Trade Plan For Australia CPI q/q 04/27/10

Our plan to trade today’s CPI release out of Australia will be twofold.  First, we’ll look for a possible pre-buying of AUD ahead of this release during early Asian trading session for a possible sentiment trade; and Second, we will look for opportunities to enter the market if we get a surprise in this release, here is the current forecast:

9:30pm AU CPI q/q         Forecast 0.9%      Previous 0.5%
ACTION: AUD/USD        BUY 1.2%      SELL 0.6%

The quarterly CPI release is showing that Australia is facing  rise in inflation, and if this number surprises to the upside, we could see demand for AUD return to the market, at least temporarily.  RBA has hiked rates last few rate meetings and with a surprise higher release, we could have justification for further rate hike. 

Here is the plan, if we get a better than expected CPI data, we should see an instant appreciation of AUD by at least of 40 pips within the hour, but if we get a worse than expected number, AUD should drop as traders will probably feel uncertain over whether or not RBA will hike rate during the next meeting, therefore we should expect the market to consolidate.  Of course, the deviation that I am looking for must be at least 0.3%, or I will skip the after news trade… 

CPI Definition

“The Consumer Price Index (CPI) measures the rate of inflation (i.e., the rate of price changes) experienced by consumers when purchasing goods and services. A rising trend has a positive effect on the nation’s currency. The primary objective of the central bank is to achieve price stability; when inflation rises above an annualized rate of approximately 2%, they will respond by raising interest rates to bring prices down. Higher interest rates attract foreign investment, thus increasing demand for the nation’s currency. CPI is one of the most closely watched indicators and will usually have a high impact upon release.”

Related posts:

1. New Zealand CPI q/q 10/14/09
2. Forex Trade Plan And Video For RBA Cash Rate Decision 08/03/10
3. Trade Plan For RBA Interest Rate Decision 09/07/10
4. Forex Trade Plan For CA Core CPI m/m 08/20/10
5. Forex Trade Plan For Canada Core CPI m/m 09/21/10
6. Forex News Trading Australia RBA Interest Rate Decision 12/06/10
7. Australia Monetary Policy Meeting Minutes 10/19/09
8. Australia Employment Changes m/m 10/07/09
9. Australia Employment Changes m/m 09/09/09
10. Australia Employment Changes 11/11/09

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