Swedish Interest Rates - Riksbank cuts 25 bps as expected

This morning at 8:30 GMT (3:30 EST) the Swedish Riksbank released their Interest Rate decision. This came along with CPI Inflation figures. Out of 18 analysts surveyed by Bloomberg before the announcement, 5 expected the Riksbank to hold rates steady at 1.75% while the other 13 expect the bank to cut. They did as the majority expected and CPI also came out lower which means the Riksbank still has room to cut more...The CPI came out first and there was a small delay of 5 or 10 seconds before the Rate Announcement then came thru the wires.

Here is the Data:

Sweden Riksbank Interest Rate
Estimates- Median: 1.5% Average: 1.57% Range: 1.50% to 1.75%
Actual: 1.50% Prior: 1.75% no revision
5 out of 18 for hold, 13 for cut

Sweden CPI - Headline Rate (MoM)
Estimates- Median: -0.5% Average: -0.5% Range: -0.7% to -0.4%
Actual: -0.9% Prior: +0.2% no revision

Sweden CPI - Headline Rate (YoY)
Estimates- Median: +2.3% Average: +2.2% Range: +2.1% to +2.4%
Actual: +1.9% Prior: +2.3% no revision

Sweden SW CPI - CPIF (MoM)
Estimates- Median: -0.5% Average: -0.5% Range: -0.6% to -0.3%
Actual: -0.7% Prior: 0.0% no revision

Sweden SW CPI - CPIF (YoY)
Estimates- Median: +1.1% Average: +1.0% Range: +0.4% to +1.3%
Actual: +0.9% Prior: +0.5% no revision

Sweden CPI Level
Estimates- Median: 312.97 Average: 313.05 Range: 312.75 to 313.50
Actual: 311.85 Prior: 314.75 no revision

Here is a 5 second chart of the EURSEK:

Here is the 30 second EURSEK chart which shows the move continued:

Australian CPI - Conflict causes whipsaw which resolves higher

This Tuesday evening of January 24th at 19:30 EST (or 00:30 GMT on January 25th) the CPI figures were released from the Australian Bureau of Statistics. This is released quarterly like it is for New Zealand and unlike the USA or UK where it comes out monthly. Probably because it is only quarterly it seems to move the price of the Australian Dollar quite a bit. This data did become a bit tricky starting in 2008 when it split up into 3 sets of data with the Headline, Trimmed Mean and Weighted Mean. So 6 figures plus there revisions makes alot of numbers to look at. The past few releases all these have lined up more or less. In october the Headline was flat as expected, but the positive deviations on Trimmed & Weighted Mean lead to a rally in AUDUSD forex pair. This time we saw a -0.2 on the Headline and positive deviations on Trimmed Mean.

Here are the figures:

Australia Consumer Prices QoQ
Estimates- Median: +0.2% Average: +0.2% Range: -0.2% to +0.5%
Actual: 0.0% Prior: +0.6% No Revision

Australia Consumer Prices YoY
Estimates- Median: +3.3% Average: +3.2% Range: +2.8% to +3.6%
Actual: +3.1% Prior: +3.5% No Revision

Australia RBA Timmed Mean QoQ
Estimates- Median: +0.5% Average: +0.5% Range: +0.2% to +0.7%
Actual: +0.6% Prior: +0.3% Revised: +0.4%

Australia RBA Timmed Mean YoY
Estimates- Median: +2.4% Average: +2.4% Range: +2.1% to +2.6%
Actual: +2.6% Prior: +2.3% Revised: +2.4%

Australia RBA Weighted Mean QoQ
Estimates- Median: +0.5% Average: +0.5% Range: +0.2% to +0.7%
Actual: +0.5% Prior: +0.3% Revised: +0.4%

Australia RBA Weighted Mean YoY
Estimates- Median: +2.4% Average: +2.4% Range: +2.1% to +2.6%
Actual: +2.6% Prior: +2.6% Revised: +2.7%

The AUDUSD forex pair initially spiked down on the lower deviation on the Headline figure but then whipped around back higher on the better Trimmed Mean, there were also downward revisions. This seems to indicate that Trimmed mean is more important. Here is the a 5 second chart of the move on AUDUSD:

