Top 5 – March 27, 2013

TOP 5 HOT IDEAS

DATE: Wednesday, March 27, 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. EUR/CHF – UBS and KoF Indicators



FUNDAMENTALS
UBS Consumption Indicator expected @ (3 AM ET / 7 GMT) & KoF Indicator expected @ 1.04 (4AM ET / 8 GMT)
Our View – Neutral
Reason – Neutral
If UBS Indicator & KoF is 1.0 or lower = Buy EUR/CHF
If UBS Indicator exceeds 1.5 & KoF exceeds 1.15 = Sell EUR/CHF

Switzerland does not release much in the way of economic data so when they do, the reports tend to be important. Unfortunately the data is difficult to predict and therefore best traded reactively. If the UBS indicator and the KoF indicator drops to 1.0 or lower, we expect EUR/CHF to rally. If the UBS indicator exceeds 1.5 or the KoF indicator rises above 1.15, we expect EUR/CHF to rally. REACTIVE TRADE

TECHNICALS

1.2150 still holds
1.2250 caps upside
Reversal off 2200 sends negative signal

EUR/CHF continues to hold 1.2150 but the very negative price action on four hour chart with 1.2200 yet rejected again suggests that the pair may be signaling further downside risk.

2. GBP/USD – Q4 Current Account and GDP



FUNDAMENTALS
Current Account expected @ -12.5B & Q4 GDP expected @ -0.3% (5:30 AM ET / 9:30 GMT)
Our View – Bearish GBP
Reason – Weaker Trade Numbers in Q4
If Current Account Deficit is smaller than -12.5B & Q4 GDP is -0.3% or better = Buy GBP/USD
If Current Account Deficit exceeds -13B & Q4 GDP is -0.3% or worse = Sell GBP/USD

We have good reasons to believe that the U.K.’s current account deficit increased in the fourth quarter because trade activity, which is one of the primary components of current account deteriorated at the end of the year. GDP growth on the other hand is not expected to be revised. As a result, the data can be traded proactively or reactively. For those who choose to wait, if the current account deficit is smaller than -12.5B & Q4 GDP is -0.3% or better, we expect the GBP/USD to rise. If the current account deficit exceeds -13B & Q4 GDP is -0.3% or worse, we expect the GBP/USD to fall. PROACTIVE or REACTIVE TRADE

TECHNICALS

Failed breakout at 1.5225 still weighs
1.5150 holds for now but
A break lower opens support at 1.5050

Cable spent a quiet day hugging the 1.5150 level but the downside pressure on the pair remains and a break through 5150 support opens a run towards the lower end support at 1.5050.

3. EUR/USD – Eurozone Confidence

FUNDAMENTALS
Eurozone Economic Confidence @ 90.5 (6 AM ET / 10 GMT)
Our View – Bearish EUR
Reason – Sentiment to be dented by Italy and Cyprus
If Eurozone Confidence exceeds 92 = Buy EUR/USD
If Eurozone Confidence is less than 90 = Sell EUR/USD

We have good reasons to believe that tomorrow’s EZ confidence numbers will be weak. Between Italy’s failed election in February and Cyprus’ problems in March, there are plenty of reasons why business and consumers may have grown more pessimistic. Aside from recent deterioration in Germany, the labor market in France remains weak, leading to anemic growth in the region’s second largest economy. As a result, we believe the data can be traded proactively or reactively. For those who choose to wait, if the Eurozone’s Economic Confidence index exceeds 92, we expect the EUR/USD to rise. If the Eurozone Confidence Index is less than 90, we expect the EUR/USD to slide. PROACTIVE or REACTIVE TRADE

TECHNICALS

2850 holds but rebounds tepid
2900 then 2950 next resistance points
Break of 2800 opens run to 2700

Although the EUR/USD has stabilized near the 1.2850 level, the rebounds have been tepid at best and the pair still faces hurdles at 1.2900 and 1.2950 as it tries to recover from yesterday’s sell off.

4. USD/CAD – Canadian Consumer Prices

FUNDAMENTALS
CPI expected @ 0.7% (8:30 AM ET / 12:30 GMT)
Our View – Bullish CAD
Reason – Higher Price Component of IVEY PMI and Raw Materials
If CPI growth is less than 0.2% = Buy USD/CAD
If CPI growth exceeds 0.8% = Sell USD/CAD

We have good reasons to believe that Canadian consumer prices increased in the month of February because the price component of IVEY PMI surged along with raw materials. As a result, we believe the data can be traded proactively or reactively. For those who choose to wait, if CPI growth is less than 0.2%, we expect USD/CAD to rise. If CPI growth exceeds 0.8%, we expect USD/CAD to slide. PROACTIVE or REACTIVE TRADE

TECHNICALS

1.0150 approaching
1.0200 new resistance
Break of 1.0150 opens 1.0100

USD/CAD is now approaching a key support level of 1.0150 as it the downtrend in the pair establishes itself. A break there opens a run to 1.0100. Meanwhile 1.0200 caps upside.

5. USD/JPY – Pending Home Sales



FUNDAMENTALS
Pending Home Sales expected @ -0.3% (10 AM ET / 14 GMT)
Our View – Bearish USD
Reason – Weaker Existing and New Home Sales
If Pending Home Sales rise by 0.5% or more = Buy USD/JPY
If Pending Home Sales fall by -0.5% or more = Sell USD/JPY

We have good reasons to believe that pending home sales declined last month after seeing similar weakness in new and existing home sales. The data can be traded proactively or reactively. For those who choose to wait, if pending home sales rise by 0.5% or more, we expect USD/JPY to rise. If however pending home sales fall by 0.5% or more, we expect USD/JPY to slide. PROACTIVE or REACTIVE TRADE

TECHNICALS

Hovering near 94.50
93.50 still supports
Break 95.00 puts more bullish bias on pair.

USD/JPY continues to hover near the 94.50 level as the 93.50 value zone from yesterday supports the downside while the upside at 95.00 would open a more bullish posture to 96.00

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