Top 5 – 05.07.2013

*Top 5 Archive Members Only Top 5


DATE: Tuesday May 7, 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 – Average Hourly Earnings

Average Hourly Earnings expected @ 0.5% (6:45 PM ET / 22:45 GMT)
Our View – Neutral
Reason – Neutral
If Average Hourly Earnings rise by 1% or more = Buy NZD/USD
If Average Hourly Earnings rise by 0% or less = Sell NZD/USD

New Zealand’s average hourly earnings report is not a big market mover for the NZD/USD unless there is a big surprise and for this reason it is best traded reactively. If average hourly earnings rise by 1%, the NZD/USD can be bought for a quick move higher on the premise that higher earnings will translate into stronger spending. However if earnings rise by 0% or less, the NZD/USD can be sold for a steeper decline. REACTIVE TRADE


8500 holds
Higher lows still in play
8550 caps upside

Although the kiwi sold off a bit the pair remains able to hold bid at the 8500 level and a series of higher lows suggests that the uptrend remains in tact. 8450 remains deep support while 8550 caps the upside for now.

2. AUD/USD – RBA Rate Decision

RBA Rate Decision @ (12:30 AM ET / 4:30 GMT)
Our View – Bearish AUD
Reason – Weaker Data, Lower than expected CPI
If RBA Leaves Rates unchanged = No Trade
If RBA cuts rates by 25bp = Sell AUD/USD

The Reserve Bank of Australia meets tonight and we believe there’ s a reasonable chance that the central bank will ease. Manufacturing and service sector activity slowed significantly in April, inflationary pressures grew at a slower than anticipated pace in the first quarter and consumer demand – the one source of optimism in Australia declined 0.4% in March. The Chinese economy has also slowed, which is bad news for Australia and taken together, we can argue that the RBA has every reason to ease. The only reason why they would hold back is the AUD/USD which has fallen in value since the last meeting, providing its own source of stimulus for Australia’s economy but even if the RBA holds rates steady, they will most likely grow more dovish which is why we think the AUD/USD can be sold proactively. PROACTIVE or REACTIVE TRADE


1.0250 given
1.0225 key support from double bottom
Break opens run to 1.0150

The Aussie was on back foot all day with 1.0250 giving way and only the 1.0225 support from prior double bottom holding for now. A break there would open up a run to 1.0150 and possibly parity as selloff accelerates.

3. EUR/CHF- Swiss Unemployment Rate

Swiss Unemployment Rate expected @ 3.1% (1:45 AM ET / 5:45 GMT)
Our View – Neutral
Reason – Neutral
If the unemployment rate rises to 3.3% = Buy EUR/CHF
If the unemployment rate drops to 3.1% = Sell EUR/CHF

Since Switzerland does not release a tremendous amount of economic data, the numbers that they do report can be difficult to predict. Based on the UBS, KoF and PMI numbers, the economy has improved but we are not sure if this is enough to prompt a drop in the unemployment rate. As a result, the Swiss data is best traded reactively. If the unemployment rate rises to 3.3%, EUR/CHF can be bought for a move higher. If the unemployment rate drops to 3.1%, EUR/CHF can be sold. REACTIVE TRADE


1.2300 caps
1.2250 still decent support
1.2200 key support of prior breakout

EUR/CHF remains above the 1.2200 breakout level a few weeks earlier, but the 1.2300 level is acting as resistance for now.

4. EUR/USD – German Factory Orders

German Factory Orders expected @ -0.5% (6 AM ET / 10 GMT)
Our View – Bearish EUR
Reason – Pullback likely after decline in PMI Manufacturing
If German Factory orders is flat or increases = Buy EUR/USD
If German Factory Orders drop by -0.9% or more = Sell EUR/USD

Given the drop in the manufacturing PMI report, we have good reasons to believe that German factory orders fell more than anticipated in the month of March. As a result, we believe that the data can be traded proactively or reactively. For those who choose to wait, if orders stagnate or increase, the EUR/USD could be bought for a squeeze higher. If orders drop by 0.6% or more, the EUR/USD can be sold. PROACTIVE or REACTIVE TRADE


1.3050 holds for now
1.3125-50 still caps
Deep range persists

The EUR/USD remains in a larger 3250-2950 range but the recent price action has sent the pair towards the lower end of the channel. Nevertheless 3050 continues to hold, but if given 1.3000 will likely be tested.

5. USD/JPY – IBD / TIPP Economic Optimism Index

IBD/TIPP expected @ 47.5 (10 AM ET / 14 GMT)
Our View – Neutral
Reason – Neutral
If the IBD/TIPP index rises to 49 or higher = Buy USD/JPY
If the IBD/TIPP index drops to 45 or lower = Sell USD/JPY

The IBD/TIPP Economic Optimism index is not a huge market mover for the U.S. dollar unless there is a big surprise. Given the rise in equities, the odds favor a stronger release but USD/JPY should only be bought if the index rises to 49 or higher or sold if it drops to 45 or lower. REACTIVE TRADE


Creeping back to 99.50
99.00 supports
Break above 99.50 puts 100.00 in play

USD/JPY continued to creep towards the 99.50-100.00 corridor and if it can trade through the 99.50 level, the run to 100.00 will come back in view. Meanwhile 98.50 provides deeper near term support.