month holidays, we have two high impact releases from U.S. today, and here are the basic forecasts:

8:30am (NY Time) US Core Retail Sales                Forecast 0.5%      Previous 0.8%
8:30am (NY Time) US Core CPI                                  Forecast 0.1%       Previous 0.1%
ACTION: USD/JPY  (CORE)                                            BUY +CPI + Retail             SELL -CPI -Retail

We’ll be focusing on both  releases as they are equally important and equally high impact releases.   What is more confusing is that also at the same time we’ll get both headline numbers released, i.e. CPI & Retail Sales, which are going to be a disaster (for traders) if we get conflict all over the place with these releases.

Therefore, the immediate plan is to stay out of spike trading.  Wait until the first spike is formed after the release and watch how the market reacts.  Usually market will concentrate on that one release with the most surprise, and it could be either Core CPI or Core Retail Sales…

What we are looking for normally is a deviation of 0.3% on the Core CPI and a deviation of 0.6% on the Core Retail Sales for an established sentiment after the release, meaning that if the actual release figure is different from the forecast by that difference, market should move in the direction of the difference at least 50 pips in the next 2 hours, but since we are getting both releases out today, we can no longer follow the same plan.

Therefore, we’ll be looking for ++ or — releases, looking for a consensus on both releases. If both are better than the forecast, then we will BUY USD/JPY, or if both are worse than the forecast, then we will SELL USD/JPY; of course, we’ll not do any spike trade and we’ll only enter in the direction of the initial spike immediately after the news release… preferably after a decent retracement.

DEFINITION RETAIL SALES:

“(Retail Sales Core) Derivative of Retail Sales that excludes the Automobile Sales component. Automobile Sales make up roughly 25% of Retail Sales, but they can be very volatile from month to month and can distort the picture. Retail Sales with the exclusion of this volatile component is thought to be a better indicator of the underlying trend in consumer spending.”

DEFINITION CPI:

“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”.

Related posts:

1. US Core Retail Sales m/m 11/16/09
2. US Core Retail Sales m/m 10/14/09
3. US Core Retail Sales m/m 12/11/09
4. US Core CPI m/m 11/18/09
5. US Core Retail Sales m/m 09/15/09
6. US CPI m/m 10/15/09
7. US Core CPI m/m 09/16/09
8. Australian Retail Sales m/m 01/06/10
9. Canada Core CPI m/m 10/16/09
10. Canada Core CPI m/m 11/18/09