Top 5 – 07.04.2013

TOP 5 HOT IDEAS

DATE: Thursday July 4, 2013 & Friday July 5, 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

Thursday

1. AUD/USD – Australian Building Approvals




FUNDAMENTALS
Building Approvals expected @ -1.0% (9:30 PM ET / 1:30 GMT)
Our View – Neutral
Reason – Neutral
If Building Approvals grow by 3% or more = Buy AUD/USD
If Building Approvals fall by -3% or more = 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 3% or more, the AUD/USD can be bought for a move higher. If Building Approvals fall by -3% or more, the AUD/USD can be sold. REACTIVE TRADE

TECHNICALS

9000 holds for now
9150 new resistance
9300 Break removes bearish bias

The Aussie continues to hold ground just above the 9000 level but a break there would open a test of 8850. Meanwhile only a retake of 9300 removes the bearish bias

2. GBP/USD – Bank of England Rate Decision



FUNDAMENTALS
BoE Rate Decision expected @ 0.5% (4:30 AM ET / 9:30 GMT)
Our View – Neutral
Reason – Neutral
If BoE leaves monetary policy unchanged = No Trade
If BoE increases asset purchases = Sell GBP/USD

The Bank of England is widely expected to leave monetary policy unchanged, which would be a nonevent for the GBP/USD and the reason why we believe the event risk should be traded reactively and only if the BoE surprises with more QE. There is a small chance that the BoE will ease and if they do, the GBP/USD can be sold as it should lead to a major sell-off in the GBP/USD. REACTIVE TRADE

TECHNICALS

Strong turnaround day
5300 in view
5100 now supports

Cable had a strong turnaround day taking out several days worth of high and is now on target to challenge the 1.5300-5350 level as it recoups its recent losses.

3. EUR/USD – ECB Rate Decision – Draghi Speech

FUNDAMENTALS
ECB Press Conference expected @ (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Neutral
If Draghi puts greater emphasis on improved outlook = Buy EUR/USD
If Draghi puts greater emphasis on negative rates = Sell EUR/USD

The ECB is not expected to change interest rates which leaves Central Bank President Draghi’s press conference as the primary focus for FX Traders. Since the last monetary policy meeting, we have seen both improvements and deterioration in Eurozone data. At the same time, there has been quite a bit of volatility in the financial markets with Portuguese yields spiking on political troubles. For these reasons, the central bank may err on the side of caution and remain dovish. The ECB meeting is best traded reactively. If Draghi puts greater emphasis on the possibility of negative rates, the EUR/USD could head to 1.29. If he focuses on the bright spots in the economy however the EUR/USD could squeeze higher and rise to 1.31. REACTIVE TRADE

TECHNICALS


2900 holds
3000 recaptured
Possible spike low

Euro may have set a spike low today as it held the 2900 barrier and recovered the 3000 level. 3100 still caps the upside for now.

FRIDAY

1. EUR/USD – German Factory Orders

FUNDAMENTALS
Factory Orders expected @ 1.2% (6 AM ET / 11GMT)
Our View – Bullish EUR
Reason – Stronger PMI Manufacturing
If Factory Orders exceed 2% = Buy EUR/USD
If Factory orders is less than 0.5% = Sell EUR/USD

German factory orders is difficult to handicap and therefore best traded reactively. If factory orders exceed 2%, we expect the EUR/USD to rise. If orders grow by 0.5% or less, we expect the EUR/USD to fall. PROACTIVE TRADE or REACTIVE TRADE

TECHNICALS

2900 holds
3000 recaptured
Possible spike low

Euro may have set a spike low today as it held the 2900 barrier and recovered the 3000 level. 3100 still caps the upside for now.

2. USD/JPY – Non-Farm Payrolls



FUNDAMENTALS
NFP @ 165K & Unemployment Rate at 7.5% (8:30 AM ET / 13:30 GMT)
Our View – Neutral
Reason – Neutral
If Payrolls rise by 170K or more AND Unemployment Rate drops to 7.5% = Buy USD/JPY
If Payrolls rise by 150K or less AND Unemployment Rate remains at 7.6% or increases = Sell USD/JPY

Based on the leading indicators for NFPs, we expect the pace of job growth to be maintained. The increase in the employment component of non-manufacturing ISM, ADP report and the low level of jobless claims supports a stronger release but consumer confidence has been mixed and layoffs increased according to Challenger Grey & Christmas. What the market is really focusing on is the unemployment rate. Economists expect the jobless rate to fall from 7.6% to 7.5%. Given the Federal Reserve’s decision to lower their forecasts for the unemployment rate, the market is looking for a similar improvement. If the unemployment rate drops as expected, USD/JPY could extend its gains but if the unemployment rate holds steady, USD/JPY longs could be unwound as investors question the Fed’s prudence on tapering asset purchases this year. NFPs are best traded reactively as per the scenarios above. REACTIVE TRADE

TECHNICALS

99.00 -101.00 new range
Consolidation possible
Break of range could set direction near term

USD/JPY is now in a new range of 99.00-101.00 as bulls and bears battle it out. A break out on either side could set the direction for near term

3. USD/CAD – Canadian Employment



FUNDAMENTALS
Net Change in Employment expected @ -7.5K (8:30 AM ET / 13:30 GMT)
Our View – Neutral
Reason – Neutral
If Net Employment Change is -15K or less = Buy USD/CAD
If Net Employment Change is 10K or greater= Sell USD/CAD

This month’s Canadian employment numbers will be difficult to handicap because the IVEY PMI report will be released after Canadian employment. Therefore the data is best traded reactively. If the net employment change is -15K or less, we expect USD/CAD to rise. If net employment change is 10K or greater, we expect USD/CAD to decline. PROACTIVE or REACTIVE TRADE

TECHNICALS

1.0600 rejected
Major resistance at that level
Break of 1.0500 opens run back to 1.0350

USD/CAD continues to find resistance at the major 1.0600 level and its break below 1.0500 it could signal a near term top with 1.0350 in view

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