UK CPI

February 12, 2013

UK CPI

We´ll be trading the UK Consumer Price Index (UK 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 volatility 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 2.7% Previous 2.7%

DEVIATION: 0.3% (BUY GBP 3.0% / SELL GBP 2.4%)

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 0.3%. If the Inflation number remained above 3.0%, which is over BOE´s inflation target, we will BUY GBP. If the Inflation number decreases to 2.4% or less, we´ll look to SELL GBP. 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.

Traded pair	Expected figure	Deviation  trigger
GBPUSD	2.7 (%)	±0.3 (%)

Expected move during first 30 minutes after the release: 20 pips or more

Actions:

	Buy	GBPUSD	if actual figure is or is above	3.0 (%)
	Sell	GBPUSD	if actual figure is or is below	2.4 (%)

Recommended Pairs : GBPUSD, GBPCAD.

GBP/USD - British Pound / US Dollar

Resistances : Weekly 1.5735 ; Daily 1.5695 ; Hourly 1.5655.

Supports :  Weekly 1.558 ; Daily 1.56 ; Hourly 1.564

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