Basically the market probably expected a lower CPI figure to give the RBA move room to cut rates in February as most analyst now expect, this mixed CPI figure brings some doubt now to the likelyhood of that outcome. Here is a 30 second chart to show the way the AUDUSD forex pair resolved higher:

Finally the 5 minute chart of the AUDUSD forex pair shows how it came up to test the R1 pivot thru the asian session, bounced off, retested and slightly broke the former highs during the European Session before moving down on bad headlines about Greece & Portugal later in the European morning:

Canadian CPI - big lower deviation causes short spike and reversal

This morning at 12:00 GMT (7:00 EST) the Consumer Price Index was released out of Canada. This is the main inflation figures and were alot lower. Earlier in the week the Bank of Canada released their Interest Rate Decision along with a statement, and the next day there was a monetary policy report which did give some sense the Bank would be raising rates again at some point.

Here are the figures:
CAD Bank of Canada CPI Core MoM
Estimates- Median: -0.2% Average: -0.2% Range: -0.4% to +0.2%
Actual: -0.5% Prior: +0.1% No Revision

CAD Bank of Canada CPI Core YoY
Estimates- Median: +2.2% Average: +2.2% Range: +2.0% to +2.5%
Actual: +1.9% Prior: +2.1% No Revision

CAD Consumer Price Index MoM
Estimates- Median: -0.2% Average: -0.2% Range: -0.5% to +0.2%
Actual: -0.6% Prior: +0.1% No Revision

CAD Consumer Price Index YoY
Estimates- Median: +2.7% Average: +2.7% Range: +2.4% to +3.1%
Actual: +2.3% Prior: +2.9% No Revision

and here is a 10 second chart of the USDCAD, showing the spike from the news and then the reversal. CPI figures are a bit tough to trade in the current economic environment because interest rates are already lower, and the reason these figures traditionally have moved the currency is because they mean the Central Bank will adjust rates according to whether inflation is high or low...but this will not happen, although it does mean that Bank of Canada is less likely to raise rates again soon, which some had expected with the monetary report. USDCAD rallied from 1.0070 to 1.0150 from yesterday's new york session into today's CPI release, perhaps there was a leak, not surprising for Canadian Data. Anyway here is that chart:

and the 15 minute chart of the move heading into the release, also shows the 2 hours of whipsaw after the 12:00 GMT (07:00 EST) release, heading into the New York Cash Equity open at 14:30 GMT(9:30 EST):

US CPI, Housing Starts, Building Permits & Initial Jobless Claims - mixed reading forms a top

Today on Thursday January 19th at 8:30 EST (13:30 GMT) the Consumer Price Inflation figures were released from the USA. This also came out with a bunch of other data such as Housing Starts, Building Permits and the weekly Jobless data, the Initial Jobless Claims and Continuing Claims. So there was alot of data to go through was it was quite difficult to get a clear trade based on the numbers. The CPI was flat, the Housing Numbers were weaker but the Initial Jobless Claims made a new low, breaking December 2011 low which had just broken the late February 2011 low. Last week this number did rebound to 399k, a higher number being bad in this case, but then this week it came back down. This 'much better than xx months/ x years' type headline seemed to steal the limelight, everyone knows that Housing is bad anyhow, but if employment is better then the economy has a better chance of recovery. The morning had been pretty risk-on with good earnings reports from Morgan Stanley and Bank of American, both those stocks jumped over 6%. Here is the data:

US CPI Ex Food & Energy m/m
Estimates- Median: +0.1% Average: +0.1% Range: -0.1% to +0.2%
Actual: +0.1% Prior: +0.2% No Revision

US Headline CPI m/m
Estimates- Median: +0.1% Average: +0.1% Range: -0.1% to +0.3%
Actual: 0.0% Prior: 0.0% No Revision

US Core CPI y/y
Estimates- Median: +2.2% Average: +2.2% Range: +2.0% to +2.3%
Actual: +2.2% Prior: +2.2% No Revision

US Headline CPI y/y
Estimates- Median: +3.0% Average: +3.0% Range: +2.9% to +3.2%
Actual: +3.0% Prior: +3.4% No Revision

US Housing Starts
Estimates- Median: 680k Average: +682k Range: +625k to +723k
Actual: +657k Prior: +685k No Revision

US Housing Starts MOM%
Estimates- Median: -0.7% Average: -0.5% Range: -8.8% to +5.6%
Actual: -4.1% Prior: +9.3% Revised: +9.1%

