Top 5 – 4.12.13


DATE: Friday April 12, 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 – Food Prices

Food Prices @ (6:45 PM ET / 22:45 GMT)
Our View – Neutral
Reason – Neutral
If Food Prices exceed 1.0% = Buy NZD/USD
If Food Prices falls by -1.0% or more = Sell NZD/USD

New Zealand food prices are due for release this evening and given the market’s complete lack of concern for last night’s drop in business PMI, we are not sure whether this report will have any impact on the NZD. As such we only recommend trading this pair if there is a large enough surprise. So if food prices exceed 1%, NZD/USD can be bought for a reactive trade higher. If food prices fall by 1% or more, NZD/USD can be sold. REACTIVE TRADE


Stalls ahead of 8700
8600 now near term support
8700-8800 more serious resistance

As we noted yesterday the 8700 level is stauncher resistance for the kiwi so it was no surprise that the pair has stalled ahead of that key level, but a run is still possible with 8600 now near term support.

2. EUR/USD – Eurozone Industrial Production

Industrial Production expected @ 0.2% (5 AM ET / 9 GMT)
Our View – Bullish EUR
Reason – Higher German and French Industrial Production
If IP exceeds 0.6% = Buy EUR/USD
If IP drops by -0.3% or more = Sell EUR/USD

We have good reasons to believe that Eurozone industrial production increased in February. Whenever we look to handicap EZ data, we always turn to German and French releases – both countries reported an improvement in IP. As a result, we believe that the data can be traded proactively or reactively. For those who choose to wait, if industrial production exceeds 0.6%, the EUR/USD can be bought for a reactive trade. If it drops by 0.3% or more, the EUR/USD can be sold. PROACTIVE or REACTIVE TRADE


1.3150 continues to cap
1.3050 remains key near term support
Break above 3150 opens up 3300

The euro remains well bid but 3150 continues to cap upside although a break through those levels opens up a path to 3300. Meanwhile 3050 continues to support.

3. USD/JPY – US Retail Sales

Advance Retail Sales expected @ 0.0% (8:30 AM ET / 12:30 GMT)
Our View – Bullish USD
Reason – Stronger Redbook and Steady ICSC
If Retail Sales grow by 0.5% or more = Buy USD/JPY
If Retail Sales fall by -0.3% or more = Sell USD/JPY

We have good reasons to believe that U.S. retail sales could surprise to the upside. Coming off the heels of a 1.1% increase in sales in February, the consensus forecast is for zero growth tomorrow in both advance retail sales and retail sales less autos. However according to the Johnson Redbook index, consumer spending increased 0.7% in March from February while the International Council of Shopping Centers reported a 1.6% yoy rise. Cold weather and soft Easter spending limited the gains but spending should have still increased which means that Friday’s retail sales report could show a rise in consumption versus a flat reading. With FX traders dying for a reason to push USD/JPY above 100, a positive print could be good enough. Therefore we believe the data can be traded proactively or reactively. For those who choose to wait, if retail sales grow by 0.5% or more, USD/JPY can be bought for a quick reactive trade. If retail sales fall by 0.3% or more, USD/JPY can be sold. PROACTIVE REACTIVE TRADE


Inching towards 100.00
99.00 still key support
Break higher opens up path 101.00

USD/JPY continues to crawl towards the key 100.00 area as the pair remains well bid. 99.00 supports the downside, while the upside break opens up the path to a run at 5 year highs near 101.00

4. USD/CHF – University of Michigan Consumer Confidence

UMich expected @ 78.5 (9:55 AM ET / 13:55 GMT)
Our View – Bullish USD
Reason – Stronger IBD/TIPP, Stocks at Record Levels
If UMich exceeds 79 = Buy USD/CHF
If UMich drops to 78.0 or lower = Sell USD/CHF

We are also looking for stronger U.S. consumer confidence. Despite the decline in payrolls, stocks have performed very well and a similar survey by Investors Business Daily found a sharp increase in sentiment. As a result, we also believe that the UMich survey can be traded proactively or reactively. For those who choose to wait, if the UMich index rises to 79 or higher, USD/CHF can be bought for a quick reactive trade. However if the index drops to 78 or lower, USD/CHF can be sold. PROACTIVE or REACTIVE TRADE


Forming a base at 9300
9350 next target of shorts
9250 support

USD/CHF looks to be turning as 93.00 is starting to look like a base. 92.50 is deeper support while 9350 is the target for longs that opens up a run 9400

5. S&P 500 and NZD/USD


Of all the major currency pairs, the one that has the closest relationship with stocks right now is the NZD/USD. U.S. stocks have hit record highs on a near daily basis and the only currency pair that has done the same (with less significant highs of course is the NZD/USD). The New Zealand dollar is traditionally a “risk on” currency and in this current economic environment when some pairs are being constrained by domestic factors, the NZD is a shining star. How long this relationship lasts remains to be seen but for the time being, its worth watching

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