Top 5 – 06.21.13

TOP 5 HOT IDEAS

DATE: Friday June 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. NZD/USD – New Zealand Consumer Confidence





FUNDAMENTALS
NZ Confidence expected @ (9 PM ET / 1 GMT)
Our View – Neutral
Reason – Neutral
If Consumer Confidence grows by 5% or more = Buy NZD/USD
If Consumer Confidence grows by 2% or less = Sell NZD/USD

New Zealand’s ANZ consumer confidence report is not a huge market mover for the NZD/USD unless there is a big surprise but given how much the currency has fallen, this report could have an unusually large impact on the currency. It is still best traded reactively. If consumer confidence grows by 5% or more, the NZD/USD can be bought for a move higher. If confidence grows by 2% or less, the NZD/USD can be sold REACTIVE TRADE

TECHNICALS


The NZD/USD continued to sell off aggressively today, hitting a 1 year low in the process. With the prior June low broken, the next level of support for the currency is at 76 cents, just because it s a round number. Below that is a more significant support level at 0.7545, the May 31, 2012 low. Should the NZD/USD start to recover, it may find resistance at 79 cents, where today’s high and first standard deviation double Bollinger band converge. If that level be broken then the next resistance will be at 0.8192, the 50% Fibonacci retracement of the April to June sell-off.

2. EUR/USD – Eurozone Current Account Balance



FUNDAMENTALS
EZ Current Account Balance expected @ (4 AM ET / 8 GMT)
Our View – Bearish EUR
Reason – Smaller German Current Account, Flat French CA
If EZ Current Account Balance exceeds 30B = Buy EUR/USD
If EZ Current Account Balance is less than 20B = Sell EUR/USD

We have good reasons to believe that the Eurozone’s current account surplus shrank in the month of April. Whenever we look to handicap EZ data we always turn to the reports of its 2 largest economies – Germany and France. In April Germany reported a smaller current account surplus and France reported no changes. As such we feel that the data can be traded proactively or reactively. For those who choose to wait, if the EZ current account balance exceeds 30B, the EUR/USD can be bought for a move higher. If the current account balance is less than 20B, the EUR/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS


The EUR/USD took another beating today. Support is not at 1.31, near the 100-day SMA. Should that level be broken then the next support will be at the February 12th high of 1.3518. The upside in the EUR/USD continues to be capped by 1.34, a level that the pair struggled to break in the past but a shorter term resistance can be found at the June 19th high of 1.33. Should that level be broken then second resistance will be at 1.3000 which is a very important psychological and technical number.

3. EUR/CHF – KoF Institute June Economic Forecasts

FUNDAMENTALS
KoF June Economic Forecasts expected @ (4 AM ET / 8 GMT)
Our View – Neutral
Reason – Neutral
If Economic Forecasts are downgraded = Buy EUR/CHF
If Economic Forecasts are upgraded = Sell EUR/CHF

Switzerland’s KoF Institute’s June Economic Forecasts is not a big market mover for the CHF unless there is a big surprise. The data is therefore best traded reactively. If the KoF downgrades its economic forecasts, EUR/CHF can be bought for a move higher. If they upgrade their forecasts, EUR/CHF can be sold. REACTIVE TRADE

TECHNICALS


EUR/CHF has been trading in a tight range for the past week. There is support at the June low of 1.2221. If this level is broken, the next support will be the April low of 1.2189. If EUR/CHF extends its gains, it may find resistance at the June 3 high of 1.2428. Should that level be broken then 1.2500, a psychologically significant number will be the next point of resistance for the pair.

4. GBP/USD – Public Sector Finances and Net Borrowing




FUNDAMENTALS
Public Sector Finances expected @ -2.5B & Public Sector Net Borrowing expected at 12.6B (4:30 AM ET / 8:30 GMT)
Our View – Neutral
Reason – Neutral
If Public Finances exceed 0B & Net Borrowing exceeds 14B = Buy GBP/USD
If Public Finances is less than -5B & Net Borrowing is less than 10B = Sell GBP/USD

The U.K’s public sector finances and data on net borrowing are due for release tomorrow. Though these reports can be market moving, they are difficult to handicap and therefore best traded reactively. If public finances exceed -2.5B & Net Borrowing exceeds 12.6B, the GBP/USD can be bought for a quick reactive trade higher. If Public Finances is less than -5B & Net Borrowing is less than 14B, the GBP/USD can be sold. REACTIVE TRADE

TECHNICALS


The GBP/USD ended the day with a small hammer formation that signals a potential for a stronger recovery. If the currency pair continues to trade higher, there is no major resistance until this month’s high of 1.5750. If that level be broken then the next resistance will be at January 31st high of 1.5877. If it fails at current levels and starts to turn south, then 1.54 could come in as support but the more important level will be 1.50, the psychologically significant round number.

5. USD/CAD – Retail Sales



FUNDAMENTALS
Retail Sales expected @ 0.2% (8:30 AM ET / 12:30 GMT)
Our View – Bullish CAD
Reason – Employment Strong, Wholesale Sales up
If Retail sales growth declines by -0.1% or more = Buy USD/CAD
If Retail sales growth exceeds 0.4% = Sell USD/CAD

We have strong reasons to believe that Canadian retail sales will surprise to the upside because the labor market has been very strong and demand increased according to the wholesale sales report. This data can be traded proactively or reactively. For those who choose to wait, if retail sales growth declines by -0.1% or more, USD/CAD can be bought for a move higher. If retail sales growth exceeds 0.4%, USD/CAD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS


USD/CAD traded higher for the fifth consecutive session. Its gains today took the pair within a whisker of 1.04. There’s currently resistance at the May 29th high of 1.0387. Should that level be broken then the next resistance will be at June 3, 2012 high of 1.0445. If USD/CAD starts to turn lower, there should be support at 1.0265 where the 20-day SMA and today’s low meet. If that level is broken then the June 13th low of 1.0136 will be the next support.

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