US Building Permits
Estimates- Median: +679k Average: +680k Range: +640k to +728k
Actual: +679k Prior: +681k Revised: +680k

US Building Permits MOM%
Estimates- Median: -0.2% Average: 0.0% Range: -5.9% to +7.1%
Actual: -0.1% Prior: +5.7% Revised: +5.6%

US Initial Jobless Claims
Estimates- Median: +384k Average: +383k Range: +363k to +405k
Actual: +352k Prior: +399k Revised: +402k

US Continuing Claims
Estimates- Median: +3590k Average: +3577k Range: +3500k to +3630k
Actual: +3432k Prior: +3628k Revised: +3647k

So 1st chart is the EMini S&P 500 future 1 minute chart which basically show a whipsaw as the market digested the positive and negative aspects of the data:

Next is the USDJPY 1 minute chart which after a little whiggle did catch a bid, this one is the safest forex pair to trade on USA news but it doesn't always move that many pips:

finally is a 30 second chart of the CADJPY, this one usually follows the stock indices quite well and when good US data gives a boost to risk appetite this one can rally. However inflation is difficult these days. In the past high CPI meant that the Fed would more likely to raise interest rates which would strengthen a currency, however sometimes the stock market would not like higher rates. In the current economic situation however, high CPI means the Fed is less likely to do more Quantitative Easing and the market will rally if there is more QE but the US dollar will weaken.

New Zealand CPI - Big Deviation lower leads to sell-off on Kiwi Dollar

This evening at 16:45 EST (21:45 GMT) the quarterly figures for New Zealand Consumer Prices was released. These are basically the inflation figures but unlike many other countries they are only released every 3 months instead of monthly like elsewhere. Because of this there are often quite nice surprises on them as it is more difficult for analysts to get there estimate right when the data is less frequent. Here is the data:

New Zealand Consumer Prices (QoQ)
EStimates- Median: +0.4% Actual: +0.4% Range: 0.0% to +0.7%
Actual: -0.3% Prior: +0.4% No Revision

New Zealand Consumer Prices (YoY)
EStimates- Median: +2.6% Actual: +2.6% Range: +2.2% to +3.0%
Actual: +1.8% Prior: +4.6% No Revision

Here is a 10 second chart of the NZDUSD:

and here is the 1 minute chart which shows that the NZDUSD did take its time but came down to make new lows hours after the release:

While the past 2 days have been risk-on and this has lead to some US dollar weakening so this could have muted the sell on NZDUSD a bit. Another option was to buy the EURNZD. Here is a 10 second chart of the EURNZD:

Finally a 5 minute chart shows how the move continued thru the rest of the Asian session into the European session:

German ZEW Survey Economic Sentiment - much higher than expectations extends rally

This morning of January 17th at 10:00 GMT (5:00 EST) the ZEW Survey figures were released from Germany and for the Eurozone, along with CPI figures for the Euro-Zone. These ZEW figures have been quite low for awhile now. The one that matters the most in terms of its ability to actually move the EURUSD forex pair is the German ZEW Survey (Economic Sentiment) which today printed much higher than the highest expectation. However the figure overall is still quite low compared to where it has been in the past, but it is a big improvement since last month.

Here is the data:

Euro-Zone CPI - Core (YoY)
Estimates: Median +1.6% Average +1.6% Range +1.5% to +2.0%
Actual: +1.6% Prior: +1.6% No Revision

Euro-Zone CPI (MoM)
Estimates: Median +0.4% Average +0.4% Range +0.3% to +0.4%
Actual: +0.3% Prior: +0.1% No Revision

Euro-Zone CPI (YoY)
Estimates: Median +2.8% Average +2.8% Range +2.7% to +2.9%
Actual: +2.7% Prior: +3.0% No Revision

Euro-Zone ZEW Survey (Econ. Sentiment)
Actual: -32.5 Prior: -54.1 No Revision

Germany ZEW Survey (Econ. Sentiment)
Estimates: Median -49.4 Average -49.5 Range -56.0 to -40.0
Actual: -21.6 Prior: -53.8 No Revision

Germany ZEW Survey (Current Situation)
Estimates: Median +24.0 Average +23.6 Range +16.0 to +28.0
Actual: +28.4 Prior: +26.8 No Revision

Here is the 10 second chart of the EURUSD forex pair showing the initial reaction to the release:

The EURUSD had been rallying anyhow since the good GDP, Retail Sales and Industrial Production data out of China overnight. About 15-20 minutes before this data there was a Spanish Bond auction which went quite well and after the news and about 10-15 minutes after the news was a Greek Bond auction which could have been worse. Finally about 40-45 minutes after the news was a Belgian Bond auction. Watching these auctions has become very important for the EURUSD and the overall market indices, especially the auctions for Italy, Spain, Greece, Ireland & Portugal.

