Top 5 – 05.29.2013

TOP 5 HOT IDEAS

DATE: Wednesday May 29, 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 – Japanese Retail Sales



FUNDAMENTALS
Retail Sales expected @ 0.2% (7:50 PM ET / 23:50 GMT)
Our View – Bullish JPY
Reason – Stronger Nikkei Should Fuel Gradual Improvement in Japanese Data
If Retail Sales fall by -0.1% or more = Buy USD/JPY
If Retail Sales grow by 0.5% or more = Sell USD/JPY

We have good reasons to believe that Japanese data will continue to show improvements in Japan’s economy. The recent rise in the Nikkei should support consumer spending, leading to a rebound in retail sales. Therefore we believe that Japan’s data tonight can be traded proactively or reactively. For those who choose to wait, if Japanese retail sales fall by 0.1% or more, USD/JPY can be bought for an extension higher. If Retail Sales grow by 0.5% or more, USD/JPY can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

Fails to break 102.50
101.00 holds
Range dominates

USD/JPY found support at the 101.00 level but failure to break and hold 102.50 suggests that range conditions still dominate and downside pressures may remain.

2. AUD/USD – Westpac Leading Index



FUNDAMENTALS
Leading Index expected @ (8:30 PM ET / 00:30 GMT)
Our View – Neutral
Reason – Neutral
If the Leading Index grows by 1% or more = Buy AUD/USD
If the Leading Index grows 0.1% or less = Sell AUD/USD

Australia’s leading index is scheduled for release this evening and while there have been recent data disappointments, the leading index is difficult to handicap and therefore best traded reactively. If the leading index grows by 1% or more, the AUD/USD can be bought for a move higher. If the leading index grows by 0.1% or less, the AUD/USD can be sold. REACTIVE TRADE

TECHNICALS

9600 holds for now
9700 near term resistance
Break of 9600 opens test of 9550

The Aussie continued to struggle with the downside but the the pair has found double bottom support at the 9600 level through if that breaks it opens a run to 9550. 9700 caps the upside.

3. EUR/CHF – UBS Consumption Index

FUNDAMENTALS
UBS Consumption Index @ (2 AM ET / 6 GMT)
Our View – Neutral
Reason – Neutral
If UBS Index drops below 1.00 = Buy EUR/CHF
If UBS Index rises above 1.50 = Sell EUR/CHF

Switzerland does not release many pieces of economic data so when they do, the numbers can have a meaningful impact on the currency. Wednesday’s UBS Consumption index is difficult to handicap but can be tradable reactively. If the index drops below 1.00, EUR/CHF can be bought for an extension higher. If the index rises above 1.50, representing an improvement in consumption, EUR/CHF can be sold. REACTIVE TRADE

TECHNICALS

1.2400 support
Retest of highs possible
Break of 1.2400 opens 1.2300

The EUR/CHF is consolidating its recent gains and as long at 1.2400 support holds the pair could mount a test of the 1.2600 level. A break below 1.2400 opens a run 1.2300 as the rally unwinds.

4. EUR/USD – German Unemployment Change




FUNDAMENTALS
German Unemployment Change expected @ 5K (3:55 AM ET / 7:55 GMT)
Our View – Bearish EUR
Reason – First Decline in Staffing Levels Since January
If Unemployment Change is 0K or declines = Buy EUR/USD
If Unemployment Change exceeds 10K = Sell EUR/USD

We have strong reasons to believe that labor market conditions in Germany deteriorated this month. According to the PMI report, staffing levels fell for the first time since January with job shedding seen in both the manufacturing and service sectors. As a result, we believe the data can be traded proactively or reactively. For those who choose to wait, if unemployment change is flat or declines, the EUR/USD can be bought for a move higher. If unemployment change exceeds 10K, the EUR/USD can be sold for a test of 1.28. PROACTIVE or REACTIVE TRADE

TECHNICALS

1.2950 fails to hold
1.2850 still support
1.2800-1.3000 still the range

EUR/USD continues to operate within a broad 1.3000-1.2800 range that has been dominant for several months. The pair failed at 1.2950 but held at 1.2850 as the churn continues but as long as it holds 1.2850 the bias remains slightly up.

5. USD/CAD – Bank of Canada Rate Decision



FUNDAMENTALS
BoC Rate Decision expected @ 1% (10 AM ET / 14 GMT)
Our View – Neutral
Reason – Neutral
If BoC cuts interest rates = Buy USD/CAD
If BoC leaves rates unchanged = No Change

Tomorrow’s Bank of Canada rate decision will be the last one for BoC Governor Carney. As such, we do not anticipate any changes in tone let alone monetary policy. So there is no trading opportunity unless the BoC surprises with a rate cut and therefore we feel that the event risk can only be traded reactively. REACTIVE TRADE

TECHNICALS

1.0400 Double top?
1.0300 new support
Break of 1.0400 opens run to 1.0500

USD/CAD may have set a double top at 1.0400 level. The pair has near term support at 1.0300 but a break above 1.0400 would put fresh highs and opens a run towards the 1.0500 level.

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