cpi and stop loss
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  1. #1
    Join Date
    Dec 2006
    Posts
    8

    Default cpi and stop loss

    hi all. i started with oanda with 1.5k~ and pretty much made profits nonstop all the way up to 3k or so. pretty confindant and perhaps foolishly unsatified with oanda's 50:1 leverage, i went to fxsol to use their 400:1 margin. i estimated that the cpi would be lower than normal and made a short before release on the euro/usd accordingly. the cpi was lower than expected as i expected, but instead of spiking down as i expected it spiked up. also, the stop loss i set at 400 didn't seem to work since i lost like half my account. i can figure out why the stop loss didn't work but i'm wondering if the market really couldn't fill a 800kish order(2k at 400 leverage). i thought people would be playing with bigger numbers and mine was small in comparison.

    for the other one, why did the euro/usd spike up when the cpi was lower than expected? i figured that lower cpi would be a good thing. did the euro/usd spike up because people wanted bad news so the feds would raise intrest rates? or was the 0 change bad because people perfered a .2 to .4 rise because it was better for the economy or something?

  2. #2
    Join Date
    Dec 2006
    Location
    Cairo, Egypt
    Posts
    327
    Negative inflation numbers made a negative (brief) effect on the USD currency..so EURUSD was briefly long.

  3. #3
    Join Date
    Dec 2006
    Posts
    8
    negative inflation was for the last three months but it's still postive over the year isn't it? i don't quite understand. could you please explain a little more?

  4. #4
    CPI is a tool used by the Fed to measure inflation. Theoretically when CPI is up, it indicates to the Fed that inflation is rising, which would cause them to raise interest rates (Dollar positive). However, when CPI is low, it tells the Fed that inflation is in check and would keep them from raising rates (Dollar negative).

    So in theory, when CPI goes up, the dollar goes up. When CPI goes down, the dollar goes down.

    Hope that helps.

  5. #5
    Join Date
    Dec 2006
    Posts
    8
    thanks you two. i was under the impression that a lower cpi is defintaly good for the dollar without considering that the cpi affects the chance of raising intrest rates and that overcomes the effects of the cpi. is there anything else like this that links together or goes against newbie thought?

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