Top 5 – 07.26.13

TOP 5 HOT IDEAS

DATE: Friday July 26, 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 CPI

FUNDAMENTALS
FUNDAMENTALS
CPI expected @ 0.1% (7:50 PM ET / 23:50 GMT)
Our View – Neutral
Reason – Neutral
If CPI declines by -0.5% or more = Buy USD/JPY
If CPI grows by 0.5% or more = Sell USD/JPY

Fighting deflation is a top priority for the Bank of Japan but the battle is slow with no major changes expected in Japanese CPI growth. Nonetheless Friday is a quiet day in the forex market and data that does not typically move a currency could have a surprisingly large reaction if the outcome deviates from expectations in a large enough way. In our opinion, Japan’s CPI report should only be traded reactively. If CPI declines by -0.5% or more, USD/JPY can be bought for a move higher. If CPI grows by 0.5% or more, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS

Back to 99.00
Key support
Break opens run to 98.00

USD/JPY failed its move to 100.50 and is now testing support at 99.00 a break there opens up the path to 98.00

2. USD/SGD – Singapore Industrial Production



FUNDAMENTALS
Singapore Industrial Production expected @ -0.5% (1 AM ET / 5 GMT)
Our View – Bearish SGD
Reason – Weaker Chinese Growth and Demand
If IP drops by 0.8% or more = Buy USD/SGD
If IP is flat or rises = Sell USD/SGD

We have good reasons to believe that Industrial Production in Singapore dropped significantly in the month of June because of slower Chinese growth and a big decline in exports. Therefore we feel the data can be traded proactively or reactively. For those who choose to wait, if Industrial Production drops by -0.8% or more USD/SGD can be bought for an extension higher. However if industrial production is flat or increases, USD/SGD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

Off the highs into support
1.2600 key hold
Break opens fresh lows

USD/SGD has turned lower off the highs and must now hold the key support at the 1.2600 or risk the break to fresh lows.

3. USD/DKK – Denmark Retail Sales

FUNDAMENTALS
Retail Sales expected @ (3 AM ET / 7 GMT)
Our View – Neutral
Reason – Neutral
If Retail Sales fall by -0.1% or more = Buy USD/DKK
If Retail Sales rise by 0.5% or more = Sell USD/DKK

Economic data from Denmark is difficult to handicap and therefore best traded reactively. If retail sales fall by -0.1% or more, we expect USD/DKK to move higher. If retail sales rise by 0.5% or more, we expect USD/DKK to move lower. REACTIVE TRADE

TECHNICALS

5.6000 in view
Major decline in process
5.5000 key support

USD/DKK has turned sharply lower and momentum flows suggest that 5.6000 can be in view with 5.5500 now key support

4. USD/MXN – Mexico Trade Balance

FUNDAMENTALS
Trade Balance expected @ -416M (9 AM ET / 13 GMT)
Our View – Neutral
Reason – Neutral
If Mexico’s Trade Deficit widens to -500M or larger = Buy USD/MXN
If Mexico’s Trade Deficit narrows to -300M or smaller = Sell USD/MXN

Economic data from Mexico is difficult to handicap and therefore best traded reactively. If Mexico’s Trade Deficit widens to -500M or larger, USD/MXN can be bought for a move higher. If Mexico’s Trade Deficit narrows to -300M or smaller, USD/MXN can be sold. REACTIVE TRADE

TECHNICALS

12.5000 holds
12.7000 contains upside
Tight consolidation

USD/MXN has not made fresh lows and continues to hold support at 12.5000 as it consolidates the down move with 12.7000 capping the upside.

5. EUR/USD – Final University of Michigan Index



FUNDAMENTALS
Average Weekly Earnings expected @ 84 (9:55 AM ET / 13:55 GMT)
Our View – Neutral
Reason – Neutral
If the UMich survey is revised down to 83 or lower = Buy EUR/USD
If the UMich survey is revised up to 84.5 or higher= Sell EUR/USD

Revisions to economic data are difficult to handicap and therefore best traded reactively. In the case of the UMich survey, if the index is revised down to 83 or lower, we feel that the EUR/USD can be bought for an extension higher. If the index is revised up o 84.5, representing stronger confidence, the EUR/USD can be sold for a potential move lower. REACTIVE TRADE

TECHNICALS

3250 taken out
3300 now in view
3400 next resistance

EUR/USD broke out with conviction taking out the 3250 level with conviction. 3300 now comes into view and the pair now target the swing highs at 3400.

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