TOP 5 HOT IDEAS

DATE: Friday May 10, 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 – NZ Credit Card Spending

FUNDAMENTALS
Credit Card Spending expected @ 0.5% (6:45PM ET / 20:45)
Our View – Neutral
Reason – Neutral
If Credit Card Spending rises by 1% or more = Buy NZD/USD
If Credit Card Spending falls by -1% or more = Sell NZD/USD

New Zealand credit card spending is not a huge market mover for the NZD/USD unless there is a big surprise. Therefore the data is best traded reactively. If credit card spending rises by 1% or more, the NZD/USD can be bought for a move higher. If credit card spending falls by 1% or more, the NZD/USD can be sold. REACTIVE TRADE

TECHNICALS


8350 tested
8500 now resistance
Break of 8350 opens run to 8200

The kiwi has been hammered in the overall dollar rally but the pair still holding to key support at 8350 level with a break there opening a run to 82.00 while 84.50 now caps the upside.

2. USD/JPY – Current Account and Trade Balance

FUNDAMENTALS
Current Account Balance expected @ Y1220B & Trade Balance expected @ -274B (7:50 PM ET / 23:50 GMT)
Our View – Bullish JPY
Reason – Further Improvements expected in Japan’s economy
If Current Account Surplus is Y700B or smaller AND Trade Deficit is –Y500 or larger = Buy USD/JPY
If Current Account Surplus is Y1300B or larger AND Trade Deficit is –Y300 or larger = Sell USD/JPY

We have good reasons to believe that Japan’s current account and trade balances improved in the month of March thanks to the BoJ’s monetary policies and the overall weakness of the Yen relative to other currencies. As a result, we think that these numbers can be traded proactively or reactively. For those who choose to wait, if the country’s current account balance is Y700B or smaller AND Trade Deficit is –Y500 or larger, USD/JPY can be bought for a move higher. If theCurrent Account Surplus is Y1300B or larger AND Trade Deficit is –Y300 or larger, USD/JPY can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

100.00 broken!
101.50 next resistance
100.00 now turns support

USD/JPY breaks out above 100.00 for the first time in four years which is massively significant and now targets 101.50 as the next level of resistance. Meanwhile former resistance now turns support at 100.00

3. EUR/USD – German Trade and Current Account Balance

FUNDAMENTALS
German Trade Balance expected @ 17.5B & Current Account Balance expected @ 19.5B (2 AM ET / 6 GMT)
Our View – Neutral
Reason – Neutral
If GE Trade & Current Account Balances exceed 19B= Buy EUR/USD
If GE Trade & Current Account Balances is less than 17B= Sell EUR/USD

With industrial production and factory orders soaring, the German trade and current account balances should have improved in March but manufacturing PMI declined, clouding the outlook. Therefore the data is best traded reactively. If the trade and current account balances exceed 19B, the EUR/USD can be bought for a quick move higher. If the Trade and Current account balances drop to 17B or lower, the EUR/USD can be sold. REACTIVE TRADE

TECHNICALS

1.3000 under threat
Major downside damage done
1.2950 still key support

The major downside damage done by the dollar rally is significant with 1.3000 now under immediate threat. However the 1.2950 remains the key level of support on the downside.

4. GBP/USD – U.K. Trade Balance

FUNDAMENTALS
Trade Balance expected @ -9B (4:30 AM ET / 8:30 GMT)
Our View – Bullish GBP
Reason – Stronger PMI Mfg and Industrial Production
If Trade Deficit shrinks to -8.7B or smaller = Buy GBP/USD
If Trade Deficit widens to -9.5B or greater = Sell GBP/USD

We have good reasons to believe that the U.K. trade deficit shrank in the month of March. Industrial and manufacturing production was strong while manufacturing activity in general increased according to the PMI report. Therefore the data can be traded proactively or reactively. For those who choose to wait, if the Trade Deficit shrinks to -8.7B or smaller, the GBP/USD can be bought for a move higher. If the Trade Deficit widens to -9.5B or greater, the trade GBP/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

5450 given
5600 remains out of reach
5400 extends support

Cable gave up the 5450 in the overall dollar avalanche but the pair remains relatively supported with 5400 a deeper level of support for longs while 5600 continues to cap the upside.

5. USD/CAD – Canadian Employment Report

FUNDAMENTALS
Net Change in Employment @ 15K (8:30 AM ET / 12:30 GMT)
Our View – Bullish CAD
Reason – Increase in Employment Component of IVEY
If Employment growth is flat or declines = Buy USD/CAD
If Employment increases by 20K or more = Sell USD/CAD

We have good reasons to believe that the Canadian labor market improved last month. Aside from an expected rebound after the sharp drop in job growth in March, the employment component of the IVEY PMI report also increased in April. This is particularly encouraging since the IVEY itself declined sharply. As a result, we think the data can be traded proactively or reactively. For those who choose to wait, it Canadian employment growth is flat or declines, USD/CAD can be bought for a move higher. If employment rises by 20K or more, USD/CAD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

1.010 caps the upside
1.0000 still a key magnet
Holds best against the greenback

USD/CAD has held up best amongst the commdollars barely selling off in the USD onslaught. Topside is capped by 1.0010 while 1.0000 remains key magnet level.