Top 5 – 04.17.13

*Top 5 Archive Members Only Top 5


DATE: Wednesday April 17, 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 – New Zealand Q1 Consumer Prices

CPI expected @ 0.5% (6:45 PM ET / 22:45 GMT)
Our View – Bullish NZD
Reason – Commodity Prices and Food Prices Increased in Q1
If PPI growth exceeds 0.7% = Buy NZD/USD
If PPI growth is less than 0.2% = Sell NZD/USD

We have good reasons to believe that New Zealand consumer prices increased in the first quarter because commodity prices and food prices shot higher. As a result, we believe that PPI can be traded proactively or reactively. For those who choose to wait, if CPI growth exceeds 0.7%, the NZD/USD can be bought for a quick reactive move higher. However if CPI grows by less than 0.2%, the NZD/USD can be sold. PROACTIVE or REACTIVE TRADE


Recovery to 8500
Bullish move ends on highs
8550-8600 next level of resistance

The kiwi has managed a very bullish recovery ending on day’s highs but now faces a more stiffer resistance as it must recover the 8500-8600 level which was very heavy liquidation yesterday.

2. AUD/USD – Westpac Leading Index

Leading Index expected @ (8:30 PM ET / 0:30 GMT)
Our View – Neutral
Reason – Neutral
If Leading Index exceeds 0.6% = Buy AUD/USD
If Leading Index is less than 0% = Sell AUD/USD

Australian leading indicators are scheduled for release this evening and given a large amount of surprise, the report can have an impact on the AUD/USD. However the data is difficult to handicap and therefore best traded reactively. If the leading index exceeds 0.6%, the AUD/USD can be sold for a quick trade lower. If the index slumps to 0% or lower, it can be bought. REACTIVE TRADE


1.0400 caps recovery
1.0300 support
1.0420 opens test of 1.0450

The Aussie has managed to rebound as well but the 1.0400 is now proving to be the cap for the rally. A break above 1.0420 opens up a run to 1.0450 while 1.0350 is the near term support with 1.0300 more heavily guarded.

3. GBP/USD – BoE Minutes and UK Employment

BoE Minutes and Jobless Claims expected @ 0K (4:30 AM ET / 8:30 GMT)
Our View – Bullish GBP
Reason – Stronger PMI and Weak Currency Could Leave BoE on Inflation Watch
If BoE Minutes are hawkish & Jobless Claims is less than 0K = Buy GBP/USD
If BoE minutes are dovish & Jobless Claims exceed 3K = Sell GBP/USD

The minutes from the most recent BoE meeting will be released at the same time as U.K. jobless claims and between these 2 reports, we think that the minutes will be more important. So while the employment component of PMI services and manufacturing fell slightly, the BoE should maintain its concerns about inflation, which would be positive for the GBP. Between the last 2 monetary policy meetings, PMI services, manufacturing and construction increased and the GBP remained weak. As a result, we believe that tomorrow’s U.K. data can be traded proactively or reactively. For those who choose to wait, if the BoE Minutes are hawkish & Jobless Claims are less than 0K, the GBP/USD can be bought for a reactive trade higher. If BoE minutes are dovish & Jobless Claims exceed 3K, we expect the GBP/USD to weaken. PROACTIVE or REACTIVE TRADE


1.5380 tops out
1.5250 key support holds
1.5425 key break to upside

In cable the 1.5250 level has held so far preserving the uptrend but the key breakout level to the upside is 1.5425 which opens a run to the major target of 1.5500

4. USD/CAD – Bank of Canada Meeting

BoC Announcement expected @ 1.0% (10 AM ET / 14 GMT)
Our View – Bearish CAD
Reason – Weaker Data Since Last Meeting
If BoC Drops call to raise rates = Buy USD/CAD
If BoC Maintains view that rates will need to be increased = Sell USD/CAD

The CAD is treading water ahead of tomorrow’s Bank of Canada monetary policy announcement. While interest rates are expected to remain unchanged from its current level of 1%, there is a reasonable chance that the BoC will drop its call to raise interest rates. Since the last monetary policy meeting in March, Canada reported its largest one month job loss since the recession 4 years ago and an unexpected trade deficit. There has been good news as well including stronger retail sales, higher consumer prices and stronger manufacturing activity but that may not be enough to ease the concerns caused by the job losses and the slowdown in the U.S. recovery. If the Bank of Canada drops its bias to raise rates, we can expect USD/CAD to hit 1.03. However if they remain cautious but continue to say that, “some modest withdrawal will likely be required,” losses in the CAD will be limited. PROACTIVE or REACTIVE TRADE


1.0250 caps
1.0350 long term resistance
1.0150 key downward test

The loonie was quiet today but volatility is likely to rise tomorrow with 1.0250 the first key level on upside while 1.0150 is the first downward support. A stronger break higher could target longer term resistance at 1.0350.

5. USD/JPY – Federal Reserve Beige Book Report

Beige Book expected @ (2 PM ET / 18 GMT)
Our View – Neutral
Reason – Neutral
If Fed Districts report improvements = Buy USD/JPY
If Fed Districts report widespread deterioration = Sell USD/JPY

The Federal Reserve’s Beige Book report is scheduled for release tomorrow and the sustainability of the rally in USD/JPY will hinge on whether the Fed districts report improvements or persistent deterioration in the U.S. economy. The report is always difficult to handicap and therefore best traded reactively. If Fed Districts report improvements, USD/JPY can be bought for a quick reactive trade higher. If Fed Districts report widespread deterioration, USD/JPY can be sold. REACTIVE TRADE


95.50 clear value
98.00 gap fill now resistance
Break of 98.00 targets rise to 99.00

The sharp selloff in USD/JPY found a clear value point at 95.50 but the recovery has now stalled at 98.00 which was the former gap close. A break above 98.50 opens the run to 99.00 recovery target.