Top 5 – 07.16.2013

TOP 5 HOT IDEAS

DATE: Tuesday July 16, 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 Prices



FUNDAMENTALS
CPI expected @ 0.3% (6:45PM ET / 22:45 GMT)
Our View – Bullish CAD
Reason – Sharp Rise in Food Prices
If CPI exceeds 0.6% = Buy NZD/USD
If CPI growth slows to 0.1% or lower = Sell NZD/USD

We have good reasons to believe that consumer prices in New Zealand increased in the second quarter because food prices, which is a key component of CPI rose sharply. Therefore the data can be traded proactively or reactively. For those who choose to wait, if CPI growth exceeds 0.6%, the NZD/USD can be bought for a move higher. If CPI growth slows to 0.1% or lower, the NZD/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

7700 key support holds
7900 remains a cap
Consolidation contonues

The kiwi continued to hold the 7700 key support for the second day in a row as consolidation continued. A break above 7900 would relieve bearish bias.

2. AUD/USD – RBA Minutes



FUNDAMENTALS
RBA Minutes expected @ (9:30 PM ET / 1:30 GMT)
Our View – Bearish AUD
Reason – RBA was quite Dovish at their last meeting
If RBA minutes contain a surprising amount of optimism = Buy AUD/USD
If RBA minutes are dovish = Sell AUD/USD

We have good reasons to believe that the RBA minutes will not be supportive of the A$. When the central bank last met, dovish comments from RBA Governor Stevens sent the Australian dollar tumbling to fresh lows. A weaker currency didn’t brighten their view either as Stevens said a lower Aussie is needed for Australian business to compete as the country transitions from a commodity boom. As a result, we feel that the RBA minutes pose a threat to the AUD/USD which is why we feel they can be traded proactively or reactive. For those who choose to wait, if the RBA minutes contain a surprising amount of optimism, the AUD/USD can be bought for a move higher. If the minutes are as dovish as we expect, the AUD/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

9000 continues to hold
9200 key break topisde
The volatility break determines near term direction

The Aussie is in a key 9000-9200 box and a break of either side will likely determine the near term direction of pair.

3. GBP/USD – UK Consumer Prices

FUNDAMENTALS
Consumer Prices expected @ -0.1% (4:30 AM ET / 8:30 GMT)
Our View – Bearish GBP
Reason – Sharp Drop in Shop Prices
If CPI rises by 0.2% or more = Buy GBP/USD
If CPI drops by -0.4% or more = Sell GBP/USD

U.K. consumer prices are scheduled for release tomorrow and inflationary pressures are expected to drop for the first time since January. According to the British Retail Consortium, shop prices fell for the second month in a row by the largest amount since 2007. At the time, the Director of the BRC said “the strong deflation in non-food item prices was due to summer sales as retailers compete for customer spending. “The volatile weather also had a part to play in pushing down non-food prices. It’s telling that the categories which saw some of the deepest discounting -- clothing, footwear, furniture and DIY -- were those whose sales were hit the hardest during the lingering cold snap.” The same factors that drove the BRC shop price index lower is expected to drive CPI down as well which is why we believe the data can be traded proactively or reactively. For those who choose to wait, if CPI rises by 0.2% or more, the GBP/USD can be bought for a move higher. If CPI drops by -0.4% or more, the GBP/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

5000 supports
5200 caps upside
Consolidation persists

Cable rebound remain in tact as the pair finds support at 5000 while 5200 caps the upside for now and consolidation persists.

4. EUR/USD – German ZEW Survey

FUNDAMENTALS
German ZEW expected @ 40 (5 AM ET / 9 GMT)
Our View – Bearish EUR
Reason – Recent volatility in markets and dovishness of ECB could hamper investor confidence
If ZEW survey rises to 42 or higher = Buy EUR/USD
If ZEW survey drops to 36 or lower = Sell EUR/USD

We have good reasons to believe that the German ZEW survey could surprise to the downside. Based on the recent volatility in the financial markets, disappointments in Eurozone data and dovishness of the ECB, we wouldn’t be surprised if investors grew less confident about the outlook for the German economy. The data can therefore be traded proactively or reactively. For those who choose to wait, if the economic sentiment component of the ZEW survey rises to 42 or higher, the EUR/USD can be bought for an extension higher. If the index drops to 36 or less, the EUR/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

3000 holds for third day in a row
3100 still caps
Consolidation persists

Much like cable, the euro remains in a consolidation pattern after its rebound last week as it continues to be supported at the key 1.3000 level for the third day in a row, but a only a break of 1.3200 opens up the upside.

5. USD/JPY – U.S. Industrial Production



FUNDAMENTALS
Industrial Production expected @ 0.3% (9:15 AM ET / 13:15 GMT)
Our View – Neutral
Reason – Neutral
If Industrial Production rises to 0.5% or higher = Buy USD/JPY
If Industrial Production growth is 0% or lower = Sell USD/JPY

There are a number of U.S. economic reports scheduled for release tomorrow and we feel that Industrial Production will be the most important. However the data is difficult to handicap and therefore best traded reactively. If IP rises to 0.5% or higher, we expect USD/JPY to rally. If industrial production growth is flat or negative, we expect USD/JPY to fall. REACTIVE TRADE

TECHNICALS

100.00 fails
99.50 near term support
A break below 99.00 turns bias bearish

The run through and failure to hold the 100.00 level is a near term bearish development for USD/JPY but the pair only turns truly negative of 99.00 is given.

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