TOP 5 HOT IDEAS

DATE: Tuesday April 16, 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 – RBA Minutes

FUNDAMENTALS
PMI Services @ (9:30 PM ET / 1:30 GMT)
Our View – Neutral
Reason – Neutral
If RBA maintains glass half full view of economy = Buy AUD/USD
If there are any renewed concerns from RBA = Sell AUD/USD

The minutes from the most recent Reserve Bank of Australia’s monetary policy meeting is scheduled for release this evening. As usual, the minutes can have a relatively significant impact on the AUD if there are any surprises. Unfortunately with Australia reporting mixed data going into the last meeting (strong employment but weak manufacturing), the RBA may not have had enough to justify changes to their monetary policy outlook. As a result, we believe the RBA minutes can only be traded reactively. If the central bank maintains a glass half full view of the economy, the AUD/USD could be bought for a quick recovery trade reactively. If the RBA expresses renewed concerns however, the AUD/USD could extend its losses quickly, creating an opportunity for a short AUD/USD reactive trade. REACTIVE TRADE

TECHNICALS

1.0350 falls
1.0300 next level for shorts
1.0450 caps the upside

The Aussie was decimated today with key 1.0350 level giving way. 1.0300 is now the next target of shorts while 1.0450 caps any upside rebound.

2. EUR/CHF – Swiss Producer Prices

FUNDAMENTALS
Swiss PPI expected @ 0% (3:15 AM ET / 7:15 GMT)
Our View – Neutral
Reason – Neutral
If PPI growth falls by -0.3% or more = Buy EUR/CHF
If PPI growth rises by 0.3% or more = Sell EUR/CHF

Swiss producer prices are not a huge market mover for the Swiss Franc unless there is a meaningful surprise. As a result, we believe this data can only be traded reactively. That is if PPI growth falls by -0.3% or more, EUR/CHF can be bought for a quick trade higher. If PPI growth rises by 0.3% or more, EUR/CHF can be sold. REACTIVE TRADE

TECHNICALS

1.2150 tested again
1.2100 next level of support
1.2200 remains key resistance

The EUR/CHF has failed to clear the 1.2200 level and now finds itself testing the long term support at 1.2150. A break here opens up a run to 1.2100 while 1.2200 remains key resistance.

3. GBP/USD – Consumer Price Report

FUNDAMENTALS
CPI expected @ 0.3% (4:30 AM ET / 8:30 GMT)
Our View – Bullish GBP
Reason – BRC Shop Prices Increased
If CPI exceeds 0.7% = Buy GBP/USD
If CPI growth is 0% or less = Sell GBP/USD

UK consumer and producer prices are scheduled for release at the same time on Tuesday morning and between these reports, CPI is the number to watch. We have good reasons to believe that consumer price growth will exceed expectations because the Bank of England has been particularly concerned about price pressures and wouldn’t be if CPI was set to trend lower. Also, a survey by the British Retail Consortium also found that shop prices increased last month. As a result, we believe that CPI can be traded proactively or reactively. For those who choose to wait, if CPI exceeds 0.7%, the GBP/USD can be bought for a quick move higher. If CPI growth is flat or worse, declines, the GBP/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

1.5300 given
1.5250 key support
Topped out at 1.5400

The latest cable push higher appears to have topped out at 1.5400 and now the pair has broken the 1.5300 support, the shorts will target the 1.5250 area which is a deeper level of support.

4. EUR/USD – German ZEW Survey

FUNDAMENTALS
ZEW Survey expected @ 41 (5 AM ET / 9 GMT)
Our View – Neutral
Reason – Neutral
If the ZEW survey exceeds 48 = Buy EUR/USD
If the ZEW survey is less than 40 = Sell EUR/USD

The German ZEW survey is a fairly important release for the EUR but one that is difficult to handicap. Problems in Cyprus should have weighed heavily on sentiment and economists are looking for a big drop in the ZEW but stocks had also been performing well. As a result, we believe that it is probably best to trade the ZEW report reactively. If the ZEW survey exceeds 48, the EUR/USD can be bought for a quick trade higher. If the ZEW drops to 40 or lower, the EUR/USD can be sold. REACTIVE TRADE

TECHNICALS

Ugly bearish reversal
1.3000 holds for now
Break of 1.3000 opens run to 1.2950

The ugly reversal off the Friday comeback candle bodes badly for EURUSD with 1.3000 now in view and possible test of 1.2950 as the bias turns heavily bearish

5. USD/JPY – Housing Starts & Building Permits

FUNDAMENTALS
Housing Starts expected @ 1.4% & Building Permits expected @ 0.4% (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Neutral
If Housing Starts AND Building Permits grow by 2% or more = Buy USD/JPY
If Housing Starts AND Building Permits grow by 0.4% or less = Sell USD/JPY

There are a number of U.S. economic reports scheduled for release tomorrow including Consumer Prices, Housing Starts and Building Permits. Of these releases, we believe the Housing Market numbers are the most important because inflationary pressures are basically nonexistent. However the data is difficult to handicap and therefore best traded reactively. If Housing Starts AND Building Permits grow by 2% or more, we expect USD/JPY to rally. If Housing Starts AND Building Permits grow by 0.4% or less, we expect USD/JPY to weaken. REACTIVE TRADE

TECHNICALS

98.00 gap filled
97.00 tested
Full unwind developing
1.0150 caps upside

The unwind in USD/JPY rally continues with 98.00 gap filled and 97.00 figure tested, the pair may not fully stabilize until in reaches longer term support of 95.00.