Top 5 – 08.15.13

TOP 5 HOT IDEAS

DATE: Thursday August 15, 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 – PMI Manufacturing



FUNDAMENTALS
Business NZ PMI expected @ (6:30 PM ET / 22:30 GMT)
Our View – Neutral
Reason -- Neutral
If NZ PMI exceeds 56 = Buy NZD/USD
If NZ PMI is 53 or less = Sell NZD/USD

New Zealand’s business PMI index is scheduled for release this evening and the outcome of this report could determine if the NZD/USD enjoys a stronger recovery. Lately we have seen nice improvements in New Zealand data and the PMI report could also surprise to the upside. Unfortunately it is difficult to handicap and best traded reactively. If the Business PMI index exceeds 56, NZD/USD can be bought for a reactive trade. If the index drops to 53 or lower, the NZD/USD can be sold. REACTIVE TRADE

TECHNICALS

8000 taken
8100 now in sight
Key upside test

The kiwi recovery remains on track with 8000 now taken out, but the pair now faces much stiffer resistance at the 8100 level which if broken could open a run towards 8300.

2. 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 second week of net 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 the recent rise in demand ends, USD/JPY can be sold for a quick move lower. If the +2% U.S. yield continues to draw 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 continued trend. REACTIVE TRADE

TECHNICALS

96.50 still caps the upside
98.00 near term support
Break below put it on path towards retest of 96.00 lows

USD/JPY remains relatively well bid but 98.50 caps the upside for now and the pair must break through that level in order to make the move towards the 99.50-100.50 corridor. Meanwhile 98.00 supports but a break below opens up another retest of 96.00

3. GBP/USD – UK Retail Sales

FUNDAMENTALS
Retail Sales expected @ 0.7% (4:30 AM ET / 8:30 GMT)
Our View – Bullish GBP
Reason – Stronger BRC and Consumer Confidence
If Retail Sales grow by 1% or more = Buy GBP/USD
If Retail Sales contract by 0.1% or more = Sell GBP/USD

We have good reasons to believe that U.K. retail sales increased last month because consumer confidence improved and spending rose according to a similar report conducted by the British Retail Consortium. Therefore we feel that the data can be traded proactively or reactively. For those who choose to wait, if retail sales grow by 1.0% or more, the GBP/USD can be bought for a recovery trade. However if retail sales contract by 0.1% or more, the GBP/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

5500 retaken
5600 test again
5400 remains support

Cable rebounded off its correction retaking the 5500 level, but 5600 is a very serious resistance level and going may be tougher at that figure. 5400 supports the downside for now.

4. USD/JPY – Philadelphia Fed Survey

FUNDAMENTALS
Philly Fed Survey expected @ 15 (10 AM ET / 14 GMT)
Our View – Neutral
Reason – Neutral
If the Philly Fed index rises to 21 or higher = Buy USD/JPY
If the Philly Fed index falls to 13 or lower = Sell USD/JPY

A number of U.S. economic reports are scheduled for release tomorrow and we believe that the Philadelphia Fed index will be the most market moving. Unfortunately with the Empire State survey being released at the same time, this month’s release is particularly difficult to handicap and therefore best traded reactively. If the Philly Fed index rises to 21 or higher, USD/JPY can be bought for an extension higher. If the Philly Fed index falls to 13 or lower, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS

96.50 still caps the upside
98.00 near term support
Break below put it on path towards retest of 96.00 lows

USD/JPY remains relatively well bid but 98.50 caps the upside for now and the pair must break through that level in order to make the move towards the 99.50-100.50 corridor. Meanwhile 98.00 supports but a break below opens up another retest of 96.00

5. USD/CAD – Canadian Existing Home Sales



FUNDAMENTALS
Existing Home Sales expected @ (9 AM ET / 15 GMT)
Our View – Neutral
Reason – Neutral
If CAD Existing home Sales fall by 1% or more = Buy USD/CAD
If CAD Existing home Sales rise by 4% or more = Sell USD/CAD

Canadian existing home sales is a difficult piece of data to handicap and also not incredibly market moving for the CAD unless there is a big surprise. Therefore the data can only be trade reactively. If existing home sales fall by 1% or more, we expect USD/CAD to rise. If existing home sales rise by 4% or more, we expect USD/CAD to fall. REACTIVE TRADE

TECHNICALS

1.0400 caps upside
Makes a higher low
1.0250 supports

USD/CAD rebound off the 1.0250 support has been rejected at the 1.0400 level but the pair still looks more bid to the upside as it has made a higher low. Only a break below 1.0250 puts the bearish bias back in the pair.

*Top 5 Archive Members Only Top 5

Leave a Comment

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