This is a 30 second chart of the EURUSD pair showing how eventually it made it to the 1.2800 round figure where it sold off.

Of course the EURUSD was a bit overextended from the rally overnight due to the good chinese news, and this good ZEW data extended this a bit and then punctuated it as the USA woke up and arrived back from holiday ready to sell.

UK CPI - Comes out lower as expected, risk-on rally continues

The Bank of England has been forecasting Inflation to come down this year. They have been saying this since inflation began to get very high last year, and it was the reason they did not go ahead and increase Interest Rates when things were looking a bit better in the middle of last year. And they made the right choice not to as when things got bad again toward the end of 2011 they actually raised the Asset Purchase Facility (the APF) by 75 Billion to 275 Billion. Which basically is Quantitative Easing or Printing Money. Although there was a wider range of estimates this month than last month (a 1.0% range compared to 0.4% in December 2011), the analysts like last month got it right and the main figure, the Headline CPI YoY came out at +4.2% as expected.

Here are the figures:

UK DCLG UK House Prices (YoY)
Actual: -0.3% Prior: -0.4% No Revisions

UK CPI (MoM)
EStimates: Median +0.4% Average +0.4% Range -0.2% to +0.8%
Actual: +0.4% Prior: +0.2% No Revisions

UK CPI (YoY)
EStimates: Median +4.2% Average +4.2% Range +3.6% to +4.6%
Actual: +4.2% Prior: +4.8% No Revisions

UK Core CPI YoY
EStimates: Median +3.0% Average +3.0% Range +2.8% to +3.2%
Actual: +3.0% Prior: +3.2% No Revisions

UK Retail Price Index
EStimates: Median 239.1 Average 239.1 Range 238.5 to 239.6
Actual: 239.4 Prior: 238.5 No Revisions

UK RPI (MoM)
EStimates: Median +0.3% Average +0.3% Range +0.1% to +0.7%
Actual: +0.4% Prior: +0.2% No Revisions

UK RPI (YoY)
EStimates: Median +4.7% Average +4.8% Range +4.5% to +5.2%
Actual: +4.8% Prior: +5.2% No Revisions

UK RPI Ex Mort Int.Payments (YoY)
EStimates: Median +4.9% Average +4.9% Range +4.7% to +5.2%
Actual: +5.0% Prior: +5.3% No Revisions

The GBPUSD forex pair actually rallied about 15 pips after the release as seen in this 10 second chart:

but this was probably just a continuation of the rally seen overnight since the better GDP, Retail Sales and Industrial Production figures out of China. However during the European Morning Cable again was the laggard as while the AUDUSD and EURUSD were near their respective highs for the day, the GBPUSD forex pair was 35 pips or so off its highs. The pair was frontrun ahead of its Daily R2 pivot but retraced back down to its R1 daily Pivot heading into the UK CPI news release. There is also the 50% of last weeks 1.5500 high to 1.5233 low at 1.5366. Here is a 5 minute chart which shows these levels:

Finally a 30 second chart of half hour or so leading into the 9:30 GMT (4:30 EST) release, which shows Cable bouncing off this R1 a few times heading into the release, and it makes a slightly lower low at this level right when the data hit the wire which punctuates the swing low and lead to a nearly 1.5400 the figure:

Norwegian CPI lower - leading to small pop in EURNOK

CPI figures are not the best to trade in this type of environment with alot of market uncertainty meaning inflation is unlikely to make central banks adjust interest rates, as they instead keep them very low to help stimulate the market...

on December 14th the Norge Bank cut rates more than expected by 0.5% or 50 basis points (bps) to 1.75%, this lower inflation figure now shows us why they were able to and it could mean they have more room to cut in the future if they need to. EURNOK rallied a bit as the Norwegian Krona weakened as a result. Not a huge move but good to keep our eyes open.

