Top 5 – 07.24.13

TOP 5 HOT IDEAS

DATE: Wednesday July 24, 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 Trade Balance



FUNDAMENTALS
Japanese Trade expected @ -155.6B (7:50 PM ET / 23:50 GMT)
Our View – Neutral
Reason – Neutral
If Japan’s Trade Deficit exceeds –Y1 trillion = Buy USD/JPY
If Japan’s Trade Deficit is -50B or less = Sell USD/JPY

As an export dependent economy, trade activity is very important to Japan. However the data is only market moving for the Yen if there is a sizeable surprise which is why we feel that it is best traded reactively. If Japan’s trade deficit exceeds –Y1 trillion, USD/JPY can be bought for a move higher. If the deficit narrows to –Y50B or smaller, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS

100.00 rejected
99.00 key support
Break opens run to 98.00

USD/JPY was rejected off the 100.00 reinforcing the negative bias in the pair, as 99.00 now becomes a key hold. A break below opens a run to 98.00

2. AUD/USD – Australian Consumer Prices



FUNDAMENTALS
CPI expected @ 0.5% (9:30 PM ET / 1:30 GMT)
Our View – Bullish AUD
Reason – Higher Food Prices
If CPI rises by 1% or more = Buy AUD/USD
If CPI rises by 0.2% or less = Sell AUD/USD

Australia’s consumer price report is not released often, so when the data is on the calendar, it is worth watching. Based on the rise in food and commodity prices in general, we have good reasons to believe that CPI increased more than expected. Therefore we feel the data can be traded proactively or reactively. For those who choose to wait, if CPI rises by 1% or more, the AUD/USD can be bought for a move higher. If CPI rises by 0.2% or less, the AUD/USD can be sold. REACTIVE TRADE

TECHNICALS

Inching towards 9300
Break above 9350 opens 9500
Support now at 9200

Aussie continued to build momentum with 9300 level a key breakoout point and a break of 9350 putting the pair firmly into a path towards 9500. For now support has moved up to 9200.

3. EUR/USD – Eurozone PMI Composite

FUNDAMENTALS
Eurozone PMI Composite expected @ 49.1 (4 AM ET / 8 GMT)
Our View – Bearish EUR
Reason – German ZEW, factory orders and IP fell
If PMI exceeds 49.5 = Buy EUR/USD
If PMI is less than 48.0 = Sell EUR/USD

Tomorrow’s Eurozone PMI report is extremely important for the euro because it will help shape the market’s expectations for ECB policy and EZ growth. Economists are looking for a stronger release but there is scope for a downside surprise because the ZEW survey, factory orders and industrial production fell. We feel the data can be traded proactively or reactively. If the PMI index exceeds 49.1, the EUR/USD can be bought for a move higher. If it drops to 48.0 or lower, the EUR/USD can be sold. REACTIVE TRADE

TECHNICALS

1.3225 taken out
1.3245 last key barrier
Break opens run to 1.3400

The euro finally broke above the 1.3225 level and now only the last barrier of 1.3245 stands in the way of full breakout that puts 1.3400 into view.

4. USD/JPY – New Home Sales

FUNDAMENTALS
New Home Sales expected @ 1.7% (10 AM ET / 14 GMT)
Our View – Bearish USD
Reason – Surprise Decline in Existing Home Sales
If New Home Sales rise by 2.5% or more = Buy USD/JPY
If New Home Sales is flat or declines, = Sell USD/JPY

U.S. new home sales are due for release tomorrow and with the decline in existing home sales, we feel that the data could surprise to the downside and can therefore be traded proactively or reactively. For those who choose to wait, if new home sales rise by 2.5% or more, USD/JPY can be bought for a quick move higher. If New Home Sales is flat or declines, USD/JPY can be sold REACTIVE TRADE

TECHNICALS

100.00 rejected
99.00 key support
Break opens run to 98.00

USD/JPY was rejected off the 100.00 reinforcing the negative bias in the pair, as 99.00 now becomes a key hold. A break below opens a run to 98.00

5. NZD/USD – RBNZ Rate Decision



FUNDAMENTALS
RBNZ Rate Decision expected @ 2.5% (5 PM ET / 21:00 GMT)
Our View – Neutral
Reason – Neutral
If RBNZ is optimistic about NZ outlook = Buy NZD/USD
If RBNZ cuts interest rates = Sell NZD/USD

Monetary policy decisions are notoriously difficult to handicap and therefore best traded reactively. With Chinese and Australian growth slowing, the RBNZ has every reason to consider lowering rates, especially given the recent earthquake. However, the central bank has not been nearly as dovish as some of its peers so their decision will be a tough call. For this reason, we feel that the RBNZ rate decision is best traded reactively. If RBNZ is optimistic about NZ outlook, the NZD/USD can be bought for a squeeze higher. If the RBNZ surprises the market by cutting interest rates, the NZD/USD can be sold for a sharp move lower. REACTIVE TRADE

TECHNICALS

8000 in view
Break above puts 8100 in focus
7900 supports

The kiwi has moved towards the key 8000 level and a break there opens a possible run towards 8150 while 7900 now becomes support for the pair.

*Top 5 Archive Members Only Top 5

Leave a Comment

Your email address will not be published. Required fields are marked *