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 in the release. Here is the forecast for this release:
4:30am NY Time UK CPI y/y Forecast 3.2% Previous 3.4%
ACTION: GBP/USD BUY 3.6% SELL 2.9%
We are looking for a safe deviation of 0.3% for SELL and 0.4% for BUY. If the Inflation number increases to of 3.6%, which is way above BOE’s inflation target, we will BUY of GBP/USD. If the Inflation number decreases to 2.9% 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.
UK’s sovereign credit rating of AAA has been placed on a negative outlook by S&P today as the credit rating agency expressed concerns over the growth outlook of UK’s economy of which the current fiscal spending plan is based on. There is a strong possibility UK may lose it’s credit rating with S&P, although both Moody’s and Fitch maintained UK’s AAA rating with stable outlook.
The momentum of GBP against USD, JPY, and EUR has reached an area of equilibrium as we can see in the tight trading range in the last few days. It is very likely we will see consolidation and possible reversal as market may be prepared to sell off GBP on both technical and fundamental reasons.
I’ll be looking more to SELL GBP than to BUY GBP due to the current market sentiment; therefore, I recommend only BUY GBP if we get a huge surprise on the CPI to the upside.
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”.
Here’s a video from one of my previous UK CPI trades…
[flv:http://www.newsprofiteer.com/101309-ukcpi/101309-ukcpi.mp4 480 360]
Related posts:
- Forex Trade Plan For Canada Core CPI m/m 09/21/10
- Forex Trade Plan For CA Core CPI m/m 08/20/10
- Forex Trade Plan & Video For UK Retail Sales 07/22/10
- US Core CPI m/m 11/18/09
- Trade Plan For UK Retail Sales 05/20/10
- Trade Plan For UK BOE Official Bank Rate Decision 07/08/10
- Forex Trading Plan For Canada Core CPI m/m 06/22/10
- Canadian Core CPI Trading Plan 05/21/10
- Forex Trade Plan For Uk BOE Rate Decision 10/07/10
- Forex News Trading Plan For CA Core CPI m/m 01/25/11
{ 5 comments… read them below or add one }
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Henry, you just a blessing to me in this journey of forex. May blessings never depart from your family.Thank you.
Henry,
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Angie: I don’t use this indicator so I have no idea what it does. But with any breakout trading methods, if you understand fundamental analysis, you can get confirmation and you won’t be fooled by fake breakouts.