Top 5 -05.15.2013

TOP 5 HOT IDEAS

DATE: Wednesday May 15, 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. EUR/USD – German GDP



FUNDAMENTALS
GDP expected @ 0.3% (2AM ET / 6 GMT)
Our View – Bullish EUR
Reason – Stronger Retail Sales and Trade in Q1
If GDP growth exceeds 0.5% = Buy EUR/USD
If GDP growth is 0.1% or less = Sell EUR/USD

We have strong reasons to believe that German GDP growth will surprise to the upside tomorrow, driving the EUR/USD higher. While the currency pair has fallen steeply today, it is still holding firm compared to other currencies. If GDP growth surprises to the upside, we could see a short covering rally in the EUR/USD. Given the improvement in retail sales and trade during the first 3 months of the year, we have valid reasons to believe that the German economy grew at a decent pace in the first quarter. Therefore we believe this data can be traded proactively or reactively. For those who choose to wait, if GDP growth exceeds 0.5%, the EUR/USD can be bought for a recovery trade. If it grows by 0.1% or less, the EUR/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

2950 goes
2925 still holds
Break lower opens run to 2850

The EUR/USD continues to slide as the dollar onslaught persists. The pair gave up the 2950 support but still holding above key 2925 level. A break there opens run towards longer term 2850 support.

2. EUR/CHF – Swiss Producer Prices



FUNDAMENTALS
Swiss PPI expected @ -0.2% (3:15 PM ET / 8:15 GMT)
Our View – Neutral
Reason – Neutral
If PPI drops by -0.6% or more = Buy EUR/CHF
If PPI exceeds 0.2% = Sell EUR/CHF

Considering that global inflationary pressures are very low, Swiss PPI will not be a major market mover for the CHF unless there is a big surprise. As a result, the data should only be traded reactively. If PPI growth declines by 0.6% or more, EUR/CHF can be bought for a quick move higher. If PPI growth exceeds 0.2%, EUR/CHF can be sold. REACTIVE TRADE

TECHNICALS

2500 caps upside
2450 old resistance new support
Break of 2500 opens way for run to 2550 highs

EUR/CHF broke through the key 2450 resistance and now has 2550 in sight which are the year to data highs. 2450 now becomes the immediate support for the pair.

3. GBP/USD – Jobless Claims

FUNDAMENTALS
Jobless Claims expected @ -3.0K (4:30 PM ET / 8:30 GMT)
Our View – Bullish GBP
Reason – Higher Employment According to PMIs
If Jobless Claims drop by 10K or more = Buy GBP/USD
If Jobless Claims rise by 5K or more = Sell GBP/USD

U.K. Jobless claims and the Bank of England’s Quarterly Inflation report are both scheduled for release on Wednesday. We don’t expect any major changes in the Quarterly report and therefore prefer to trade Jobless claims. According to the PMI numbers, the service sector saw stronger jobs last month and the manufacturing sector saw fewer job losses, which is good for the U.K. economy and hence the GBP. Therefore the data can be traded proactively or reactively. For those who choose to wait, if jobless claims drop by 10K or more, the GBP/USD can be bought for a move higher. If jobless claims rise by 5K or more, the GBP/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

5250 broken
5200 major support level holds
Break of 5200 opens run back to 5100 level

Cable broke below the key 5250 level and looks very weak on the charts with only the 5200 as support left. The upside is now contained by 5300 while a break of 5200 opens a run further to the 5000-5100 support.

4. USD/CAD – Manufacturing Sales



FUNDAMENTALS
Manufacturing Sales expected @ 0.5% (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Neutral
If Manufacturing sales drop by -0.2% or more = Buy USD/CAD
If Manufacturing sales rise by 2% or more = Sell USD/CAD

Canada’s manufacturing sales report is not a huge market mover for the Canadian dollar unless there is a big surprise. As a result, the data is best traded reactively. If Manufacturing sales drop by -0.2% or more, USD/CAD can be bought for a quick move higher. If Manufacturing sales rise by 2% or more , USD/CAD can be sold. REACTIVE TRADE

TECHNICALS

1.0150 taken out
Longs now target 1.0200
1.0100 becomes new support

USD/CAD finally succumbed to the dollar rally taking out the 1.0150 level and longs will now target the key 1.0200 figure. 1.0100 now becomes new support for the pair.

5. USD/JPY – Empire State Manufacturing Survey



FUNDAMENTALS
Empire State Manufacturing Survey expected @ 4 (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Neutral
If Empire State index exceeds 5 = Buy USD/JPY
If Empire State index is less than 2 = Sell USD/JPY

There are a number of U.S. economic reports scheduled for release Wednesday morning and the Empire State manufacturing survey is one of the more important ones. While the data is difficult to handicap, the odds favor a stronger release given the overall trend of U.S. data. Nonetheless, the report should be traded reactively. If the Empire State manufacturing index exceeds 5, USD/JPY can be bought for a move higher. If the index drops to 2 or lower, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS

Fresh highs take out 102.25
102.50 next
101.50 supports downside

USD/JPY takes out fresh highs with the pair now focused on the 102.50 level as the momentum in the pair continues to press the upside. The 101.50 acts as near term support for dip buyers while 103.00 now the next round number for longs to target

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