USD/JPY Fundamental Analysis October 16, 2012 Forecast

USD/JPY Fundamental Analysis October 16, 2012 Forecast

Analysis and Recommendation:
The USD/JPY is trading at 78.57 breaking above the lower 78 range that the pair has been stuck in. The U.S. dollar held on to modest gains through the Asian morning Monday, supported by a hint of risk aversion, although trade activity was generally subdued.
Bank of Japan Deputy Governor Hirohide Yamaguchi said on Monday that economic growth in emerging economies is slower but their growth potential is still high.
“Amid the continued low economic growth, the environment surrounding securities markets has been severe and there has recently been concern over a decline in the competitiveness of Japanese securities markets compared with those overseas.”
Yamaguchi didn’t mention the outlook for the BOJ’s monetary policy or Japan’s economy.
FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports.
Economic Data October 15, 2012 actual v. forecast

Date				Currency				Event	Actual		Forecast	Previous
Oct. 13				CNY				Chinese Trade Balance	27.70B		20.40B	26.66B
				CNY				Chinese M2 Money Stock	14.8%		13.6%	13.5%
Date			Currency					Event		Actual	Forecast	Previous
Oct. 15			GBP					Rightmove House Price In		3.5%		-0.6%
			AUD					Home Loans (MoM)		1.8%	1.4%	-0.7%
			AUD					New Motor Vehicle Sales (M		4.7%		4.3%
			CNY					Chinese CPI (YoY)		1.9%	1.9%	2.0%
			CNY					Chinese PPI (YoY)		-3.6%	-3.6%	-3.5%
			CNY					Chinese CPI (MoM)		0.3%	0.4%	0.6%
			CNY					Chinese FDI				-3.40%
			JPY					Industrial Production (MoM)		-1.6%	-1.3%	-1.3%
			SGD					Singaporean Retail Sales		3.2%	0.6%	-2.9%

UK CPI y/y | October 16, 2012 | News Plan

We´ll be trading the UK Consumer Price Index (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 2.3% Previous 2.5%
DEVIATION: 0.3% (BUY GBP 2.6% / SELL GBP 2.0%)
The Trade Plan
We are looking for a variable deviation of 0.3%. If the Inflation number remained above 2.6%, which is close to BOE´s inflation target, we will BUY GBP. If the Inflation number decreases to 2.0% 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.
We´ll be looking to trade this release using my after-news retracement method. We´ll wait for the release, wait for market spike, and then wait for a decent retracement before jumping in. For more information on my trading methods:
http://www.henryliuforex.com/how-to-get-started-with-news-trading/
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: GBPUSD.
Outlook Score
Outlook 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.

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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”.