Top 5 -04.05.13

TOP 5 HOT IDEAS

DATE: Friday April 5, 2013

Guidelines for Top 5 Trading:
Proactive –
Enter trade 20 minutes before data, 25 pip stop, 25 pip first target
Reactive – Enter trade 5 minutes after data release, 20 pip stop, 15 pip target

1. USD/JPY – BoJ Monthly Report



FUNDAMENTALS
BoJ Monthly Report @ (1 AM ET / 5 GMT)
Our View – Neutral
Reason – Neutral
If BoJ Downgrades Outlook on Economy = Buy USD/JPY
If BoJ Upgrades Outlook on Economy = Sell USD/JPY

The Bank of Japan’s monthly report is scheduled for release tomorrow and we don’t anticipate any major surprises. As a result, there’s no real trading opportunity unless the BoJ changes its outlook for the economy (which we do not expect). Nonetheless, if the BoJ downgrades their economic assessment, we expect USD/JPY to rise as it would reaffirm the need for more easing. If they upgrade their outlook on the economy, which would be a huge surprise, we expect USD/JPY to fall quickly. REACTIVE TRADE

TECHNICALS

Blowout move
96.68 yearly highs next target of longs
95.50 near term support

USD/JPY has posted a massive blowout day to the upside and looks to challenge the yearly highs near the 96.68 level while 95.50 acts as the first level of support

2. GBP/USD – Halifax House Prices



FUNDAMENTALS
House Prices expected @ (3 AM ET / 7 GMT)
Our View – Neutral
Reason – Neutral
If House Prices grow by 0.6% or more = Buy GBP/USD
If House Prices stagnate (0%) or declines = Sell GBP/USD

U.K. house prices are due for release tomorrow and should not be a huge market mover for the GBP/USD unless there is a big surprise. Overall the housing market has been weak and if house prices grow by 0.6% or more, we expect the GBP/USD to rally. If house prices stagnate or decline, we expect the GBP/USD to fall. REACTIVE TRADE

TECHNICALS

5250 still caps
5100 support
Break opens up run to 5300

Cable had a strong move to the upside but 5250 still acting as resistance, though if broken opens up the path to 5300-5500 zone as upside bias becomes established.

3. EUR/USD – Eurozone Retail Sales

FUNDAMENTALS
EZ Retail Sales expected @ -0.4% (5AM / 9GMT)
Our View – Bullish EUR
Reason – Stronger German Retail Sales but slightly weaker French spending
If Retail Sales growth is 0% or higher = Buy EUR/USD
If Retail Sales growth is -0.7% or lower = Sell EUR/USD

We have good reasons to believe that Eurozone retail sales will surprise to the upside. Whenever we look to gauge the potential surprise of EZ data, we always turn to the economic reports of the region’s 2 largest economies – Germany and France. In February, German retail sales improved significantly but consumer spending in France declined. Still, we believe the data can be traded proactively. For those who choose to wait, if retail sales grow by 0% or more, we expect the EUR/USD to rally. If it contracts or declines by 0.7% or more, we expect the EUR/USD to weaken. PROACTIVE or REACTIVE TRADE

TECHNICALS

2850 level finally broken
2950-3000 next zone for longs
2850 now support

EUR/USD finally broke out of its range taking out the upside resistance and now guns for the 2950-3000 area while 2850 which was old resistance now becomes support.

4. USD/CAD – Canadian Employment Numbers

FUNDAMENTALS
CAD employment expected @ 6.5K (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Neutral
If employment declines by 5K or more = Buy USD/CAD
If employment exceeds 30K = Sell USD/CAD

Tomorrow will be a busy day for the CAD with trade, employment and manufacturing sector reports scheduled for released. Typically these are spaced out better but the Easter Holiday shifted the release date of some reports. The CAD hit a 1 month high in anticipation and could pare its gains if the data surprises to the downside. Of these 3 releases, the employment numbers should be the most market moving. After adding 50k jobs last month, a far more modest 6.5k increase is expected. It is important to remember that Canadian employment will be released at the same time as U.S. non-farm payrolls and USD/CAD will react based on the larger surprise. The data is best traded reactively. If Canadian employment has the larger surprise and falls by 5K or more, we expect USD/CAD to rally. If employment exceeds 30K, we expect USD/CAD to slide. REACTIVE TRADE

TECHNICALS

Fresh monthly lows
1.0100 in view
1.0200 caps upside

The rally in loonie continued with the pair making fresh monthly lows. On the downside the 1.0100 level is natural target for longs while 1.0200 caps any upside rallies.

5. EUR/USD – U.S. Non-Farm Payrolls



FUNDAMENTALS
Payrolls expected @ 190K (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Neutral
If Payrolls are 150K or less = Buy EUR/USD
If Payrolls are 250K or higher = Sell EUR/USD

The U.S. non-farm payrolls report is a notoriously difficult piece of data to trade and should only be traded reactively and ideally with a 5 minute wait after the data is released for the initially volatility to settle. If the surprise is large enough, there will usually be continuation. If non-farm payrolls rise by less than 150K, we expect EUR/USD to rally. If payrolls rise by 250K or more, we expect the EUR/USD to slide. REACTIVE TRADE

TECHNICALS

Blowout move
96.68 yearly highs next target of longs
95.50 near term support

USD/JPY has posted a massive blowout day to the upside and looks to challenge the yearly highs near the 96.68 level while 95.50 acts as the first level of support

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