8:30am (NY Time) US Core CPI m/m Forecast 0.1% Previous 0.2%
ACTION: USD/JPY BUY 0.3% SELL -0.1%
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”.
Our surprise factor is 0.2%, if the CPI number (core) increases to a surprise at 0.3% then we will BUY of USD/JPY. If the CPI number decreases to -0.1% or less, we’ll SELL USD/JPY. Since US inflation number is a worldwide caliber report, we should see some risk sentiment driving the market as better CPI = risk appetite while worse CPI = risk aversion. Observe pairs such as GBP/JPY, EUR/JPY, and AUD/JPY for better opportunities.
Historically, even at a different of 0.1% the market tends to overreact. If it does hit our S. Factor, there is 80% of chance it will move 50 pips.
[flv:http://www.newsprofiteer.com/081409-uscpi/081409-uscpi.mp4 480 360]
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{ 2 comments… read them below or add one }
risk sentiment is basically what happens when the market is driven by emotion. When traders are scared about the future and they seek protection from low yield currencies such as JPY, it is called risk aversion; when traders are optimistic and they seek returns to make more profit by buying high-yield currencies such as AUD, NZD, it is called risk appetite. That’s a simple version of it…
hi Henry,
Thanks for the education. but i need more enlightment about risk appetite and risk aversion. what lead to the sentiment, is it only U.S Core CPI numbers.