Top 5 – 07.31.13

TOP 5 HOT IDEAS

DATE: Wednesday July 31, 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 – ANZ Business Confidence


FUNDAMENTALS
Business Confidence expected @ (9 PM ET / 1:30 GMT)
Our View – Neutral
Reason – Neutral
If Business Confidence exceeds 55 = Buy NZD/USD
If Business Confidence is less than 45 = Sell NZD/USD

New Zealand business confidence numbers are due for release this evening and generally not a big market mover for the NZD unless there is a significant surprise. Therefore we feel that the data is best traded reactively. If business confidence exceeds 55, the NZD/USD can be bought for a move higher. If business confidence index drops to 45 or lower, the NZD/USD can be sold. REACTIVE TRADE

TECHNICALS

8100 fails again
7900 near term support
7800 follows

The kiwi once again failed at the 8100 level setting up a double top in the pair as 7900 now near term support while 7800 provides deeper support.

2. EUR/CHF – UBS Consumption Index



FUNDAMENTALS
UBS Consumption Indicator @ (2AM ET / 7GMT)
Our View – Neutral
Reason – Neutral
If UBS Consumption Indicator is less than 1.20 = Buy USD/CHF
If UBS Consumption Indicator exceeds 1.60 = Sell USD/CHF

Switzerland’s economic calendar is generally very light but there are a handful of releases worth watching and this includes the UBS Consumption indicator which is a measure of demand. Unfortunately the data is difficult to handicap and therefore best traded reactively and only if there is a meaningful surprise. If the index drops to 1.20 or lower, EUR/CHF can be bought for an extension higher. If it is rises to 1.60, EUR/CHF can be sold. REACTIVE TRADE

TECHNICALS

2300 continues to hold
Lower top in place
Break opens run to 2200

EUR/CHF continues to hold ground for now at the 2300 level, but a break below could open a run to 2200 as the downside dominates after a lower top at 2450.

3. EUR/USD – German Unemployment

FUNDAMENTALS
German Unemployment expected @ 0K (3:55 AM ET / 7:55 GMT)
Our View – Bullish EUR
Reason – Employment component of PMI Services increased, manufacturing steady
If unemployment rolls drop by 10K or more = Buy EUR/USD
If unemployment rolls rise by 10K or more = Sell EUR/USD

We have good reasons to believe that German labor market conditions improved in the month of July because the employment component of service sector PMI index increased which means more jobs were added whereas the employment component of the manufacturing index held steady. We feel that the data can be traded proactively or reactively. If German unemployment rolls drop by 10K or more, we expect the EUR/USD to rise. If unemployment rolls rise by 10K or more, we expect the EUR/USD to decline. PROACTIVE or REACTIVE TRADE

TECHNICALS

3300 repelled again
3200 continues to hold
Range break likely

The euro continues to hold within a very tight 3300-3200 range as 3300 is rejected again, but a range break on either side is likely soon.

4. USD/CAD – Canadian GDP

FUNDAMENTALS
GDP expected @ 0.3% (8:30 AM ET / 12:30 GMT)
Our View – Bullish CAD
Reason – Huge Jump in Retail Sales
If GDP growth is flat or contracts = Buy USD/CAD
If GDP growth is 0.8% or more = Sell USD/CAD

While we have strong reasons to believe that Canadian GDP growth will surprise to the upside because of a strong rise in retail sales in the month of May. We feel that the data can be traded proactively or reactively. If GDP growth is flat or negative, USD/CAD can be bought for a move higher. If GDP growth exceeds 0.8%, USD/CAD can be sold. REACTIVE TRADE

TECHNICALS

1.0250 finds suport
1.0400 caps upside
Break of 1.0250 opens test of 1.0150

USD/CAD finally ran into support at 1.0250 but the upside is capped by 1.0400 while a break of 1.0250 opens run t0 1.0150.

5. USD/JPY – US Q2 GDP



FUNDAMENTALS
Q2 GDP expected @ 1% (8:30 AM ET / 12:30 GMT)
Our View – Bullish USD
Reason – Slightly Stronger Retail Sales, Mixed Trade numbers
If GDP growth exceeds 1.5% = Buy USD/JPY
If GDP growth is 1% or less = Sell USD/JPY

Wednesday is a busy day for the U.S. dollar with the release of Q2 GDP, Chicago PMI and the FOMC rate decision. While the Fed meeting will be a central focus, GDP is also important because it is an advance release. Whenever we look to handicap GDP, we always look at the 2 main underlying components (trade and retail sales). In the second quarter, U.S. retail sales increased but trade was mixed. Nonetheless with the pickup in consumer spending and the market’s low estimates, we have good reasons to believe that the data could surprise to the upside. As such, we feel that the data can be traded proactively or reactively. For those who choose to wait, if GDP growth exceeds 1.5%, USD/JPY can be bought for a move higher. If GDP growth is 1% or less, USD/JPY can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

98.00 continues to consolidate
97.50 support
99.00 caps upside

USD/JPY continues to consolidate at the 98.00 level with 97.50 now near term support. Meanwhile 99.00 caps the upside as the range breakout appears likely in the near term

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