Top 5 – 06.25.2013

TOP 5 HOT IDEAS

DATE: Tuesday June 25, 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 – Small Business Confidence





FUNDAMENTALS
Small Business Confidence expected @ (1 AM ET / 5 GMT)
Our View – Neutral
Reason – Neutral
If Small Business Confidence drops to 46 or lower = Buy USD/JPY
If Small Business Confidence exceeds 50 = Sell USD/JPY

Japanese small business confidence numbers are difficult to handicap and not particularly market moving for USD/JPY unless there is a big surprise. The data should therefore only be traded reactively. If small business confidence index drops to 46 or lower, USD/JPY can be bought for an extension higher. However if small business confidence continues to contract, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS


99.00 caps upside
97.50 holds support
Break lower would mark near term top in recovery

USD/JPY recovery rally ran out of gas ahead of the 99.00 figure and today’s turn off the highs may signal a near term top, especially if the 97.50 support is given taking us back towards the 96.00 level.

2. USD/ZAR – South Africa Leading Indicators



FUNDAMENTALS
Leading Indicators expected @ 101 (3 AM ET / 7 GMT)
Our View – Neutral
Reason – Neutral
If Leading Indicators drop to 100 or lower = Buy USD/ZAR
If Leading Indicators exceed 103= Sell USD/ZAR

We don’t look at USD/ZAR very often but it is a pair that can move. Tomorrow we have leading indicators from South Africa and given a large enough surprise, we may see a reasonable reaction in USD/ZAR. If leading indicators drop to 100 or lower, USD/ZAR can be bought for a move higher. If leading indicators exceed 103, USD/ZAR can be sold. REACTIVE TRADE

TECHNICALS


Triple top at 10.2000
Break opens run to 10.5000
10.0000 now acts as support

The pair has tried and failed to clear the 10.2000 three times forming a triple top that is capping the upside for now. A break higher would a significant breakout while 10.0000 now acts as support.

3. GBP/USD – BBA Home Loans

FUNDAMENTALS
BBA Loans expected @ 33200 (4:30 AM ET / 8:30 GMT)
Our View – Neutral
Reason – Neutral
If BBA Home Loans exceed 35000 = Buy GBP/USD
If BBA Home Loans are less than 30000 = Sell GBP/USD

While the U.K. housing market in general is on the road to recovery, the BBA’s report on home loans is not particularly market moving for the GBP/USD unless there is a big surprise. The data should therefore only be traded reactively. If home loans exceed 35000, the GBP/USD can be bought for an extension higher. If home loans drop to 30000 or less, the GBP/USD can be sold. REACTIVE TRADE

TECHNICALS

5300-5400 corridor holds
5500 next test of upside
Break of 5500 opens retest of 5700

Cable has found support in the 5300-5400 corridor and appears ready to make a run the 5500 level. A retake of that figure would suggest that the correction is over and puts 5700 in view.

4. USD/HKD – Trade Balance




FUNDAMENTALS
Trade Balance expected @ -38B (4:30 AM ET / 8:30 GMT)
Our View – Neutral
Reason – Neutral
If Trade Deficit is -45B or larger = Buy USD/HKD
If Trade Deficit is -35B or smaller = Sell USD/HKD

Hong Kong’s latest trade numbers will be released on Tuesday and like many there countries, the level of imports versus exports is important to its currency. Unfortunately the data is difficult to handicap though recent weakness in Chinese data suggests more room for a disappointment than an upside surprise. The data is best traded reactively. If the trade deficit is -45B or larger, USD/HKD can be bought for a move higher. If the trade deficit shrinks to -35B or smaller, USD/HKD can be sold. REACTIVE TRADE

TECHNICALS


Support at edge of range
7.7250 key hold
1.7600 caps

USD/HKD has found support at the lower edge of the range with 7.7550 a key hold while 7.7600 is the resistance to the upside.

5. EUR/USD for U.S. Consumer Confidence



FUNDAMENTALS
Consumer Confidence expected @ 75 (10 AM ET / 14 GMT)
Our View – Neutral
Reason – Stronger UMich, Lower IBD
If the Consumer Confidence Index drops to 74 or lower = Buy EUR/USD
If the Consumer Confidence Index exceeds 78 = Sell EUR/USD

There are a number of U.S. economic reports scheduled for release tomorrow but in our opinion, the most important will be the Consumer Confidence report. Unfortunately with stocks falling, the University of Michigan reporting an improvement in confidence but the IBD/TIPP survey reporting deterioration, this month’s report is a very tough call. Therefore it is best traded reactively. If the consumer confidence index exceeds 78, EUR/USD can be sold. If the index drops to 74 or lower, EUR/USD can be bought. REACTIVE TRADE

TECHNICALS


Survives a test of 3050
3150 near term resistance
3000-3100 corridor key hold

EUR/USD found a modicum of support after last week’s selloff and now the 3000-3100 corridor becomes a key hold for the pair with 3150 acting as near term resistance which if broken puts a retest of 3250 into view

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