Here the figures:

Norway CPU (MoM)
Estimates: Median +0.3% Average +0.3% Range -0.5% to +0.7%
Acutal: +0.1% Prior: 0.0% No Revisions
Norway CPI (YoY)
Estimates: Median +0.5% Average +0.4% Range -0.4% to +0.8%
Actual: +0.2% Prior: +1.2% No Revisions
Norway Underlying (MoM)
Estimates: Median +0.2% Average +0.2% Range -0.3% to +0.4%
Actual: +0.2% Prior: -0.2% No Revisions
Norway Underlying (YoY)
Estimates: Median +1.0% Average +1.0% Range +0.5% to +1.2%
Actual: +1.0% Prior: +1.0% No Revisions
Norway Producer Prices incl.Oil (MoM)
Estimates: Median +0.3% Average +0.2% Range -0.4% to +0.8%
Actual: +0.2% Prior: +1.4% No Revisions
Norway Producer Prices incl.Oil (YoY)
Actual: +8.2% Prior: +12.9% No Revisions


The first chart is the 10 second chart of EURSEK:

and the 1 minute of the same pair:

Canadian CPI - Nearly completely flat

The CPI (Consumer Price Inflation) figures for Canada came out this morning at 12 noon GMT, or
7am EST. They were mostly flat with the exception of the Core y/y coming in slightly lower.

Here the figures:

Canadian Core CPI m/m
Estimates: Median +0.1% expected, Avg +0.1%, Range -0.3% to +0.3% (most 0.0 to +0.3)
Actual: +0.1% Prior: +0.3%
Canadian Core CPI y/y
Estimates: Median +2.2% expected, Avg 2.2%, Range +1.8% to +2.4% (most +2.1 to +2.3)
Actual: 2.1% Prior: +2.1%
Canadian CPI m/m
Estimates: Median +0.1%, Average +0.1% prior, Range -0.2% to +0.2% (most 0.0 to +0.2)
Actual: +0.1% Prior: +2.1%
Canadian CPI y/y
Estimages: Median +2.9%, Average +2.9%, Range +2.6% to +3.0% (most +2.8 to +3.0)
Actual: 2.9% Prior: 2.9%

Here is the chart of the USDCAD 5 seconds:

US CPI - Mixed reading leads to some wiggle as US shows up and sells

Today December 16th at 8:30am EST (13:30 GMT) the CPI inflation figures for the USA were released.
This one hasn't had anything more than a +/-0.1 deviation in ages and in this environment of economic uncertainty inflation is not going to change the FOMC interest rates.

Here the figures:

US CPI m/m
Estimates: Median +0.1% Average +0.1% Range -0.1% to +0.4%
Actual: 0.0% Prior: -0.1%

US CPI Ex Food & Energy m/m
Estimates: Median +0.1% Average +0.1% Range 0.0% to +0.3%
Actual: +0.2% Prior: +0.1%

US CPI y/y
Estimates: Median +3.5% Average +3.5% Range +3.3% to +3.7%
Actual: +3.4% Prior: +3.5%

US CPI Ex Food & Energy y/y
Estimates: Median +2.1% Average +2.1% Range +2.0% to +2.3%
Actual: +2.2% Prior: +2.1%

Here some charts, first USDJPY 1 minute:

This is the EMini S&P 500, this is a spreadbet chart, so might be slightly different than the actual futures.

Also the CADJPy 1 minute chart since this has a good correlation to the Stock Indices:

UK CPI - Expectations lower and correct

CPI and RPI figures came out of the UK this morning December 13th 2011. These are the numbers which tell us about inflation in the UK, which has been well above target for sometime. Normally the Central Bank will raise interest rates when inflation is too high, but the Bank of England or the BOE has not down this because growth is very slow and they fear if they hike rates this will kill what little growth there is and the UK will go into a recession.

