Top 5 – 07.23.13

TOP 5 HOT IDEAS

DATE: Tuesday July 23, 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 – Cabinet Monthly Report



FUNDAMENTALS
Cabinet Monthly Report expected @ (7:50 PM ET / 23:50 GMT)
Our View – Neutral
Reason – Neutral
If Cabinet downgrades economic outlook = Buy USD/JPY
If Cabinet upgrades economic outlook = Sell USD/JPY

Japan’s Cabinet Office will release its monthly economic report for Japan this evening and it is not expected to be a big market mover unless the Cabinet upgrades or downgrades its economic outlook for Japan. So we feel that this report is best traded reactively. If the Cabinet downgrades its economic outlook, which is unlikely and unexpected, USD/JPY should recover part of today’s losses. If they upgrade their economic outlook, USD/JPY could extend its losses. REACTIVE TRADE

TECHNICALS

Major reversal
99.50 holds for now
99.00 key support

USD/JPY saw a major reversal today with 99.50 barely holding support and 99.00 now comes into view as key support. A break there could lead to deeper selloff of 98.00.

2. GBP/USD – BBA Loans for House Purchases



FUNDAMENTALS
BBA Loans expected @ 38300 (4:30 AM ET / 8:30 GMT)
Our View – Neutral
Reason -- Neutral
If BBA Loans rise by 39000 or more = Buy GBP/USD
If BBA Loans rise by 36000 or less = Sell GBP/USD

The British Bankers Association is set to release its monthly report on House Purchases tomorrow and this report is not a huge market mover unless there is a big surprise. The number of homes sold has been climbing gradually since March and is expected to increase further in June. Low interest rates have been extremely supportive of the U.K. housing market. Howeve the data is not exceptionally market moving unless there is a big surprise, which is why we feel that it is best traded reactively. If BBA loans rise by 39000 or more, we expect the GBP/USD to rally. If loans rise by 36000 or less, we expect the GBP/USD to weaken. REACTIVE TRADE

TECHNICALS

5300 taken out
Clears path to 5500
Support now at 5200

Cable broke out above the 5300 level today which opens the path to 5500 while 5200 now comes in as support.

3. USD/CAD – Canadian Retail Sales

FUNDAMENTALS
Retail Sales expected @ 0.4% (8:30 AM ET / 12:30 GMT)
Our View – Bullish CAD
Reason –Wholesale Sales up Strongly
If Retail sales growth declines by -0.1% or more = Buy USD/CAD
If Retail sales growth exceeds 0.8% = Sell USD/CAD

We have strong reasons to believe that Canadian retail sales will surprise to the upside because wholesale sales rose strongly in the month of May. We feel that this data can be traded proactively or reactively. For those who choose to wait, if retail sales growth declines by -0.1% or more, USD/CAD can be bought for a move higher. If retail sales growth exceeds 0.8%, USD/CAD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

1.0350 chipped away
1.0300 next target of shorts
1.0400 now resistance

USD/CAD continues to drift lower with 1.0300 now in view as key support. A break below opens up to 1.0250 while 1.0400 now acts as resistance.

4. USD/JPY – Richmond Fed Index

FUNDAMENTALS
Richmond Fed Index expected @ 9 (10 AM ET / 14 GMT)
Our View – Bullish USD
Reason – Stronger Philly Fed and Empire State
If the Richmond Fed index exceeds 12 = Buy USD/JPY
If the Richmond Fed index is less than 5 = Sell USD/JPY

The Richmond Fed index is not a big market mover for USD/JPY unless there is a big surprise but given the rise in the Philly Fed index and the Empire State survey, we have good reasons to believe that the index will increase which is why we feel the data can be traded reactively. If the Richmond Fed index exceeds 12, USD/JPY could recover part of today’s losses. If the index drops to 5 or lower, USD/JPY can potentially move lower. PROACTIVE or REACTIVE TRADE

TECHNICALS

Major reversal
99.50 holds for now
99.00 key support

USD/JPY saw a major reversal today with 99.50 barely holding support and 99.00 now comes into view as key support. A break there could lead to deeper selloff of 98.00.

5. EUR/USD – Eurozone Consumer Confidence



FUNDAMENTALS
Eurozone Consumer Confidence Expected @ -18.3 (10:00 AM ET / 14:00 GMT)
Our View – Neutral
Reason – Neutral
If EZ Confidence Better Than -15 = Buy EUR/USD
If EZ Confidence Less than -25 = Sell EUR/USD

Eurozone Consumer Confidence numbers are scheduled for release at 10:00 AM / 14:00 GMT. We do not anticipate a big reaction to the data unless there is a very large surprise. However as the most actively traded currency pair, the EUR/USD is always a big focus of the market. The data is best traded reactively. If the EZ Confidence is -15 or better, we expect the EUR/USD to move higher. If the index is less than -25, the EUR/USD could move lower REACTIVE TRADE

TECHNICALS

3200 taken out
But 3220 caps
Break above 3225 opens up run to 3400

The euro continues to trade to the upside with 1.3200 taken out today, but the pair is capped by the 1.3225 resistance. A break there could open a run to 1.3400

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