Top 5 – 3.26.2013

TOP 5 HOT IDEAS

DATE: Tuesday, March 26, 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 – New Zealand Trade Balance



FUNDAMENTALS
Trade Balance @ -12M (5:45 PM ET / 21:45 GMT)
Our View – Bullish NZD
Reason – Sharp Increase in Manufacturing PMI
If Trade Balance is 0M or better = Buy NZD/USD
If Trade Deficit exceeds -300M = Sell NZD/USD

We have good reasons to believe that New Zealand’s trade deficit narrowed in the month of February because manufacturing activity increased significantly. More specifically, the business PMI index rose to its highest level in 12 months. As a result, we believe the data can be traded proactively or reactively. For those who choose to wait, if the Trade deficit shrinks to 0M or better, we expect the NZD/USD to rally. If the trade deficit exceeds 300M, we expect the NZD/USD to fall. PROACTIVE or REACTIVE TRADE

TECHNICALS

8350 holds
8400 target of the longs
8300 near term support

The kiwi continues to show great resilience as the pair holds up well against the buck with 8350 and 8300 as near term supports while 8400 is the next target of the longs as the uptrend remains in place

2. USD/JPY – Japanese Small Business Confidence



FUNDAMENTALS
Small Business Confidence @ (12 AM ET / 4 GMT)
Our View – Neutral
Reason – Neutral
If Small business is less than 44 = Buy USD/JPY
If Small business Confidence exceeds 50 = Sell USD/JPY

Japan’s small business confidence survey is not a huge market mover for the Yen unless there is a big surprise. Therefore the data should only be traded reactively. If the country’s small business confidence index drops to 44, we expect USD/JPY to rally. If the small business confidence index exceeds 50, it may drive a sell-off in USD/JPY. REACTIVE TRADE

TECHNICALS

94.00 broken
93.50 quickly bought
Break of 93.50 opens run to 92.00

As we have been warning for days the 94.00 was key support for USD/JPY and once given created further downside action. The snapback at 93.50 however is mildly bullish as it appears to have hit a value area, but if the level is approached again a break there could open a run to 92.00.

3. EUR/CHF – KoF March Economic Forecasts

FUNDAMENTALS
KoF Institute March Economic Forecasts @ (4 AM ET / 8 GMT)
Our View – Neutral
Reason – Neutral
If KoF March Economic Forecasts are cut = Buy EUR/CHF
If KoF March Economic Forecasts are raised = Sell EUR/CHF

The KoF Institute’s March Economic Forecasts are due for release tomorrow morning and if they are revised significantly, we could see a reaction in EUR/CHF. Since we don’t know how much the revisions could be and there are no leading indicators to help, the data should only be traded reactively. If KoF March Economic Forecasts are cut, we expect EUR/CHF to rise. If KoF March Economic Forecasts are raised, we expect EUR/CHF to slide. REACTIVE TRADE

TECHNICALS

1.2150 still holds
1.2250 caps upside
Shooting star sends negative signal

The flameout in EUR/CHF is an ugly signal of possible further downside to come as the shooting star weighs with 1.2150 a key hold and 1.2250 the new resistance in the pair.

4. GBP/USD – CBI Reported Sales

FUNDAMENTALS
CBI Reported Sales expected @ 13 (7 AM ET / 11 GMT)
Our View – Bullish GBP
Reason – Stronger Retail Sales and Data in General
If CBI exceeds 15 = Buy GBP/USD
If CBI is less than 8 = Sell GBP/USD

We have good reasons to believe that the CBI reported sales survey will increase. There have been a number of improvements in U.K. data including retail sales and a result, we believe the data can be traded proactively or reactively. For those who choose to wait, if the CBI index exceeds 15, we expect the GBP/USD to rally. If the index holds steady at 8 or declines, we expect the GBP/USD to sell off. PROACTIVE or REACTIVE TRADE

TECHNICALS

Failed breakout at 1.5225
1.5150 holds
A break lower opens support at 1.5050

Cable’s breakout at 1.5225 has failed so far and a if the pair peeks back below the 1.5150 level it may experience a steeper correction to 1.5050. A push through 1.5250 reestablishes upside bias.

5. USD/JPY – Consumer Confidence



FUNDAMENTALS
Consumer Confidence expected @ 67.5 (10 AM ET / 14 GMT)
Our View – Bearish USD
Reason – Sharp Decline in UMich Survey
If Consumer Confidence exceeds 70 = Buy USD/JPY
If Consumer Confidence is less than 65 = Sell USD/JPY

We have good reasons to believe that U.S. consumer confidence index will fall sharply tomorrow because a similar survey conducted by the University of Michigan and Investors Business index found sentiment deteriorating significantly this month. As a result, we believe the data can be traded proactively or reactively. For those who choose to wait, if the consumer confidence index exceeds 70, we expect USD/JPY to rise. If the index drops to 65 or lower, we expect USD/JPY to weaken. PROACTIVE or REACTIVE TRADE

TECHNICALS

94.00 broken
93.50 quickly bought
Break of 93.50 opens run to 92.00

As we have been warning for days the 94.00 was key support for USD/JPY and once given created further downside action. The snapback at 93.50 however is mildly bullish as it appears to have hit a value area, but if the level is approached again a break there could open a run to 92.00.

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