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 release. Here is the forecast:
4:30am NY Time UK CPI y/y Forecast 3.1% Previous 3.2%
ACTION: GBP/USD BUY 3.4% SELL 2.8%
The Trade Plan
We are looking for a safe deviation of 0.3% for SELL and 0.3% for BUY. If the Inflation number increases to of 3.4%, which is above BOE’s inflation target, we will BUY of GBP/USD. If the Inflation number decreases to 2.8% 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.
We’ll be looking to trade this release using my after-news retracement method. We’ll wait for the release, wait for market spike, then wait for a decent retracement before jumping in.
The Market
Risk aversion has strengthened on the back concerns over global economic recovery. GBP has suffered as a result of last week’s BOE Inflation Report which once again painted a bleak outlook for UK’s economy. BOE Gov. King stated that inflationary (or CPI) should drop to 1.5% in 2 years, and growth pretty much peaked during the 2nd quarter of 2010.
However, BOE has been singing the same tune since the beginning of 2010, and as a matter of fact, previous BOE Inflation report stated that inflationary pressure (CPI) should drop below the 2.0% target by the end of year; instead, we’re getting 3 upside surprises during the last 7 releases by 0.2% or more…
BOE’s arguments for this unsual resilience in inflationary pressure include high fuel prices and the rise in VAT from 17.5pc to 20pc., and insists that these temporary effects will be wearing off soon. As a matter of fact, BOE Inflation Report is opening doors for further easing policy by expanding its Asset Purchasing Facilities. It is likely we’ll see some selling pressure on the GBP today.
Additional Thoughts
With BOE opening the door for further easing, there is really no upside on the short term. We’re like to see further selling of GBP, even if we get a slightly better than expected CPI y/y. However, if we get a worse than expected release, this could be a catalyst for a more profound move as MPC Meeting Minutes scheduled for the next day could add to more bearish sentiment for Sterling.
Pre-news Consideration
I believe we could see some moderate pre-selling before the release. However, the expectation for today’s release is pretty “as expected”, but I’d expect more selling pressure after the release. I’d recommend to wait for at least 1.5700 before taking a SELL…
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”.
Thank you,
Henry Liu
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{ 15 comments… read them below or add one }
hi henry do u offer auto click services just like forex diamond did in days back.if not can u mirror ur trade or analyse trade to ensure better understand..
No I don’t do that, sorry.
hi,henry am a news trader still finding it hard to get the news on the minute it was release and tradethe news site is locked i dont know why,pls reccomend a better news wire services that can give me actual and analysis on what to due if the news is out.
I’d use tradethenews.com for up-to-date news releases.
Hi Henry,
Could you please recommend where to open an account?
Thanks
Ishai
I have accounts with 4 different brokers and they are (in no particular order)
FXDD
FXCM
MBTrading
IBFX
hi henry i just missed yr 10k to 1mm program by a few days. how abt opening the doors for another 2 days for those of us who missed it for one reason or other?
I am processing some duplicate orders and some cancellation due to fraud etc… Once everything is finished, I may open registration up for 12 hours to get everyone who missed it a chance.
Henry please do so, which day will be, so I can put money in paypal
10Kto1MM registration is closed for now. I am not sure when will be the next launch.
CPI y/y is 3.1% so now what to do? should we buy or sell?
We stay away. No trade.
I have been looking the behaviour of previous UK CPI.
On Jan 19 it increased 0.3%, but instead of moved up the price drop.
Could you please help me to understand why the market reacted in an opposite way this time.
You have to look at the context of the market. Sometimes there are other news or sentiment driving the market. I don’t recall what happened in Jan.
Hi Henry, my name is chima olua, this is my first time to write to you. not the way i want it but just i cant be able to log in my forex peace army forum to let you know how exceted i am reading the text messages you have been sending to me. for two year now i have been a forex trader without profit making. but for weeks now which i started concerted to follow your analysis my way of trading forex has change a lot. one thing i keep praying for you is that, may god who have giving you this dream of been kind to people will con tune to poor on you, his endless wisdom do to more amen. for the 10k to 1mm, i wish i could be part of it but i don’t have what it takes to do it right now, but i know that there be another opportunity that i will be able to fits my self. so please Henry if there is any information i need to know about forex please kindly send it to my mail.one more thing as i said before that i couldn’t be able to access my forum, is like i have forgotten my pass word so i don’t know if you can help me to discover it back so that i be making use of it to write you any time i want to. ones again thank you very much. chima olua also this is my mail address i write form.