UK CPI

Forex News Trading UK CPI y/y 03/20/12

4:30am NY Time UK CPI y/y Forecast 3.4% Previous 3.6%
ACTION: GBP/USD BUY 3.8% / SELL 3.0%


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”.


The Trade PlanWe are looking for a variable deviation of 0.4%. If the Inflation number remained above 3.8%, which is beyond BOE´s inflation target, we will BUY GBP/USD. If the Inflation number decreases to 3.0% 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, and then wait for a decent retracement before jumping in.