TOP 5 HOT IDEAS

DATE: Thursday April 11, 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 – Business PMI

FUNDAMENTALS
Business NZ PMI @ (6:30 PM ET / 22:30 GMT)
Our View – Neutral
Reason – Neutral
If the Business PMI index exceeds 58 = Buy NZD/USD
If the Business PMI index drops to 55 or lower = Sell NZD/USD

New Zealand’s business PMI index is scheduled for release tomorrow and this report could determine whether the NZD/USD powers higher from here or pulls back from its lofty levels. Overall we have seen both weakness and strength in the country’s economic reports and for this reason, the Business PMI index is difficult to handicap and best traded reactively. If the Business PMI index exceeds 58, NZD/USD can be bought for a reactive trade. If the index drops to 55 or lower, the NZD/USD can be sold. REACTIVE TRADE

TECHNICALS

Fresh yearly highs
8600 in view
8500 now supports

The kiwi momentum march continues and the pair now targets on the key 8600 level after setting fresh yearly highs. It is becoming strongly overbought but sees no real resistance until 8700. 8500 supports the downside for now.

2. AUD/USD – Australian Employment

FUNDAMENTALS
Employment Change expected @ -7.5K (9:30 PM ET / 1:30 GMT)
Our View – Bearish AUD
Reason – Pullback likely after a strong month, employment component of Mfg increased, services decreased
If Employment Change rises by 25K or more = Buy AUD/USD
If Employment Change drops by -25K or more = Sell AUD/USD

The most market moving event risk for the next 24 hours will be Australia’s employment report. Economists are looking for a decline in job growth after Australia reported the largest increase in jobs in 13 years. We believe that the decline could be larger than expected because the employment component of the service and construction sectors declined but employment conditions in the manufacturing sector improved. Nonetheless we believe the data can be traded proactively or reactively. For those who choose to wait, if employment change rises by 25K or more, the AUD/USD can be bought for a reactive trade. If employment change drops by 25K or more, the AUD/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

1.0550 cleared
1.0600 may prove more sticky
1.0450 remains support

As we noted yesterday after clearing the 1.0515 level Aussie has barreled through 1.0550 but 1.0600 may prove to be more problematic as it offers more serious resistance. 1.0450 provides downside support.

3. EUR/USD – ECB Monthly Report

FUNDAMENTALS
ECB Monthly Report expected @ (4 AM ET / 8 GMT)
Our View – Neutral
Reason – Neutral
If ECB Monthly Report is optimistic = Buy EUR/USD
If ECB Monthly report is pessimistic = Sell EUR/USD

The ECB monthly report sounds important but usually does not have a huge impact on the EUR/USD unless it contains views that differ from the comments made at the last central bank meeting. Therefore the report should only be traded reactively. If there is surprise optimism, the EUR/USD can be bought for a reactive trade. If there is surprise pessimism, the EUR/USD can be sold REACTIVE TRADE

TECHNICALS

Backs off 1.3100
1.3000 near term support
Gap fill area remains key resistance

The gap fill area around the 1.3050-1.3100 area remains key resistance for the EUR/USD as the pair consolidates its recent gains. The 1.3000 continues to support while a break above 1.3150 opens a run towards 1.3300.

4. USD/JPY – Jobless Claims

FUNDAMENTALS
Jobless Claims expected @ 360K (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Neutral
If Jobless Claims is less than 350K = Buy USD/JPY
If Jobless Claims exceed 380K = Sell USD/JPY
Last week jobless claims popped higher and the increase added to the market’s overall concerns about the labor market. After Friday’s abysmal NFP report, this week’s jobless claims report is unusually important. However the data is best traded reactively since its difficult to handicap. If jobless claims are less than 350K, we expect USD/JPY to rally. If jobless claims exceed 380K, we expect USD/JPY to weaken.
REACTIVE TRADE

TECHNICALS

100.00 in view
99.00 remains support
Break opens up 101.00 5 year high

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

5. USD/CAD – New Housing Price Index

FUNDAMENTALS
New Housing Price Index expected @ 0.1% (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Neutral
If Housing price index drops -0.1% or more = Buy USD/CAD
If Housing price index rises by 0.3% or more = Sell USD/CAD

Canada’s new housing price index is not a big market mover for USD/CAD unless there is a big surprise. The data should only be traded reactively. If the housing price index declines by 0.1% or more, we expect USD/CAD to rally. If it rises by 0.3% or more, we expect USD/CAD to weaken. REACTIVE TRADE

TECHNICALS

very tight range
1.0150 broken slightly
1.0200 caps

The pair remains in a very tight range but continues to trickle lower. 1.0150 was broken but just barely as 1.0100 proving to be very tough for shorts to run. 1.0200 caps upside for now.