NZ CPI

NEWS TRADING
Wednesday April 18, 2012


[6:45pm NY Time]

We'll be trading the Consumer Price Index (CPI) figure out
of New Zealand today. CPI is Inflation, therefore it is a
very high impact release. Here's the forecast:

6:45pm (NY Time) NZ CPI q/q
Forecast 0.6% Previous -0.3%
ACTION: NZD/USD BUY 1.0% SELL 0.0%


DEFINITION:“The Consumer Price Index (CPI) measures the rate of inflation (i.e., the rate of price changes) experienced by consumers when purchasing goods and services. A rising trend has a positive effect on the nation’s currency. The primary objective of the central bank is to achieve price stability; when inflation rises above an annualized rate of approximately 2%, they will respond by raising interest rates to bring prices down. Higher interest rates attract foreign investment, thus increasing demand for the nation’s currency. CPI is one of the most closely watched indicators and will usually have a high impact upon release.”



The MarketGeneral market sentiment is leaning towards risk aversion, however when it comes to NZD, it is basically tracking the direction of the global equity market.  On a strong surprise release, where the fundamentals of the country may come into play, we will see some temporary volatilities (up or down) in the NZD, but the medium to long term trend momentum should resume shortly after, therefore I’d recommend more of a BUY on dip rather than SELL on rally…


The Basic PlanOur focus will be on the headline CPI number. If we get a better release of 1.0%, we should be looking to BUY NZD/USD; if we get a lower release 0.0%, then we’ll see NZD/USD move down. Usually if our BUY or SELL figures are hit, we could expect the market to move about 40~50 pips within the next 30~90 minutes.


Additional ThoughtsRBNZ has been rather optimistic over the rebuilding plans over the earthquake in Christchurch. As a matter of fact, RBNZ stated that because of the rebuilding, New Zealand’s GDP could rise by 1~2% yearly. Therefore, I believe the big picture would be to go LONG on NZDUSD on dips.

Book : Greg Michalowski ---- Attacking Currency Trends: How to Anticipate and Trade Big Moves in the Forex Market (Wiley Trading Series)

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