We’ll be trading US Core CPI m/m release today. CPI or Consumer Price Index, also known as the “true cost of living”, is what drives Central Banks to raise/cut interest rate, therefore this release will be widely watched. Here’s the forecast:
8:30am (NY Time) US Core CPI m/m Forecast 0.1% Previous 0.1%
ACTION: USD/JPY BUY 0.3% SELL -0.1%
The Trade Plan
Our minimum tradable deviation for this release is 0.2%; if the release number (core) increases to a minimum 0.3% then we will BUY USD (either BUY USD/JPY, or GBP/JPY). If the CPI number decreases to -0.1% 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 exaggerate its move, therefore if either of our tradable releases is hit, there is about 80% of chance market will move 50 pips within the next 90 minutes or so.
Recent market optimist started first with Greek bond tendering, and today intesified with the Spanish bond auction. Looks like the entire market has recovered from sovereign debt fears and now is looking to buy the Euro along with all other European currencies.
Considering current market condition, we know today will probably be negative for the USD, unless we get some negative news out of Europe; the volatility after the release will probably last 2 hours after the schedule, and market should move back to pre-release market trend.
One word of caution as we trade the U.S. CPI tomorrow. As I have explained in the UK CPI analysis, FOMC is also not looking to raise/cut rates base on inflation, therefore this release probably generates very little interest in the market. However, compared to BOE, the FOMC is expected to hike rates sooner, by the end of this year, 2010, and a surprise high release of CPI should add to that sentiment.
If the Fed Future starts to shift and pricing in a stronger possibility for a FOMC rate hike, then we should see more reaction from the market. But as I said, we probably won’t see much but it’s a good practice to check the Fed Fund Future, especially when we measure the after effect of market sentiment of the CPI release.
It’s my opinion that the market will stall until after this release, then EUR/USD could head up to the 1.3000 level. But I seriously don’t think market will keep this pair at above 1.3000 for long. If anything, I’d recommend a long-term SELL on the EUR/USD because I believe EUR/USD will go down to the 1.1800 later on this year. Here are two articles if you are interested in finding out what other analysts are saying about the EUR.
Bank of Tokyo EUR/USD Analysis
The Most Accurate Forecaster In The World On EUR (Shaun Osborne) & His Analysis
With the PPI release on Thursday at -0.5% v -0.2%e, as attributed to lower energy cost which is means that the upcoming headline inflation release is likely weaker; however, the Core CPI release, should remain unaffected as the Core PPI reading remained in line with expectation. PPI or Producer Price Index often has a strong correlation to the CPI, as PPI measures cost at the source, and having a higher cost at this level will often lead to higher cost at consumer level. That’s why it is important to monitor PPI when trading CPI releases.
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 one of my previous US Core CPI Trading Videos:
[flv:http://www.newsprofiteer.com/101509-uscpi/101509-uscpi.mp4 480 360]
Related posts:
- US Core CPI m/m 11/18/09
- US CPI m/m 10/15/09
- Canada Core CPI m/m 10/16/09
- Canada Core CPI m/m 11/18/09
- US Core CPI m/m 09/16/09
- Forex News Analysis CA Core CPI m/m 06/29/11
- Forex Analysis For CA Core CPI m/m 07/22/11
- Forex Trade Plan For Canada Core CPI m/m 09/21/10
- Forex News Trading Canada Core CPI m/m 10/22/10
- Forex News Trading Canada Core CPI m/m 11/23/10
{ 15 comments… read them below or add one }
Thanks, Henry, for your analysis, is very useful for me, and I invest/Spend Time reading it,
I watch your videos to learn how you trade the news, and I hope to be in the right way.
The title is wrong Lui – not Retail Sales…. great insight and learned a lot from your vids..
I changed it. Thanks
Hi Henry,
sorry for offtopic, but I would like to know your opinion about pre release news action which can cover spike after release and may be more profitable with maximum 20 pips risk. I put two reverse waiting buy and sell stop commands shifted 10 pips (range depend on pre release situation) SL is 10 pips . I do it about 1 -2 minutes before news is commited. I have with it succes about 2 mons trading …. What do you thing about it ?
thanks Orion
Orion: I think that is called straddling. Usually when a broker finds out you are doing it, you get placed on manual execution or worse yet, they widen the spread and take both trades. If you have stops, even worse because both trades get picked up and stopped out.
My advise, do it while your broker allows you, but learn other trading methods because this is not likely to last.
You are right Henry,
Today fxopen shift my buy stop command up to 18 pips up with GB GDB trading news !! I made some profit, but less than I expekt. But thanks very much for your advice.
Orion
Hi Henry,
enjoyed watching the video. Noted your caution. Would like to see many more.
thank You.
Jack… S.
Hi Henry,
Thanks, thanks, thanks. I’m so appreciative of all the time and energy you put into imparting your knowledge. If has been very helpful. I am learning so much. You share so freely, you stand out as one of the few forex educators who is actually selling a real product instead of puff. It’s really refreshing to know that my inbox is not filled with ‘one-day-wonders’ offers. I fully intend to become a part of you inner circle as soon as life allows me, maybe as soon as early next year. Again, thanks.
The video would not start for me
Thanks for the analysis Henry – especially liked the articles about EUR/USD.
It good to know some of the big names and market movers – like chief currency strategist (Shaun Thompson). I was thinking of shorting EUR/USD between 12915 – 1.2950, but will watch the market for a move back up to 1.3000.
Lets hope for a good CPI figure (eithere positive or negative) for some strong movement in the currencies
Francis
Thank you for the analysis.
In my personal opinion, as FED reiterated that the interest rates would remain low for an extended period by considering pulling in the new idea of “additional stimulus”, the possibility of a rate hike by the end of this year, 2010 is very unlikely.
A surprise high release of CPI (which is not expected in this round) should not bring forward the possibility of rate hike from year 2011 to 2010.
I am expecting the USD/JPY to break the 3 time tested low at 87 decisively in coming days.
My tendency is to short USD after this release, which should carry lesser resistance and lower risk.
Thanks Henry for your analysis of US Core Retail Sales and for including the 2 analyses on the EUR. Very informative and helpful for my trading. I’ve enjpyed your newsletters etc. Thanks for your work and help in the forex as I continue to learn.
1. You have to correct title to ” US Core CPI m/m” !
2. Last period you are adding previous trades videos. This is excellent!
But why those videos so old (usually half year)?
Are there no trades during this time (after “previous”)?
Henry, thank you so much for your emails and videos. They are really a great help. Will you be trading this news event (US Core Retail Sales) anywhere live tomorrow so that I can trade along with you?
j’ai comprant rien avec la launge english