Top 5 -07.12.2013

TOP 5 HOT IDEAS

DATE: Friday July 12, 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. AUD/USD – Home Loans



FUNDAMENTALS
Home Loans expected @ 2.2% (9:30PM ET / 1:30 GMT)
Our View – Neutral
Reason – Neutral
If Home Loans exceed 3% = Buy AUD/USD
If Home Loans is less than 0.0% = Sell AUD/USD

Australia’s home loans report is not a huge market mover for the AUD/USD unless there is a big surprise. Therefore tonight’s Australian economic report is best traded reactively. If home loans exceed 3%, we expect the AUD/USD to rise. If it stagnates or declines, we expect the AUD/USD to fall. REACTIVE TRADE

TECHNICALS

9300 still very stiff resistance
9100 supports
Consolidation continues

The 9300 remains a cement ceiling for Aussie as it cannot break above it, but at the same time 9100 still supports creating consolidation in the pair.

2. GBP/USD – Construction Output



FUNDAMENTALS
Construction Output expected @ -2.8% (4:30 PM ET / 8:30 GMT)
Our View – Neutral
Reason – Neutral
If Construction Output rises by 1% or more = Buy GBP/USD
If Construction Output drops by -3.5% or more = Sell GBP/USD

UK Construction Output is not a major market mover for the GBP/USD unless there is a big surprise. The data is therefore best traded reactively. If Construction Output exceeds 1%, we expect the GBP/USD to rise. If it drops by 3.5% or more, we expect the GBP/USD to fall. REACTIVE TRADE

TECHNICALS

5150-5200 caps
1.5000 now support
1.5200 break opens up 1.5400

Cable remains capped by the 1.5150-5200 corridor as 1.5000 now the new support and a break above 1.5200 opens up 1.5400.

3. EUR/USD – Eurozone Industrial Production

FUNDAMENTALS
EZ Industrial Production expected @ -0.3% (5 AM ET / 9 GMT)
Our View – Bearish EUR
Reason – Sharp Drop in GE and FR IP
If IP rises by 1% or more = Buy EUR/USD
If IP drops by -0.6% or more = Sell EUR/USD

We have strong reasons to believe that Eurozone Industrial Production will surprise to the downside. When we look to handicap EZ data, we always turn to the releases of its 2 largest economies – Germany and France. Both countries reported sharp decline in IP during the month of May. As a result, the data can be traded proactively or reactively. If industrial production rises by 1% or more, the EUR/USD can be bought for a move higher. If industrial production drops by -0.6% or more, the EUR/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

1.3000 the new equilibrium
1.3200 is key resistance
1.2800 now support

After the bust out yesterday euro now finds equilibrium at 1.3000 with 1.3200 the new resistance while 1.2800 now offers support.

4. USD/CAD – House Price Index

FUNDAMENTALS
House Price Index expected @ (9 AM ET / 13 GMT)
Our View – Neutral
Reason – Neutral
If House Price index drops -0.5% = Buy USD/CAD
If House Price Index exceeds 1.5% = Sell USD/CAD

Canada’s house price index is not a huge market mover unless there is a big surprise. Therefore the data can only be traded reactively. If house prices drop by -0.5% or more, USD/CAD can be bought. If the House Price Index exceeds 1.5%, USD/CAD can be sold. REACTIVE TRADE

TECHNICALS

1.0400 broken
Decline accelerates
1.0300 now in view

The decline in USD/CAD has accelerated markedly with a give up of the 1.0400 level and the pair now eyes the 1.0350 level as the turn from 1.0600 highs takes on more momentum.

5. USD/JPY – University of Michigan Consumer Confidence



FUNDAMENTALS
UMich expected @ 84.7 (9:55 AM ET / 13:55 GMT)
Our View – Bearish USD
Reason – Drop in IBD/TIPP
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 drop in the IBD/TIPP index, confidence should deteriorate which is why we 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

98.50 finds downside support
100.00 now caps
Break of 98.00 opens run to 95.00

USD/JPY has found temporary support at the 98.50 level but a break below 98.00 opens the possibility of a run to 95.00 meanwhile 100.00 now acts as resistance.

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