Top 5 – 06.14.2013

TOP 5 HOT IDEAS

DATE: Friday June 14, 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. NZD/USD – Business NZ PMI



FUNDAMENTALS
Business NZ PMI expected @ (6:30 PM ET / 22:30 GMT)
Our View – Neutral
Reason -- Neutral
If NZ PMI exceeds 56 = Buy NZD/USD
If NZ PMI is 53 or less = Sell NZD/USD

New Zealand’s business PMI index is scheduled for release this evening and the outcome of this report could determine if the NZD/USD enjoys a stronger recovery. Overall we have seen both weakness and strength in the country’s economic reports and for this reason, the Business PMI index is difficult to handicap and best traded reactively. If the Business PMI index exceeds 56, NZD/USD can be bought for a reactive trade. If the index drops to 53 or lower, the NZD/USD can be sold. REACTIVE TRADE

TECHNICALS

8000 taken out
8100 next target for longs
7900 now support

The kiwi cam roaring back and having now taken out 8000 has 8100 in full view as the short squeeze continues. Meanwhile 7900 now acts as new support.

2. EUR/USD – Eurozone Consumer Prices



FUNDAMENTALS
EZ CPI expected @ 0.1% (5 AM ET / 9 GMT)
Our View – Bullish EUR
Reason – Higher French and German CPI
If CPI growth exceeds 0.5% = Buy EUR/USD
If CPI growth drops by -0.3% or more = Sell EUR/USD

We have strong reasons to believe that Eurozone Consumer Prices will surprise to the upside. When we look to handicap EZ data, we always turn to the releases of its 2 largest economies – Germany and France. Both countries reported an increase in price pressures last month. As a result, the data can be traded proactively or reactively. If CPI rises by 0.5% or more, the EUR/USD can be bought for a move higher. If CPI growth drops by -0.3% or more, the EUR/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

Hesitation at 3400
3250 supports
Break of 3400 opens run to 3500

The euro rally has now run into resistance at the 1.3400 level and the price hesitation there suggests that some correction may be due. A pullback could test the 1.3250 support while a break above 1.3400 puts 1.3500 squarely in view.

3. USD/CAD – Manufacturing Sales

FUNDAMENTALS
Manufacturing Sales expected @ 0.3% (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Neutral
If Manufacturing Sales drop -0.3% or more = Buy USD/CAD
If Manufacturing Sales rise by 0.5% or more = Sell USD/CAD

Canada’s manufacturing sales report is not a huge market mover unless there is a big surprise. Therefore the data can only be traded reactively. If Manufacturing Sales drop -0.3% or more, USD/CAD can be bought. If Manufacturing Sales rise by 0.5% or more, USD/CAD can be sold. REACTIVE TRADE

TECHNICALS

1.0150 still contains
1.0250 caps upside
Major standoff as these levels

USDCAD continues to find very stiff support at 1.0150 as that level holds for the third day. The topside is capped by 1.0250 and the overall compression of volatility suggests a standoff for now.

4. USD/JPY – University of Michigan Consumer Confidence




FUNDAMENTALS
UMich expected @ 84.5 (9:55 AM ET / 13:55 GMT)
Our View – Bullish USD
Reason – Rise in IBD/TIPP, Stocks Decline
If the UMich index exceeds 86 = Buy USD/JPY
If the UMich index drops below 82 = Sell USD/JPY

There are a number of U.S. economic reports scheduled for release tomorrow but we feel that the University of Michigan consumer confidence report will be the most important. Based on the rise in the IBD/TIPP index, confidence should improve but stocks have also tumbled in May, which could curtail sentiment. Nonetheless we still feel this data can be traded proactively or reactively. For those who chose to wait, if the UMich index exceeds 86, USD/JPY can be bought for a move higher. If the UMich index drops below 82, USD/JPY can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

95.00 gives way
Bounce off 94.00 suggest some support
96.00-97.00 no become overhead resistance

USD/JPY broke key support at 95.00, but the rebound at end of day suggests that the pair may find some support at these levels, although overhead resistance now stands at 96.00-97.00 corridor.

5. Nikkei and USD/JPY



FUNDAMENTALS
Having covered all of the key event risks expected on Friday, we want to take this opportunity to share with you one of our favorite charts of the Nikkei and USD/JPY. If you attend our Wednesday World Markets webinar, we talk about the relationship between these 2 instruments often. Overnight we obviously had a very strong sell-off in the Nikkei and while USD/JPY also declined, the drop was modest in comparison. The chart shows how strong the relationship between these 2 instruments are and if this correlation continues (and there’s no reason to expect it not to), then USD/JPY could be headed lower if the drops to 12,000.

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