They have justified this by producing forecasts which predict that CPI will fall over the next year or two, so the consumers who are facing higher prices but lower wages and higher taxes must weather this storm...whether there is enough social cohesion for this is a question especially after the August riots. Here are the figures:

CPI Headline m/m : Median Estimate +0.2% Average Estimate +0.1% Prior +0.1%
Range of Estimates -0.1% to +0.3% Actual +0.2%
CPI Headline y/y : Median Estimate +4.8% Average Estimate +4.8% Prior +5.0%
Range of Estimates +4.6% to +5.0% Actual +4.8%
CPI Core y/y : Median Estimate +3.3% Average Estimate +3.3% Prior +3.4%
Range of Estimates +3.1% to +3.4% Actual +3.2%
RPI Headline m/m : Median Estimate +0.2% Average Estimate +0.2% Prior +0.0%
Range of Estimates 0.0% to +0.4% Actual +0.2%
RPI Headline y/y : Median Estimate +5.1% Average Estimate +5.1% Prior +5.4%
Range of Estimates +5.0% to +5.4% Actual +5.2%
RPI ex Mort Int. Payments y/y : Median Estimate +5.3% Average Estimate +5.3% Prior +5.6%
Range of Estimates +5.1% to +5.6 Actual +5.6%

So pretty much lower as predicted, let's hope they continue to be correct and we see inflation
come down lower and people have more to spend. Cable or GBPUSD did rally 25-30 pips despite no deviation:

BOE's Dale had made some comments going into the release, here is a link to what he said, which was basically CPI was to fall and the BOE had room to increase QE (called the Asset Purchase Facility in the UK or APF)...CLick Here for more details. You can see that the Pound did fall before the news, but this could have been to selling of the Euro and DAX rather than Dales comments, which came 15 minute before the CPI release, where as the main thrust of the drop was 40 minutes before the release...see this chart:

Canadian CPI - Big Deviation Spike but Reversal

The Consumer Price Index, the major gauge of inflation was released out of Canada this Tuesday Nov. 23rd at noon GMT (7am EST). This has been a great report to trade a few years ago but recently it will only cause a short-lived spike. However this month there were quite signicant deviation on all 4 of the main numbers that come out with this report. There are yearly and monthly figures for both a Core Number, which excludes volatile items like energy and food, and a Headline number. Here is the Data:

CANADA OCT CPI CORE M/M: 0.4% V 0.1%E; Y/Y: 1.8% V 1.5%E - No revisions
CANADA OCT CONSUMER PRICE INDEX M/M: 0.4% V 0.2%E; Y/Y: 2.4% V 2.2%E - No revisions

As the 1st chart shows the USDCAD did spike down from near 1.0190 to 1.0165, so there was money to be made trading the spike using the Secret News Weapon, and members in the Profitmonger Live Online Forex Traderoom made money trading it. Price bounced quickly back up to the 61% within the 1st 30 seconds after the news release at around 1.0185 and moved back to below the 38% of the same fib move at around 1.0170 for a quick +15 pip afterspike move. Price did not continue down however and came back to the same 61% level at 1.0185 and held there for over 5 minutes, definately not a good sign. Traders were aware that there was alot of risk aversion in the markets as not only was the situation with EuroZone peripheral debt issues causing this but also there were some shot fired near the border between North and South Korea and alot of tough talk. In risk aversion situations the USD can strengthen as it is a safe haven currency, because it is the biggest most liquid market it can absorb all those in risky assets who want to get home fast.

....So to judge the performance of this CPI release based on what happened to the USDCAD pair is not right, so also included is the 1 minute chart of the EURCAD. As we can see on this chart, this news performed exceptionally well for the afterspike. After about 10 minutes of the release price retraced to the 50% of the previous swing, which included the news spike move, as price was moving down already heading into the release. From this 1.3808 level prices moved down all day as the situation in the EuroZone grew worse as various Euro ministers said things which weakened confidence in the single pair, including Angela Merkel. In fact the trade could have been held for the next day as well as it reached a total of +350 pips.

US CPI + Housing Starts and Building Permits - momentum take some time to build

On Wednesday Nov.17th at 1:30pm GMT (8:30am EST) the Consumer Price Index for the USA was released. At the same time 2 housing data figures were also released. Although these housing numbers are important and frequently they are released on their own and we watch and trade these releases in the live forex & futures trading room when they do. This month however they just happened to be scheduled for the same date and time as the much more important CPI.

