Top 5 – 07.19.13

TOP 5 HOT IDEAS

DATE: Friday July 19, 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 – Japanese Purchases of Foreign Bonds



FUNDAMENTALS
MoF Data on Japan Buying Foreign Bonds expected @ (7:50 PM ET / 23:50 GMT)
Our View – Neutral
Reason – Neutral
If Purchases exceed 100B = Buy USD/JPY
If Purchases are -100B or lower = Sell USD/JPY

An essential criteria for a resumption of the USD/JPY rally is Japanese purchases of foreign bonds. Last week’s report showed the first weekly purchases of foreign bonds since May. While this data has become very important it is unfortunately difficult to handicap. The only opportunity to trade this data is reactively. If last week’s rise proved to be a one month trend and sales resume, USD/JPY can be sold for a quick move lower. If the 2% U.S. yield finally draws demand from the Japanese, leading to an increase in purchases in excess of 100B, USD/JPY can be bought as investors start to see this as a renewed trend. REACTIVE TRADE

TECHNICALS

100.50 taken out
101.50 next
100.00 now supports

The uptrend recovery in USD/JPY continues with longs now eying the key 101.50 level while 100.00 provides new support.

2. NZD/USD – NZ Credit Card Spending



FUNDAMENTALS
Credit Card Spending expected @ (11PM ET / 3 GMT)
Our View – Neutral
Reason -- Neutral
If Credit Card Spending rises by 1% or more = Buy NZD/USD
If Credit Card Spending falls by -1% or more = Sell NZD/USD

New Zealand credit card spending is not a huge market mover for the NZD/USD unless there is a big surprise. Therefore the data is best traded reactively. If credit card spending rises by 1% or more, the NZD/USD can be bought for a move higher. If credit card spending falls by 1% or more, the NZD/USD can be sold. REACTIVE TRADE

TECHNICALS

8000 continues to cap
7800-7900 consolidation zone
7700 longer term support

The consolidation in kiwi continues with 7800-7900 zone keeping the pair boxed in while 800 caps and 7700 supports for now.

3. EUR/USD – German Producer Prices


FUNDAMENTALS
PPI expected @ -0.1% (2 PM ET / 6 GMT)
Our View – Bearish EUR
Reason – Wholesale Prices Declined
If GE PPI rises by 0.3% or more = Buy EUR/USD
If GE PPI declines by -0.5% or more = Sell EUR/USD

We have strong reasons to believe that German producer prices declined in the month of June because wholesale prices, which measure a similar subset of goods fell -0.4%. As a result, we believe that the data can be traded proactively or reactively. For those who choose to wait, if producer prices rise by 0.3% or more, the EUR/USD can be bought for a move higher. If PPI declines by -0.5% or more, the EUR/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

3200 remains tough resistnace
3000 longer term support
Range continues with 3100 new equilibrium

The euro is now trapped in a 3200-3000 range as the upside still caps the move. 3100 is now the new equilibrium in the pair as it looks to resolve direction.

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

FUNDAMENTALS
Public Sector Finances expected @ 8.0B & Public Sector Net Borrowing expected at 9.4B (4:30 AM ET / 8:30 GMT)
Our View – Neutral
Reason – Neutral
If Public Finances & Net Borrowing exceeds 10B = Buy GBP/USD
If Public Finances & Net Borrowing is less than 7B = 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 Net Borrowing exceeds 10B, the GBP/USD can be bought for a quick reactive trade higher. If Public Finances & Net Borrowing is less than 7B, the GBP/USD can be sold. REACTIVE TRADE

TECHNICALS

5300 key upside target
5000 supports
Uptrend in tact

The uptrend in GBP/USD remains in tact but the 5300 level is the key to further upside while 5000 now acts as support.

5. USD/CAD – Canadian CPI



FUNDAMENTALS
CPI expected @ 0.1% (8:30 AM ET / 12:30 GMT)
Our View – Bearish CAD
Reason – Lower IVEY PMI Prices
If CPI is -0.2% or lower = Buy USD/CAD
If CPI exceeds 0.5% = Sell USD/CAD

We have good reasons to believe that Canadian consumer prices eased in the month of June. According to the IVEY PMI report, prices declined. As a result, we believe the data can be traded proactively or reactively. For those who choose to wait, if CPI drops by -0.2% or more, USD/CAD can be bought for a reactive move higher. If CPI exceeds 0.5%, USD/CAD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

1.0350 support
1.0450 resistance
Downside dominates

USD/CAD remain in a downdraft but 1.0350 now acts as key support while 1.0450 caps the upside in the short term for the pair.

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