Forex News Trading For US Core CPI

We´ll be trading US Core CPI m/m release tomorrow. CPI or Consumer Price Index, also known as the “true cost of living”, is what drives Central Banks to raise/cut interest rate, therefore this release will be widely watched. Here´s the forecast for the CPI:

8:30am (NY Time) US Core CPI m/m Forecast 0.1% Previous 0.2%
ACTION: 0.3% BUY USDCHF / -0.1% SELL USDJPY

The Trade Plan
Our minimum tradable deviation for this release is 0.1%; if the release number (core) increases to a minimum 0.3% then we will BUY USD/CHF. If the CPI number decreases to -0.1% or less, we´ll SELL USD/JPY. Historically even at a difference of 0.1%, market is likely to exaggerate its move, therefore if either of our tradable releases is hit, there is about 80% of chance market will move 50 pips within the next 90 minutes or so.

We´ll be trading this release using our after news retracement trade method.

The Market
With Tuesday’s PPI ex Food & Energy showing a slight rise in inflationary pressure (0.3% vs 0.1%) and PPI at -0.1% vs .1%E, we’ll probably get similar results today, with slightly higher or inline Core CPI and negative or flat headline CPI… This may very well add to the speculation or at the very least give the Fed greenlight to QE3 if situation calls for it.

Additional Thoughts
With Fed’s mandate on both Unemployment and Inflation, today’s CPI may not be enough to change Fed’s view on their monetary policy, therefore I believe the effect may be short-lived.

Pre-News Consideration
No Pre-news for this release.

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”.