Top 5 – 05.21.13

TOP 5 HOT IDEAS

DATE: Tuesday May 21, 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. AUD/USD – RBA Minutes



FUNDAMENTALS
RBA Minutes expected @ (9:30 PM ET / 0:30 GMT)
Our View – Bearish AUD
Reason – RBA Cut Interest Rates
If RBA offsets rate cut with an optimistic outlook = Buy AUD/USD
If RBA is dovish and suggests more rate cuts possible = Sell AUD/USD

When the RBA last met, they surprised the market with a 25bp rate cut. The minutes from that meeting will be released this evening and given the central bank’s decision to ease, we have reasons to believe that their tone will be dovish. Therefore the minutes can be traded proactively or reactively. For those who choose to wait, if the RBA offsets the rate cut with an optimistic outlook, the AUD/USD can be bought for a recovery trade. If they are dovish and indicate that another rate cut is possible, the AUD/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

9800 retaken
9700 now serves as near term bottom
9850 next resistance

The Aussie appears to be carving out a near term bottom with 9700 as key support. Having now taken out 9800 the longs will try to press 9850 as short covering begins.

2. NZD/USD – Credit Card Spending



FUNDAMENTALS
Credit Card Spending expected @ (11 PM ET / 3 GMT)
Our View – Neutral
Reason – Neutral
If Credit Card Spending grows by 1% or more = Buy NZD/USD
If Credit card spending falls by 1% or more = Sell NZD/USD

New Zealand credit card spending numbers are difficult to handicap and should therefore only be traded reactively. If credit card spending grows by 1% or more, the NZD/USD can be bought for a move higher. If spending contracts by 1% or more, the NZD/USD can be sold. REACTIVE TRADE

TECHNICALS

Bottoms out at 8050
8200 now recovery target
8100 new support

Much like the Aussie the kiwi selloff looks like its tapped out for now and the pair has found key support at 8050 with 8200 now the key target of longs looking to push the recovery further.

3. USD/JPY – All Industry Activity Index

FUNDAMENTALS
All Industry Activity Index expected @ (12:30 AM ET / 4:30 GMT)
Our View – Neutral
Reason – Neutral
If the All Industry Activity Index falls by 1% or more = Buy USD/JPY
If the All Industry Activity Index rises by 2% or more = Sell USD/JPY

Japan’s all industry activity index is not a major market mover for USD/JPY unless there is a big surprise. Therefore this data should only be traded reactively. If the All Industry Activity Index falls by 1% or more, USD/JPY can be bought for a move higher. If the All Industry Activity Index rises by 2% or more, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS

103.00 tops out
102.00 still holds
Break lower opens up test of 101.50

USD/JPY has lost momentum at the 103.00 level and looks ready to consolidate and perhaps correct. The pair has near term support at 102.00 but if given the next down is 101.50 as long liquidate. A break above 103.50 keeps upside rally going.

4. EUR/USD – German Producer Prices





FUNDAMENTALS
German PPI expected @ (2 AM ET / 6 GMT)
Our View – Bearish EUR
Reason – Lower wholesale prices
If German Producer Prices rises by 0.3% or more = Buy EUR/USD
If German Producer Prices fall by -0.4% or more = Sell EUR/USD

We have good reasons to believe that German producer prices will surprise to the downside because wholesale prices, which measures similar types of products continued to decline. As a result, the data can be traded proactively or reactively. If German producer prices rise by 0.3% or more, the EUR/USD can be bought for a move higher. If prices fall by 0.4% or more, the EUR/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

Recovery to 2900
2800 now strong support
2950 next resistance

The EUR/USD looks to have made a higher double bottom at 2800 and the retake of 2900 suggests that a counter trend rally is on the way. Resistance now at 2950 and the much heavier at 3000.

5. GBP/USD – U.K. Consumer Prices



FUNDAMENTALS

UK Consumer Prices expected @ 0.4% (4:30 AM ET / 8:30 GMT)
Our View – Neutral
Reason – Neutral
If CPI rises by 0.6% or more = Buy GBP/USD
If CPI growth is 0.1% or less = Sell GBP/USD

The U.K.’s consumer price report is a very important release for the British pound. However with producer and consumer prices released at the same time, CPI growth is a tough call. If we had guess, inflationary pressures probably eased because shop prices declined. Yet the data is still best traded reactively. If CPI rises by 0.6% or more, the GBP/USD can be bought for a recovery trade. If CPI growth is 0.1% or less, the GBP/USD can be sold. REACTIVE TRADE

TECHNICALS

5250 retaken
5150
5300 next target of longs

Cable has been improving along with all the risk currencies today and the move through 5250 now puts 5300 squarely in the sights of the longs while 5150 supports the downside.

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