CPI is the main measure of inflation and US Federal Reserve has been myopically focused on the deflation that has been seen in the USA and this is 1 of their 2 main mandates - some have even mentioned making inflation the sole mandate of the Fed, currently the other mandate is for the Fed to support job growth. The deflation is the main reason that the Fed has introduced another round of Quantitative Easing, aptly named QE2. They have also maintained very low interest rates, all this is an attempt to make money more available, there is more of it. They use this created money to buy bonds.

Anyhow a higher than expected CPI is generally supportive the US Dollar, as if inflation comes back it may signal that QE2 is working and it is time to scale it back and think about raising rates. So far Australia, New Zealand, Norway, and even Canada have raised their rates after the financial crisis saw all Central Banks cut them drastically. When will the ECB and BOE follow, could the USA be the last to hike, or is it possible that a scenario like is seen in Japan where deflation has continued for over a decade and rates have remained next to zero for all this time. CPI has 4 numbers, 2 yearly and 2 monthly, 1 is a core number which excludes food and energy which are considered more volatile, and a headline number which includes food and energy. Anyhow here is the data:

(US) OCT CONSUMER PRICE INDEX M/M: 0.2% V 0.3%E; CPI EX FOOD&ENERGY M/M: 0.0% V 0.1%E; CPI NSA: 218.7 V 218.8E
- CPI Y/Y: 1.2% v 1.3%e
- CPI Ex-food & Energy Y/Y: 0.6% v 0.7%e (Core Y/Y CPI at 0.6% is lowest reading on record)
- CPI core index SA: 221.8 v 221.8 prior
- No revisisons

*(US) OCT HOUSING STARTS: 519K V 598KE (lowest since April 2009); BUILDING PERMITS: 550K V 568KE
- Prior Housing Starts revised lower from 610K to 588K
- The decline in overall starts was almost entirely due to a 44% plunge in multi-family starts. Single-family permits rose by 1.0% to 406K

- Note: Housing starts -11.7% m/m is approximately double the lowest street estimate.

So all the CPI figures were lower by -0.1, this was not enough of a difference lower for it to trigger the lighting fast entry generated by the Secret News Weapon from Fast Economic News Service, however the housing data was also lower. So looking at all the data as a whole after it was released, it all did seem rather negative for the US Greenback. Although the deviations for CPI were small but all 4 of the figures were all negative, which was a definate plus because some times they will conflict, where for example the Core month-on-month number is a positive deviation and the Headline year-on-year figure is negative. Then to add fuel to the fire the Housing Starts figure was the lowest reading since April 2009. As mentioned in previous posts, whenever we see a news headline where a number is the highest of lowest in a certain period of time, the market will pay attention to this. So this housing crisis, which started the how financial meltdown a few years ago, does not seem to be getting that much better, at least in the USA. The Building Permits Data was also lower, not by a large amount and it is not as important as the Housing Starts number, but as it also came out in the same negative direction all the other data, it did not matter and only supported the other data.

Ultimately in these situations price action is true indicator as to whether the data is good or bad. Normally in the trading room we focus on USDJPY when trading Spot Forex for US Data, as well as either the 10 year Notes or the EMini S&P 500 when looking at futures, but we have also started watching the USDCHF as it has had some really good moves on economic figures from the USA. Focusing on the moves in Spot Forex, initially the USDJPY and USDCHF only moved down 15-20 pips minute after the release. There was then a pullback as we have seen on many releases, to the 61% on USDJPY, but on USDCHF the 38% got frontrun. The USDJPY then moved about 10 pips from the number, while the USDCHF produced a 20 pip move, so definately outperforming the Dollar Yen on this news.

Also included are some charts of the next few hours after the release, as with US data sometimes we have to wait for the US Stock market to open, also sometimes there is more US Data at 3pm GMT (10am EST), and many market participants want to see all the data before making their trading decisions. There was no data except the DOE Crude Inventories at 3:30pm EST (10:30am EST), however with all the bad data there was really no reason not to stay short. If price action had turned back up then of course the decision to exit would have had to be take. The Swiss just went into a period of sidewise consolidation for the next half hour, before momentum gently turned lower and then accelerated. From the cart we can see several trading entry opportunities, drawing a new fib over the entire news reaction and watching the candlestick close for entry. Even after the initial move down price on the USDCHF came back up to test the news reaction low at 0.9925, producing another opportunity to enter if the trader had not yet got in or to add more to the position after banking some profit on the initial move down. The USDJPY made a key reversal also about half an hour after the news was also at the 61% fib of the news reaction swing which then price extended down even past the 161% extension of the same move.

