Top 5 – 08.29.2013

TOP 5 HOT IDEAS

DATE: Thursday August 29, 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 Retail Trade



FUNDAMENTALS
Retail Trade expected @ 0.9% (7:50 PM ET / 23:50 GMT)
Our View – Neutral
Reason – Neutral
If Japanese Retail Trade is less than 0% = Buy USD/JPY
If Japanese Retail Trade exceeds 1.6% = Sell USD/JPY

Japanese retail trade numbers are due for release this evening and the data is important because consumer spending is the driving force for every economy. In the case of Japan, spending is expected to grow only modestly because the recovery has slowed. The data is difficult to handicap and we feel that it is best to wait for the data to be released before taking a trade. If Japanese retail sales growth stagnates or worse, declines, we expect USD/JPY to rise. If growth exceeds 1.6% we expect USD/JPY to slide. REACTIVE TRADE

TECHNICALS

97.00 tested and holds again
98.00 still resistance
Break opens test of 99.00

USD/JPY has held 97.00 once again and the firmer bid tone suggests that the pair may now base for a run to 98.00. A break there opens a retest of 99.00.

2. 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 is 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

7700 possible triple bottom
Support remains key
7800 caps for now

The 7700 level remains key support in NZD/USD for now as the pair continues to build a possible triple bottom there. 7800 caps upside for now.

3. EUR/USD – German Unemployment

FUNDAMENTALS
German Unemployment expected @ -5K (3:55 AM ET / 7:55 GMT)
Our View – Neutral
Reason – Service sector job growth offset by manufacturing sector job losses
If German Unemployment drops by 10K or more = Buy EUR/USD
If German Unemployment rises by 5K or more = Sell EUR/USD

German unemployment numbers are important but this month’s report is difficult to handicap because job growth in the service sector was offset by job losses in manufacturing. As such, we feel that the data is best traded reactively. If German unemployment rolls drop by 10K or more, we expect the EUR/USD to rise. If unemployment rolls rise by 5K or more, we expect the EUR/USD to decline.
REACTIVE TRADE

TECHNICALS

Yet another hammer at 3300
3400 still caps
Consolidation continues

The EUR/USD printed a yet hammer on the dailies suggesting that the bullish bias remains in place as long at 1.3300 holds. 1.3400 still caps the upside.

4. USD/CAD – Q2 Current Account

FUNDAMENTALS
Q2 Current Account expected @ -14.8B (8:30 AM ET / 12:30 GMT)
Our View – Bearish CAD
Reason – Lower Trade and International Securities Transactions
If the current account deficit balloons to -15B or more = Buy USD/CAD
If the current account deficit narrows to -13B or less = Sell USD/CAD

We have good reasons to believe that Canadian current account numbers will surprise to the downside with the country’s trade deficit widening. The 2 key components of the current account balance is trade and investment flows, both of which deteriorated in Q2. As such, we feel that the data can be traded proactively or reactively. If the current account deficit balloons to -15B or more, USD/CAD can be bought for a move higher. If the current account deficit narrows to -13B or less, USD/CAD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

1.0500 continues to distribute
1.0450 near term support
1.0350 deeper support

USD/CAD continues its topping formation near the 1.0500 level and is now slowly sliding back towards the 1.0400 support. Meanwhile 1.0350 provides deeper support for the pair.

5. USD/JPY – Q2 GDP Revision



FUNDAMENTALS
GDP expected @ 2.2% (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Neutral
If GDP is revised up to 2.2% = Buy USD/JPY
If GDP is revised down to 1.6% = Sell USD/JPY

GDP revisions are difficult to handicap and while economists are looking for a stronger release, we are not sure if the number will deliver. As such, we feel that the report is best traded reactively. If GDP is revised up to 2.2% or higher, we expect USD/JPY to rally. If GDP is revised down to 1.6% or lower, we expect USD/JPY to sell off. REACTIVE TRADE

TECHNICALS

97.00 tested and holds again
98.00 still resistance
Break opens test of 99.00

USD/JPY has held 97.00 once again and the firmer bid tone suggests that the pair may now base for a run to 98.00. A break there opens a retest of 99.00.

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