Top 5 – 4.23.13

TOP 5 HOT IDEAS

DATE: Tuesday April 23, 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. AUD/USD – Chinese HSBC Flash PMI



FUNDAMENTALS
HSBC Flash Manufacturing PMI expected @ 51.5 (9:45 PM ET / 1:45 GMT)
Our View – Bearish AUD
Reason – Sharp Plunge in Chinese GDP Points to Weaker Economic Activity
If Flash PMI exceeds 52.5 = Buy AUD/USD
If Flash PMI drops below 51 = Sell AUD/USD

We have good reasons to believe that HSBC will report a lower Chinese Flash manufacturing PMI index for the month of April. With the first quarter GDP numbers, the Chinese government admitted that growth has slowed which is something the flash PMIs have been reporting for some time. With U.S. and Europe also hitting a rough patch, manufacturing activity should have grown at a slower pace this month. Australia and its currency are particularly sensitive to Chinese data and the AUD/USD is therefore our preferred currency pair to trade. We believe the data can be traded proactively or reactively. For those who choose to wait, if the Flash PMI index exceeds 52.5, the AUD/USD can be bought for a move higher. If the index drops below 51, the AUD/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

1.0250 holds but barely
Bias remains down
1.0300 now resistance

The downward bias in Aussie continues and although the pair has managed to close above the 1.0250 level the pressure to test 1.0200 remains while 1.0300 now acts as resistance.

2. EUR/USD – Eurozone PMI Numbers



FUNDAMENTALS
PMI Composite expected @ 46.5 (4 AM ET / 8 GMT)
Our View – Mildly Bullish
Reason – ZEW declined but factory orders and industrial production increased
If the PMI Composite index exceeds 47.5 = Buy EUR/USD
If the PMI Composite index drops below 46 = Sell EUR/USD

Eurozone PMI numbers will be released tomorrow and given recent comments from the ECB, this month’s releases carry particular importance as they will shape expectations for ECB easing. Unfortunately our leading indicators for PMIs this month are mixed with the ZEW falling and factory orders plus industrial production rising. Yet we think this is a high volatility event and for this reason are placing TWO orders in the EUR/USD (see trading alert). Our leading indicators lean towards stronger PMIs but a big disappointment should trigger a move below 1.30 and a deeper sell-off in the euro. The data can be traded proactively or reactively. For those who choose to wait, if the PMI Composite index exceeds 47.5, the EUR/USD can be bought for a move higher. If the PMI Composite index drops below 46, the EUR/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

1.3000 holds
1.3125 key to upside break
1.3000 break opens path to 1.2900

The euro has managed to hold the key 1.3000 support once again, although the break there could be severe with a quick drop to 1.2900 if tested. Meanwhile upside break of 1.3125 would reassert the bullish bias in the pair.

3. GBP/USD – Public Sector Finances and Net Borrowing

FUNDAMENTALS
Public Sector Finances expected @ 18B & Public Sector Net Borrowing expected at 13.8B (4:30 AM ET / 8:30 GMT)
Our View – Neutral
Reason – Neutral
If Public Finances exceed 18B & Net Borrowing exceeds 14B = Buy GBP/USD
If Public Finances is less than 18B & Net Borrowing is less than 14B = Sell GBP/USD

The U.K’s public sector finances and data on net borrowing are due for release tomorrow. Though these reports can be market moving, they are difficult to handicap and therefore best traded reactively. If public finances exceed 18B & Net Borrowing exceeds 14B, the GBP/USD can be bought for a quick reactive trade higher. If Public Finances is less than 18B & Net Borrowing is less than 14B, the GBP/USD can be sold. REACTIVE TRADE

TECHNICALS

5200 tested but recovered
5300 still caps upside
Pair remains in consolidation mode

Cable remains in consolidation mode but has shown some support at the 1.5200 level as it continues to base after failing at 1.5400. 1.5300 remains the cap for now.

4. USD/CAD – Canadian Retail Sales


FUNDAMENTALS
Retail Sales expected @ 0.3% (8:30 AM ET / 12:30 GMT)
Our View – Bearish CAD
Reason – Weak employment and flat wholesale sales
If Retail Sales fall by 0.1% or more = Buy USD/CAD
If Retail Sales grow by 0.8% or more = Sell USD/CAD

We have strong reasons to believe that Canadian retail sales growth slowed in February. Between a sharp decline in jobs and stagnant wholesale sales growth, retail sales will most likely surprise to the downside. Therefore we believe the data can be traded proactively or reactively. For those who choose to wait, if retail sales fall by 0.1% or more, USD/CAD can be bought for a move higher. If retail sales grow by 0.8% or more, USD/CAD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

1.0250 remains equilibrium
1.0300 caps upside
Break below 1.0200 puts downward bias back in play

USD/CAD remains at a near standstill position near the 1.0250 level as the bulls and the bears appear to be in a near perfect balance. A topside break of 1.0300 opens further upside while 1.0200 puts the downward bias back in the pair.

5. USD/JPY – U.S. New Home Sales



FUNDAMENTALS
New Home Sales expected @ 1.2% (10 AM ET / 14 GMT)
Our View – Neutral
Reason – Neutral
If New Home Sales rise by 2.0% or more = Buy USD/JPY
If New Home Sales is flat or declines, = Sell USD/JPY

U.S. new home sales are due for release tomorrow and while existing home sales declined, which points to the potential for a softer new home sales report, the sharp drop in February makes a rebound in March possible. As a result, the data is best traded reactively. If new home sales rise by 2% or more, USD/JPY can be bought for a quick move higher. If New Home Sales is flat or declines, USD/JPY can be sold REACTIVE TRADE

TECHNICALS

Failure at 100.00 yet again
99.00 support holds
Break of 99.00 creates another short term top

USD/JPY has yet again failed to take out the century mark but the pair remains stubbornly bid at the 99.00 level and as long as that holds the bias remains up.

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