UK CPI - overreaction and reversal

The Consumer Price Index, which measure the change in the cost of a basket of commonly purchased items, for the UK was released this morning at 9:30am London Time (GMT). The indicator has been trending higher for the past few months, and so according to the data, the UK does not have the same deflation which the Fed in the USA is trying so hard to get rid of by quantitative easing. So going into the news the number was expected to surprise to the upside, however most of the price action during the London Open was quite choppy and indecisive. The numbers were released and they were all a bit higher than expected, but not enough to trigger a spike trade according to the parameters we have successfully used in the past. Although recently the market has been very sensitive to news and there have been some good moves, this is not always the case, and especially on CPI data, when Interest Rates came down very low during the financial crisis, it was not reacting so well. This data comes out with 3 figures a monthly and yearly headline, and also a core year-on-year figure, which excludes the volatile food, energy, alcohol, and tobacco items. Generally to get a high probability trade on this news figure release all 3 numbers should deviate in the same direction, however the most important figure to watch is the headline y/y figure. Also the Retail Price Index is released at the same time, which is similar but includes only consumables and includes housing costs such as rent, again ideally this RPI would also deviate from the expected number in the same direction as the CPI, ie. + or - deviation, however it is not so important if it conflicts with CPI, as that is the big figure the market is really paying attention to. Here are the figures:

(UK) OCT CPI M/M: 0.3% V 0.2%E; Y/Y: 3.2% V 3.1%E; CORE CPI Y/Y: 2.7% V 2.6%E
- No revisions

(UK) OCT RPI M/M: 0.2% V 0.3%E; Y/Y: 4.5% V 4.6%E; RPIX Y/Y:4.6% V 4.6%
- No revisions

During the London session it did look like GBPUSD had bottomed and was ready to move higher, but there was no decent momentum, all this changed as soon as the news was release and the pair moved briskly up just over +30 pips. There was a small pullback of 10 pips, however with such a small deviation it was not enough for a good low-risk entry, and the price of GBPUSD did not even make a 38% pullback. It then headed another 20 pips higher to about 1.6088, for about a +45 pip move total. This level coincides with the 50% pullback of the move down on the GBPUSD forex pair since the start of the week, and the quick reversal off that level confirmed this as an important longer term fibonacci level (see the 2nd chart of this post-a 30 minute GBPUSD chart). Incidentally the central daily pivot was also at 1.6079, as well as the swing high during the asian session at 1.6081, thus creating a double top. Traders will often notice that price will come up or down to a previous swing high or low, break it by some pips (the amount of pips vary), and then turn around. This is the classic sweep out of stops, and perhaps to lure a fresh herd of breakout traders into the market to be squeezed. This subject could easily become the subject of a longer post. The GBPUSD continued down after this for a run of 100 pips. This is why it is important to be aware when the price maybe overreacting to a small deviation and not get so caught up in the short term volatility after the news release so as to forget the bigger picture fibonacci levels, trend, flows and sentiment.

As the price of GBPUSD moved down off this key 1.6088 50% fibonacci retracement level, we can see in the last chart how price reacted off the various fibonacci levels created by the swing during the news. There are many examples in previous posts of trading in the direction of the initial spike move of the news release after it has retraced, however generally a trader will want to do so within the first 5-10 minutes after the release. As time after the release passes, the probability of the classic news afterspike pullback trade diminishes. The chart shows how 10 minutes after release the 38% had a small bounce, again the 61% fibonacci retracement created another bounce some 16-17 minutes after release for 10 pips, and even the 78% caused a 12-15 pip bounce some 25 minutes after the release. Surely this could have confused any trader looking for a continuation of the initial spike move up, but with such a small deviation, once the trade had moved a few pips after the bounce off the fib level, stops should have been tightened. It highlights the importance of having a fast reliable source of market news, any trader simply watching price without knowing the actual numbers could have got caught by this. It simply was not the type of deviation of give the trade a big stop. Always remember to use tight stops on forex news afterspike trades! Even if a trader gets it wrong - 1 trade with a 30 pip stop equals the same as 3 trades with 10 pip stops. This is not the same for swing trading and other strategies but in fast moving news trading it is advisable.