Top 5 – 3.29.2013


DATE: Friday, March 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

**Given the Good Friday Holiday, we only have 3 Top Hot Ideas Today

1. USD/JPY – Japanese CPI and Industrial Production

National YoY CPI expected @ -0.7% (7:30 PM ET / 23:30 GMT) & Industrial Production @ 2.5% (7:50 PM ET / 23:50 GMT)
Our View – Neutral
Reason – Neutral
If CPI is less than -1.0% AND Industrial Production is less than 2.0% = Buy USD/JPY
If CPI is -0.3% or higher AND Industrial Production is 2.5% or higher = Sell USD/JPY

There are a number of Japanese economic reports scheduled for release this evening and we believe that Consumer Prices and Industrial Production are the most important. Prime Minister Abe said he is watching import prices carefully but to the BoJ, the most important measure is consumer prices. Economists are looking for CPI growth to fall significantly on a year over year basis and if it does, the case for easing increases significantly. Japanese CPI is difficult to forecast so it is probably best to wait for the data to be released before taking a trade. If CPI falls by -1.0% or more AND Industrial Production is less than 2.0%, we expect USD/JPY to rally. If CPI growth eases to -0.3% or better AND Industrial Production is 2.5% or higher = Sell USD/JPY REACTIVE TRADE


94.00 continues to hold
Volatility compressing
95.00 still key to upside

USD/JPY continues to meander between 94.00-95.00 but volatility is compressing suggesting that the next breakout could be setting the stage for directional movess. 95.00 still key to any upside.

2. USD/TRY for Turkish Trade Balance

Turkish Trade Balance expected @ -8.8B (4 AM ET / 8 GMT)
Our View – Neutral
Reason – Neutral
If Trade Deficit exceeds -10B = Buy USD/TRL
If Trade Deficit is less than -6.5B = Sell USD/TRL

Turkey’s trade balance numbers are due for release tomorrow and if there is a large enough surprise, we could see a reaction in the Turkish Lira. Unfortunately the data is difficult to handicap and therefore best traded reactively. If the trade deficit exceeds -10B, we expect USD/TRL to rise. If the trade deficit is less than -6.5B, we expect USD/TRL to decline. REACTIVE TRADE


1.8300 caps upside
1.8100 near term support
Break of 1.8100 put 1.8000 in play

USD/TRY looks to be topping at 1.8300. 1.8100 as support still holds but a break opens a run to 1.8000

3. USD/JPY – Personal Income and Spending

Personal Income expected @ 0.8% and Personal Spending expected @ 0.6% (8:30 AM ET / 12:30 GMT)
Our View – Bullish USD
Reason – Stronger Retail Sales and Average Hourly Earnings
If Personal income and Spending BOTH exceed 0.8% = Buy USD/JPY
If Personal income and Spending are BOTH less than 0.6% = Sell USD/JPY

We have good reasons to believe that U.S. personal income and personal spending increased in the month of February because retail sales and average hourly earnings, 2 similar measures also rose. As a result we believe the data can be traded proactively or reactively. For those who choose to wait, if Personal income and Spending BOTH exceed 0.8% we expect USD/JPY to rise. If Personal income and Spending are BOTH less than 0.6%, we expect USD/JPY to slide. PROACTIVE or REACTIVE TRADE


1.2750 holds once again
1.2850 caps for now
Break of 2750 opens run to 2650

The hold of 2750 for the second day in a row suggests that the pair may be carving out a near term bottom, but it needs to break above 2850 in order to gather some upside momentum and put 2950 into view. A break below 2750 opens up a test of long term support at 2650.

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