8:30am (NY Time) US Core CPI m/m Forecast 0.2% Previous 0.1%
ACTION: USD/JPY BUY 0.4% SELL 0.0%
We’ll be focusing on the Core CPI release today and our minimum tradable deviation is 0.2%; if the release number (core) increases to a minimum 0.4% then we will BUY USD (either SELL EUR/USD or BUY USD/JPY). If the CPI number decreases to -0.0% or less, we’ll SELL USD (BUY EUR/USD or SELL USD/JPY). Historically even at a difference of 0.1%, market is likely to to exaggerate its move, therefore if either of our tradable releases is hit, there is about 80% of chance market will move 50 pips.
With the PPI release on Tuesday missing expectation (PPI -0.1% v 0.1%e) we may see a worse than expected release as a weaker PPI release may affect CPI as both news releases are highly correlated. However, judging from recent economic data, we’ll probably get an as expected Core CPI release.
One final observation is that current market is driven by heavy risk aversion sentiment. Therefore a worse than expected release may not necessarily be negative for the USD as risk aversion may increase USD demand.
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”.
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Hi Henry,
Hope you enjoyed your vacation!!
Alot has happened since you left.
With all the recent sentiment on Europe, do you think fundamentals might be out of whack? Given there is such a flight to safety to US dollars and moreover, Gold???
Thus trading the news might be more difficult in this environment?
Thanks. Cheers.
No doubt risk sentiment is currently driving the market, but I think ultimately market will return back to fundamentals as it always has been. My focus will be on a mid to long term because as fast as EUR dropped in the last 2 weeks, it could rise up with the same intensity.
Henry when do u talking new paying members ??
best regards
Not at the moment. As I said last, I may not take another batch until 2011…
Henry with an aversion to risk in a news relase the negative U.S. dollars can be strengthened in pair USD / JPY?
Dfoliex:
Short answer, Yes