Top 5 – 05.20.2013

TOP 5 HOT IDEAS

DATE: Monday May 20, 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 – Bernanke Speech



FUNDAMENTALS
Bernanke speech expected on 5/18 @ (11 AM ET / 15 GMT)
Our View – Neutral
Reason – Neutral
If Bernanke makes no mention of economy or monetary policy = No Trade
If Bernanke sounds optimistic or talks about tapering asset sales = Sell EUR/USD

Fed Chairman Ben Bernanke is speaking this weekend at a Commencement speech. Most likely he will not touch on monetary policy or the economy but if he does, it could affect how the EUR/USD opens on Sunday. If Bernanke makes no mention of economy or monetary policy, there’s no trading opportunity. However if Bernanke sounds optimistic or talks about tapering asset sales, the dollar could extend its gains against the EUR, creating an opportunity to sell the currency for a move lower. REACTIVE TRADE

TECHNICALS

2800 given
2750 next target for shorts
2900 now resistance

The EUR/USD downtrend is firmly entrenched but the pair now approaches the long term support near the 1.2750 level. Meanwhile 2900 caps any upside and only a move through 2950 removes downside bias.

2. NZD/USD – PMI Services



FUNDAMENTALS
PMI Services expected @ (6:30 PM ET / 22:30 GMT)
Our View – Bullish NZD
Reason – Uptick in Business PMI and credit card spending
If PMI Services exceed 57 = Buy NZD/USD
If PMI Services drops below 54 = Sell NZD/USD

We have strong reasons to believe that service sector activity in New Zealand improved in April because credit card spending picked up and the business PMI index increased. Therefore we believe the data can be traded proactively or reactively. For those who choose to wait, if the PMI services index exceeds 57, the NZD/USD can be bought for a recovery trade. If the index drops to 54 or lower, the NZD/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

Selling reaches to 8050
8200 now near term resistance
Will 8000 hold

The kiwi selloff is relentless with pair slicing through levels like a hot knife through butter. For now the selling has stopped at 8060 but with 8000 so close in view the shorts will likely press their case.

3. GBP/USD – Rightmove House Prices

FUNDAMENTALS
Rightmove House Prices expected @ (7:01 PM ET / 23:01 GMT)
Our View – Neutral
Reason – Neutral
If House Prices grow by 3% or more = Buy GBP/USD
If House Prices drop by 0% or more = Sell GBP/USD

The U.K.’s Rightmove house price report is not a big market mover for the GBP/USD unless there is a significant surprise. Therefore the data should only be traded reactively. If House Prices grow by 3% or more, the GBP/USD can be bought for a move higher. If House Prices drop by 0% or more, the GBP/USD can be sold. REACTIVE TRADE

TECHNICALS

5300 rejected
As offered as bid yesteday
Break of 1.5150 opens run to 1.5050

Cable was as offered on Friday as it was bid the day before with 5300 level clearly rejected. The pair now stands at key 1.5150 support and a break there opens a run towards 1.5050.

4. USD/JPY – Japanese Department Store Sales





FUNDAMENTALS
Nationwide Department Store Sales expected @ (1:30 AM ET / 5:30 GMT)
Our View – Neutral
Reason – Neutral
If Dept Store Sales growth slows to 2% or lower = Buy USD/JPY
If Dept Store Sales growth rises to 5% or more = Sell USD/JPY

Japanese department store sales are due for release on Sunday evening and will not have a big impact on USD/JPY unless there is a meaningful surprise. So the data should only be traded reactively. If Department Store Sales growth slows to 2% or lower, USD/JPY can be bought for a move higher. If department store sales growth rises to 5% or more, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS

103.00 taken out
Fresh highs open run to 103.50
102.50 now support

Fresh highs have now taken USD/JPY through the 103.00 level and the momentum may carry the pair through 103.50 as longs press their position. 102.50 now acts as support.

5. AUD/USD & Gold



FUNDAMENTALS
A large part of the decline in the AUD/USD can be attributed to the drop in gold prices. As shown in the chart above, AUD/USD has been moving in lockstep with gold. Of course the move in gold is being caused by the strength of the U.S. dollar, which is also the main driver behind AUD/USD weakness. So while the AUD/USD may have some support at 97 cents, its ability to hold above that level largely hinges upon whether gold prices make a new low.

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