Top 5 – 05.14.13

TOP 5 HOT IDEAS

DATE: Tuesday May 14, 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. GBP/USD – RICS House Price Balance



FUNDAMENTALS
RICS expected @ 2% (7:01PM ET / 23:01)
Our View – Neutral
Reason -- Neutral
If RICS House Price Balance exceeds 5% = Buy GBP/USD
If RICS House Price Balance drops by -3% or more = Sell GBP/USD

The U.K.’s RICS house price balance is not a big market mover for the GBP unless there is a large surprise. In order for the GBP/USD to rally and for us to even consider a reactive trade to the long side, the RICS House Price Balance would need to exceed 5%. If the RICS House Price Balance drops by -3% or more, the GBP/USD could be an attractive short. REACTIVE TRADE

TECHNICALS

5300 given
5250 now becomes support
5400 caps upside

A very weak performance for cable today as the pair gives up 5300 unwinding most of the upside rally. However, the pair now approaches the key 5250 support and is likely to base there.

2. NZD/USD – New Zealand Retail Sales



FUNDAMENTALS
Retail Sales expected @ 0.8% (6:45 PM ET / 22:45 GMT)
Our View – Bearish NZD
Reason – Credit Card Spending weakened in Q1
If Retail Sales growth exceeds 2% = Buy NZD/USD
If Retail Sales growth is less than 0.5% = Sell NZD/USD

We have good reasons to believe that consumer spending in New Zealand grew at a slower pace in the first quarter. Taking a look at each of the monthly credit card spending reports, consumer demand has been weakening, pointing to a softer official quarterly release. The data can be traded proactively or reactively in our opinion. For those who choose to wait, if New Zealand retail sales grow by 2% or more, the NZD/USD can be bought for a recovery trade. If retail sales grow by less than 0.5%, the NZD/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

8250 continues to hold
8200 very deep support
8300 continues to cap

The downside pressure on kiwi remains as the pair tests the 8250 support but much deeper support rests at the 8200 level while 8300 now caps the upside in the pair.

3. USD/JPY – Japan CGPI

FUNDAMENTALS
CGPI expected @ 0.1% (7:50 PM ET / 23:50 GMT)
Our View – Neutral
Reason – Neutral
If CGPI drops by -0.1% or more = Buy USD/JPY
If CGPI exceeds 0.5% = Sell USD/JPY

Japan’s Domestic Goods Price Index is not a big market mover for the Yen unless there is a big surprise. CGPI is a measure of inflation so if CGPI drops by 0.1% or more, it could boost USD/JPY. If it exceeds 0.5%, USD/JPY could slip as stronger inflation eases the pressure on the BoJ to ease. CGPI should only be traded reactively. REACTIVE TRADE

TECHNICALS

Fresh highs made above 102.00
102.25 key to further upside
101.50 supports

USD/JPY continues to churn higher although failure to hold the 102.00 level suggests the rally may be due for a bit of pause. A break above 102.25 opes a run to 103.00 while 101.50 supports the downside.

4. EUR/USD – German ZEW Survey



FUNDAMENTALS
ZEW expected @ 40 (5 AM ET / 9 GMT)
Our View – Bullish ZEW
Reason – ECB recently cut rates, hotter German Industrial Production
If ZEW exceeds 40 = Buy EUR/USD
If ZEW drops below 36 = Sell EUR/USD

We have good reasons to believe that German investor confidence improved this month. Not only have stocks performed well but the ECB also cut interest rates recently, providing additional support for the economy and data hasn’t been terrible with industrial production surprising to the upside. As a result, we believe that the German ZEW survey can be traded proactively or reactively. For those who choose to wait, if the ZEW index exceeds, the EUR/USD can be bought for a recovery trade. If it drops below 36, the EUR/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

2950 continues to hold
3000-3050 near term resistance
Break of 2925 opens run to 2850

The EUR/USD remains relatively well supported at the 2950 level, but the 3000-3050 corridor continues to contain the rallies in the pair. Meanwhile a break of 2925 would open a run to 2850.

5. EUR/USD – Euro Area Finance Ministers Meeting



FUNDAMENTALS
Import Prices expected @ -0.5% (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Neutral
If import price growth exceeds 0.8% = Buy USD/JPY
If import price growth drops by more than -1% = Sell USD/JPY

U.S. import prices is not a huge market mover for USD/JPY unless there is a large surprise especially with inflationary pressures not a big problem at this time. Therefore import prices should only be traded reactively. If import price growth exceeds 0.8%, we expect USD/JPY to extend higher. If price growth drops by more than -1%, we expect USD/JPY to fall. REACTIVE TRADE

TECHNICALS

Fresh highs made above 102.00
102.25 key to further upside
101.50 supports

USD/JPY continues to churn higher although failure to hold the 102.00 level suggests the rally may be due for a bit of pause. A break above 102.25 opes a run to 103.00 while 101.50 supports the downside.

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