TOP 5 HOT IDEAS

DATE: Thursday April 18, 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 Trade Balance

FUNDAMENTALS
Merchandise Trade Balance expected @ -Y522.2B (7:50 PM ET / 23:50 GMT)
Our View – Bullish JPY
Reason – Weak Yen should have boosted exports
If Trade Balance is –Y700B or worse = Buy USD/JPY
If Trade Balance is –Y300B or better = Sell USD/JPY

We have good reasons to believe that Japan’s trade deficit continued to narrow in the month of March. The combination of a weak currency and easy monetary policy is finally having a positive impact on Japan’s economy. We have already seen a number of improvements in Japanese data and expect to see this strength carry over to the trade numbers. Therefore we believe the data can be traded proactively or reactively. For those who choose to wait, if the trade balance is –Y700B or worse, we expect USD/JPY to rally. If the deficit is Y300B or better, we expect USD/JPY to weaken. PROACTIVE or REACTIVE TRADE

TECHNICALS

Tops out at 98.50
97.50 acts as support
Range in play

USD/JPY continues to consolidate between 97.50-98.50 but the upper end of the range continues to cap for now. A break below 97.00 opens the way for a retest of recent lows of 95.60

2. NZD/USD – ANZ Consumer Confidence

FUNDAMENTALS
Consumer Confidence expected @ (9 PM ET / 1 GMT)
Our View – Neutral
Reason – Neutral
If Confidence grows by 2% or more = Buy NZD/USD
If Confidence falls by 7% or more = Sell NZD/USD

Consumer confidence numbers are important for every country and New Zealand is no exception. However the data is difficult to handicap and therefore best traded reactively. If consumer confidence grows by 2% or more, we believe that the NZD/USD can be bought for a quick move higher. If confidence falls by 7% or more, the NZD/USD can be sold. REACTIVE TRADE

TECHNICALS

Recovery to 8500 ends there
8400 continues to hold
Rally looks out of steam

The kiwi recovery petered out at 8500 and the pair looks like it likely to consolidate after the parabolic move of last week. 8400 holds for now.

3. AUD/USD – NAB Business Confidence

FUNDAMENTALS
NAB Business Confidence expected @ (9:30 PM ET / 1:30 GMT)
Our View – Neutral
Reason – Neutral
If NAB Business Confidence Index exceeds 0 = Buy AUD/USD
If NAB Business Confidence Index is -8 or lower = Sell AUD/USD

Australian business confidence numbers are scheduled for release this evening and with the AUD having fallen so steeply, the outcome of the report could trigger a meaningful reaction in the currency. While we believe that business confidence has deteriorated in recent weeks, this data is for the full first quarter, which makes it more difficult to handicap. As a result, the report is best traded reactively. If the NAB index rises to 0 or higher, the AUD/USD can be bought for a quick rally. If the index drops to -8 or lower, the AUD can be sold.
REACTIVE TRADE

TECHNICALS

1.0400 tops out
1.0250 holds for now but bias down
Break of 1.0250 opens run to 1.0150

The Aussie continues to look offered as the pair failed at 1.0400 and broke through the 1.0300 level again. For now the 1.0250 holds but the break there opens further downside to 1.0150

4. GBP/USD – UK Retail Sales

FUNDAMENTALS
Retail Sales expected @ -0.6% (4:30 AM ET / 8:30 GMT)
Our View – Bearish GBP
Reason –BRC Retail Sales Index Declined
If Retail Sales increases by 0.1% or more = Buy GBP/USD
If Retail Sales fall by 0.8% or more = Sell GBP/USD

We have strong reasons to believe that U.K. retail sales will drag the GBP lower tomorrow. According to the latest jobs numbers, wage growth has slowed and earlier this month, the British Retail Consortium reported in decline in spending. As a result, we believe retail sales can be traded proactively or reactively. For those who choose to wait, if retail sales increases by 0.1% or more, the GBP/USD can be bought for a recovery trade. However if retail sales falls by 0.8% or more, the GBP/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

1.5250 gives way
But 1.5200 holds
1.5350 now resistance

The pound saw further liquidation today giving up 1.5250 but 1.5200 continues to hold – though a break there could quickly open a test of 1.5150. On the topside 1.5350 which was former support now becomes resistance.

5. USD/JPY – Philadelphia Fed Index and Leading Indicators

FUNDAMENTALS
Philadelphia Fed Index expected @ 3.0 & Leading Indicators expected @ 0.1% (10 AM ET / 14 GMT)
Our View – Bearish USD
Reason – Lower Empire State & General Weakness in Data
If Philadelphia Fed Index exceeds 5 AND Leading Indicators rise by 0.4% or more = Buy USD/JPY
If Philadelphia Fed Index is less than 0 AND Leading Indicators fall by 0% or more = Sell USD/JPY

We have good reasons to believe that tomorrow’s U.S. Philadelphia Fed and leading indicators reports will surprise to the downside. Between the drop in the Empire State manufacturing survey, weakness in the labor market and decline in U.S. bond yields, the bigger surprise would be if the numbers were strong. As a result, we believe that the data can be traded proactively or reactively. For those who choose to wait, if the Philadelphia Fed Index exceeds 5 AND Leading Indicators rise by 0.4% or more, we expect USD/JPY to rally. However if the Philadelphia Fed Index is less than 0 AND Leading Indicators fall by 0% or more, we expect USD/JPY to weaken. PROACTIVE or REACTIVE TRADE

TECHNICALS

Tops out at 98.50
97.50 acts as support
Range in play

USD/JPY continues to consolidate between 97.50-98.50 but the upper end of the range continues to cap for now. A break below 97.00 opens the way for a retest of recent lows of 95.60