AU CPI

AU CPI  04/23/2012 – Forex Trading Plan

Our plan to trade today’s CPI release out of Australia will be to look for opportunities for entry if we get a surprise in this release, here is the current forecast:
9:30pm AU CPI q/q Forecast 0.7% Previous 0.0%

ACTION: AUD/USD BUY 1.0% SELL 0.3%

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 Trade Plan

Here is the plan, if we get a better than expected CPI data, we should see an instant appreciation of AUD by at least of 40 pips within the hour, but if we get a worse than expected number, AUD should drop and we should expect the market to consolidate. Of course, the deviation that I am looking for must be at least 0.3%, or I will skip the after news trade… On a minimum release of 1.0%, I would buy AUD/USD after a decent retracement. If we get a 0.3% or worse release, I’d SELL AUD/USD immediately, I would consider a spike trade on a better than expected release as recent gains in the AUD are screaming for a strong demand.

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