Trading The U.S. Core CPI, May 17, 2016

US Core CPI is expected to rise to around 0.2%, and with the Fed still sticking to live meeting language in June, if we were to get a surprise figure, we should see plenty of market reaction…

8:30am (NY Time) US Core CPI m/m Forecast 0.2% Previous 0.1% DEVIATION: 0.2% (BUY USD 0.4% / SELL USD 0.0%)

The Trade Plan Our minimum tradable deviation for this release is 0.2%; if the release number (core) decreases to a minimum 0.0% then we will SELL USD; if the core release is 0.4%, we’ll BUY USD. Historically, even at a difference of 0.1%, market is likely to exaggerate its move, therefore if our tradable release is hit, there is about 80% of chance market will move 50 pips within the next 90 minutes or so. Once again, we are going to focus on the Core figure, or CPI EX Food and Energy, not the headline CPI.

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

I’d recommend to use the Recommended Pairs from above as they are based on my CSM, which should provide the best combination of currency pairs to trade based on better/worse news… of course, you can also trade the default pair: EUR/USD.

Outlook ScoreOutlook score is derived from market sentiment, focus, and economic indicators for the currency. It represents the long-term trend of the currency and its market perception. In short, a strong Outlook Score means more long-term demand for the currency, and a weak Outlook Score is the opposite.

DEFINITION”US Core 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”.

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