Top 5 – 05.30.2013

TOP 5 HOT IDEAS

DATE: Thursday May 30, 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 Purchases of Foreign Bonds



FUNDAMENTALS
MoF Data on Japan Buying Foreign Bonds expected @ (7:50 PM ET / 23:50 GMT)
Our View – Neutral
Reason – Neutral
If Purchases exceed 0B = Buy USD/JPY
If Purchases are -100B or lower = Sell USD/JPY

An essential criteria for a resumption of the USD/JPY rally are Japanese purchases of foreign bonds. Last week’s report showed heavy selling that basically offset all of the buying over the past 3 weeks. This data has become very important and is unfortunately difficult to handicap but if we continue to see more sales than buys of foreign bonds, USD/JPY can be sold as it should experience a deeper correction. The only opportunity to trade this data is reactively and if the 2% U.S. yield finally draws demand from the Japanese, leading to an increase in purchases, USD/JPY can be bought as investors start to see this as a renewed trend. REACTIVE TRADE

TECHNICALS

102.50 fails again
101.00 tested several times
100.50 break opens test of 100.00

USD/JPY continues to test the 101.00 level as it forms a topping formation but so far support ahead of the 100.50 level continues to hold. A break through though will open the way for a run towards 100.00

2. AUD/USD – Building Approvals



FUNDAMENTALS
Building Approvals expected @ 4.0% (9:30 PM ET / 1:30 GMT)
Our View – Neutral
Reason – Neutral
If Building Approvals grow by 6% or more = Buy AUD/USD
If Building Approvals grow 1% or less = Sell AUD/USD

Australian building approvals are scheduled for release this evening and is best traded reactively because it is not a major market mover for the AUD unless there is a big surprise. If Building Approvals grows by 6% or more, the AUD/USD can be bought for a move higher. If Building Approvals grow by 1% or less, the AUD/USD can be sold. REACTIVE TRADE

TECHNICALS

Rebound off fresh lows suggests bottom may be in
9500 key support
Break above 9710 relieves downside pressure

The dramatic plunged towards the .9500 may have set near term lows for the pairs as today’s bounce suggest some short covering in play. A move above 9710 would relieve the downside bias. A break below .9500 could trigger more stop loss selling.

3. EUR/CHF – Swiss GDP

FUNDAMENTALS
Swiss GDP expected @ 0.2% (1:45 AM ET / 5:45 GMT)
Our View – Bearish CHF
Reason – Slightly Weaker Retail Sales and Trade
If GDP growth slows to 0% or declines = Buy EUR/CHF
If GDP growth exceeds 0.4% = Sell EUR/CHF

We have good reasons to believe that Swiss GDP growth slowed in the first quarter. The two primary components of GDP are retail sales and trade – both of which deteriorated in the first 3 months of the year. The data can therefore be traded proactively or reactively. For those who choose to wait, if GDP is flat or declines, EUR/CHF can be bought for a move higher. If GDP growth exceeds 0.4%, EUR/CHF can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

Fails to hold 2500
2400 still support
Break of 1.2400 opens 1.2300

The EUR/CHF is rejected at 1.2500 once again suggesting that the pair may now correct towards 1.2350 as the weakness in the Swissie fades.

4. EUR/USD – Eurozone Confidence




FUNDAMENTALS
EZ Economic Climate Index expected @ 89.4 (5 AM ET / 9 GMT)
Our View – Bullish EUR
Reason – ZEW down but IFO and PMI p
If the index is 90 or higher = Buy EUR/USD
If the index drops to 87 or lower = Sell EUR/USD

We have good reasons to believe that Eurozone economic confidence improved this month. While the ZEW survey declined, stocks have hit new highs, the IFO index of business sentiment ticked higher along with the PMIs. As a result, we believe the data can be traded proactively or reactively. For those who choose to wait, if the index is 90 or higher, the EUR/USD can be bought for a move higher. If the index drops to 87 or lower, the EUR/USD can be sold for a test of 1.28. PROACTIVE or REACTIVE TRADE

TECHNICALS

1.2950 still caps for now
1.2850 supports
Break of of 1.3000 could open a run towards 1.3200

The edges of the range continue to control the EUR/USD trade with 2950 capping upside while 2800 holds the downside. But upward bias suggests that another at run 1.3000 may be possible.

5. USD/JPY – Pending Home Sales



FUNDAMENTALS
Pending Home Sales expected @ 1.5% (10 AM ET / 14 GMT)
Our View – Neutral
Reason – Neutral
If Pending Home Sales grow by 4% or more = Buy USD/JPY
If Pending Home sales drop by 0% or more = Sell USD/JPY

While the second release of US Q1 GDP is also on the calendar tomorrow, we do not expect any major revision and as such feel that pending home sales could have a larger impact on USD/JPY. Unfortunately the data is difficult to handicap and therefore best traded reactively. If Pending home sales grow by 4% or more, USD/JPY can be bought for a move higher. If Pending home sales drop by 0% or more, USD/JPY can be sold. REACTIVE TRADETECHNICALS

102.50 fails again
101.00 tested several times
100.50 break opens test of 100.00

USD/JPY continues to test the 101.00 level as it forms a topping formation but so far support ahead of the 100.50 level continues to hold. A break through though will open the way for a run towards 100.00

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