Top 5 – 3.28.2013

TOP 5 HOT IDEAS

DATE: Thursday, March 28, 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 @ 0.5% (7:50 PM ET / 23:50 GMT)
Our View – Neutral
Reason – Neutral
If Retail Trade growth is less than -0.2% = Buy USD/JPY
If Retail Trade growth exceeds 1.5% = Sell USD/JPY

Consumer spending numbers are important for every country and Japan is no exception however the Yen only moves on Japanese data when there is a meaningful surprise. As a result, the data is best traded reactively. If retail trade growth falls by 0.2% or more, we expect USD/JPY to rise. However if demand is strong and retail trade grows by 1.5% or more, we expect USD/JPY to rise. REACTIVE TRADE

TECHNICALS

94.50 still equilibrium
Break of 95.00 opens run to 96.00
93.50 still supports

USD/JPY spent the day quietly consolidating but remains trapped at 95.00 only a break through that level puts the bullish bias back on.

2. GBP/USD – GfK Consumer Confidence



FUNDAMENTALS
GfK Confidence @ (8:01 PM ET / 0:01 GMT)
Our View – Neutral
Reason – Neutral
If Confidence Index is -25 or better = Buy GBP/USD
If Confidence Index is -27 or worse = Sell GBP/USD

U.K. consumer confidence numbers are due for release this evening and unless there is a meaningful surprise we typically do not expect a big reaction in the GBP/USD. However traders are watching U.K. data very carefully to see if the recent improvements can be sustained and therefore only a small change is needed to move the GBP. Still, the data is best traded reactively. If the consumer confidence index rises to -25 or better, we expect the GBP/USD to rally. If the index drops to -27 or lower, we expect the GBP/USD to slide. REACTIVE TRADE

TECHNICALS

1.5100 holds
1.5200 still caps upside
Break of 1.5100 opens up 1.5050

Cable upside has been stymied at 1.5200 and the pair is now starting to drift lower again. A break of 1.5100 opens up 1.5050.

3. EUR/USD – German Retail Sales & Unemployment

FUNDAMENTALS
Retail Sales expected @ -0.6% (3 AM ET / 7 GMT) & Unemployment expected @ -2K (4:55 AM ET / 8:55 GMT)
Our View – Bullish EUR
Reason – PMI Report Shows Strongest Rise in Employment Since Jan 2012
If Retail Sales is 0% or higher & Unemployment Change is -5K or better = Buy EUR/USD
If Retail Sales drops by -1% or more & Unemployment Change is 1K or higher = Sell EUR/USD

EUR/USD traders need to be careful with this one. While we have strong reasons to believe that German unemployment numbers will surprise to the upside because the PMI reports showed the strongest job growth since January 2012, we have no clarity on retail sales. Therefore retail sales should probably be traded reactively whereas unemployment can be traded proactively. For those who choose to wait for both releases to come out before taking a trade, if Retail Sales is 0% or higher & Unemployment Change is -5K or better, we expect the EUR/USD to rise. If Retail Sales drops by -1% or more & Unemployment Change is 1K or higher, we expect the EUR/USD to fall. PROACTIVE or REACTIVE TRADE

TECHNICALS

1.2800 given
1.2750 next support
1.2850 caps

The pair continues to deteriorate with 1.2800 now given the downside pressure to test 2750 and the large support at 2700 increases.

4. USD/CAD – Canadian GDP

FUNDAMENTALS
CAD January GDP expected @ 0.1% (8:30 AM ET / 12:30 GMT)
Our View – Bullish CAD
Reason – Stronger Retail Sales and Trade
If GDP is less than 0% = Buy USD/CAD
If GDP exceeds 0.3% = Sell USD/CAD

We have strong reasons to believe that Canadian GDP growth will surprise to the upside. The 2 most important components of GDP are retail sales and trade and both improved in the month of January. Therefore we believe the data can be traded proactively or reactively. For those who choose to wait, if GDP growth is less than 0%, USD/CAD will rise. If GDP growth is in excess of 0.3%, USD/CAD should slide. PROACTIVE or REACTIVE TRADE

TECHNICALS

Fresh monthly lows
1.0150 in view
1.0200 upside cap

Loonie remains well bid but the 1.0150 level still holds. A break there opens up run to 1.0100.

5. USD/JPY – U.S. Q4 GDP Revisions



FUNDAMENTALS
Q4 GDP revision expected @ 0.5% (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Neutral
If GDP growth is revised up 0.5% or better = Buy USD/JPY
If GDP is unrevised and left at 0.1% = Sell USD/JPY

Revisions to GDP are difficult to handicap but economists are looking for a major upward revision. If they are right, we expect a meaningful rally in USD/JPY. This data should be traded reactively and more specifically, USD/JPY can be bought if GDP growth exceeds 0.5% or sold if GDP growth is unrevised or lower than 0.1% REACTIVE TRADE

TECHNICALS

94.50 still equilibrium
Break of 95.00 opens run to 96.00
93.50 still supports

USD/JPY spent the day quietly consolidating but remains trapped at 95.00 only a break through that level puts the bullish bias back on.

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