Top 5 – 03.25.13

*Top 5 Archive Members Only Top 5


DATE: Monday, March 25, 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/USD – Cyprus, Cyprus, Cyprus

Cyprus Bailout Deal expected @ (No Time)
Our View – Neutral
Reason – Neutral
If Troika and Cyprus Reach a Deal = Buy EUR/USD
If Troika and Cyprus Deal Breaks Down = Sell EUR/USD

The big focus this weekend is Cyprus and by the time the market opens on Sunday we should know whether they have reached an agreement with the Troika. According to rumors Sunday morning, a deal has not been made but we won’t know for sure until a formal announcement is made. If there is a deal, the EUR/USD will most likely gap higher at the Sunday open and continue to trade well into the European trading session. If talks break down and a deal is not reached, the EUR/USD could resume its slide. Given the uncertainty, it is best to wait for the announcement before taking a trade. REACTIVE TRADE


1.2850-1.3050 range persists
gap still not filled
Break of either edge could signal direction

The EUR/USD remains in a wide range of 1.2850-1.3050 as the downside gap remains unfilled. A trade to 1.3050 fills the gap but runs into resistance a break of 1.2850 could open a move to 1.2700

2. GBP/USD – Hometrack Housing Survey

Hometrack Housing Survey @ (8:01 PM ET / 00:01 GMT)
Our View – Neutral
Reason – Neutral
If Hometrack index rises by 0.4% or more = Buy GBP/USD
If Hometrack index falls by -0.3% or greater = Sell GBP/USD

The U.K.’s Hometrack Housing Survey isn’t a huge market mover for the GBP/USD unless there is a big surprise. The data should therefore only be traded reactively. If the housing survey index rises by 0.4% or more, it would be consistent with the overall improvement in the U.K. economy and boost the GBP/USD. If the index falls 0.3% or more, we expect a sell-off in the GBP/USD. REACTIVE TRADE


1.5225 cleared
1.5300 next target of longs
1.5050 supports

Cable has finally been able to clear the 1.5200 barrier opening the way for trade to a test of 1.5300. Meanwhile 1.5050 remains the near term support.

3. USD/SGD – Singapore Consumer Prices

CPI expected @ 0.4% (1 AM ET / 5 GMT)
Our View – Neutral
Reason – Neutral
If CPI growth is 0% or less = Buy USD/SGD
If CPI growth exceeds 0.6% = Sell USD/SGD

Singapore’s consumer price report is due for release on Monday and the data is best traded reactively. Inflationary pressures are expected to increase and if economists are right and CPI rises by 0.6% or more, we expect USD/SGD to sell-off. If CPI growth is less than 0%, we expect USD/SGD to rise. REACTIVE TRADE


1.2450 supports
1.2550 caps
Continues to consolidate breakout

USD/SGD continues to consolidate the breakout but 1.2550 caps any upside for now while 1.2450 offers near term support.

4. USD/MXN – Global Economic Indicators

Industrial Confidence expected @ (10 AM ET / 14 GMT)
Our View – Neutral
Reason – Neutral
If Global Economic Indicator growth drops to 0.5% or lower = Buy USD/MXN
If Global Economic Indicator growth rises to 3.5% or higher = Sell USD/MXN

There’s clearly not much in the way of economic data on Monday when we turn to Mexico’s global economic indicators for excitement. However, the calendar is very sparse and if there is a large enough surprise in Mexico’s Global Economic Indicators report, we could see a sizeable move in USD/MXN. More specifically, if Global Economic Indicator growth drops to 0.5% or lower we expect USD/MXN to rise. If Global Economic Indicator growth rises to 3.5% or higher, we expect USD/MXN to rise. REACTIVE TRADE


12.30 still key support
12.45 caps upside
12.30 break opens run to 12.00

USD/MXN may be in the process of making a double bottom at 12.30 which remains a key support for the pair while 12.45 caps the upside for now.

5. USD/JPY – Speech from Bernanke

Bernanke Speech expected @ (1:15 PM ET / 17:15 GMT)
Our View – Neutral
Reason – Neutral
More optimism from Bernanke = Buy USD/JPY
Renewed caution from Bernanke = Sell USD/JPY

Bernanke is speaking Monday afternoon at a panel chaired by BoE Governor King and if we hear more optimism from Bernanke, it could lift USD/JPY. If he shifts gears, which would be the real surprise, the renewed caution could drag down USD/JPY. Speeches are generally best traded reactively. REACTIVE TRADE


94.00 is a key hold
Break of 94.00 opens run to 92.00
96.00 caps upside

The 94.00 remains absolutely essential hold for USD/JPY longs as it has been tested twice already. A break below opens a run to 92.00 as the rally unwinds.

S&P up 0.67%, Gold down 0.4%, 10 year bond yields up 5.8bp