TOP 5 HOT IDEAS

DATE: Thursday May 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. NZD/USD – New Zealand Business PMI

FUNDAMENTALS
Business PMI @ (6:30 PM ET / 22:30 GMT)
Our View – Neutral
Reason – Neutral
If PMI exceeds 55 = Buy NZD/USD
If PMI is 52 or less = Sell NZD/USD

We have good reasons to believe that New Zealand Business PMI weakened in the month of April because of slower economic activity in Australia and China. Therefore the data can be traded proactively or reactively. For those who choose to wait, if the PMI index exceeds 55, the NZD/USD can be bought for a move higher. If the index drops to 52 or lower, the NZD/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

8200 recovered
8250 caps upside for now
8150 acts as support

The massive liquidation in kiwi may have come to an end for now with the pair finding support underneath the 8200 level and recovering that figure during the day. 8250 still caps any upside while 8150 provides strong support for time being.

2. USD/JPY – Japanese Q1 GDP

FUNDAMENTALS
Q1 GDP expected @ 0.7% (7:50 PM ET / 23:50 GMT)
Our View – Bullish JPY
Reason – Slightly Higher Deficit but Stronger Retail Sales
If GDP growth is less than 0.3% = Buy USD/JPY
If GDP growth exceeds 1% = Sell USD/JPY

We have good reasons to believe that Japanese GDP growth accelerated in the first quarter because retail sales growth strengthened. However the trade deficit was still a bit worse in Q1, which is why we have a level 2 confidence in the trade. Nonetheless we still believe the data can be traded proactively or reactively. However for those who choose to wait, if GDP growth is less than 0.3%, USD/JPY can be bought for an extension higher. If GDP growth exceeds 1%, USD/JPY can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

102.50 taken but not held
102.00 near term support
101.50 deeper support

USD/JPY set fresh highs but the inability to hold the 102.50 level suggests that the pair may be getting tired and due for some correction with 102.00 immediate support and 101.50 deeper level support for dip buyers.

3. EUR/USD – Eurozone Trade Balance

FUNDAMENTALS
Eurozone Trade Balance expected @ 11.5B (5 AM ET / 9 GMT)
Our View – Bullish EUR
Reason – Stronger German and French Trade
If Trade Surplus exceeds 14B = Buy EUR/USD
If Trade Surplus drops to 10B = Sell EUR/USD

We have strong reasons to believe that the Eurozone’s trade surplus increased in the month of March because France reported a much smaller trade deficit while Germany reported a larger trade surplus – both of which represents improvements. Therefore the data can be traded proactively or reactively. For those who choose to wait, if the Eurozone’s trade surplus exceeds 14B, the EUR/USD can be bought for a move higher. If the trade surplus drops to 10B, the EUR/USD can be sold PROACTIVE or REACTIVE TRADE

TECHNICALS

2900 and 2850 given
Major breakdown suggests further downside
2750 key support

The EUR/USD crashed and burned today with key support levels taken out. The pair found some support at 2850 but remained near the lows of the day suggesting that it may want to test the yearly swing lows at 2750. Only a move above 3000 relieves the downside pressure.

4. USD/CAD – International Securities Transactions

FUNDAMENTALS
International Securities Transactions expected @ 5B (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Neutral
If Int’l Securities Transactions declines by -10B or more= Buy USD/CAD
If Int’l Securities Transactions exceed 10B = Sell USD/CAD

Canada’s International Securities Transaction report is not a huge market mover for the Canadian dollar unless there is a big surprise. As a result, the data is best traded reactively. If Int’l Securities Transactions declines by -10B or more, USD/CAD can be bought for a quick move higher. If Int’l Securities Transactions exceed 10B, USD/CAD can be sold. REACTIVE TRADE

TECHNICALS

1.0200 tested but not held
1.0150 now support
1.0100 deeper target for shorts

USD/CAD tested the 1.0200 level as we noted yesterday but the pair did not hold above the figure suggesting that some slide back may be due towards the 1.0150 level. For now the par remains in a tight consolidation range between 1.0150-1.0200

5. EUR/USD – U.S. Philadelphia Survey

FUNDAMENTALS
Philly Fed survey expected @ 2.3 (10 AM ET / 14 GMT)
Our View – Bearish USD
Reason – Surprise Decline in Empire State
If Philly Fed drops to 1 or lower = Buy EUR/USD
If Philly Fed exceeds 5 = Sell EUR/USD

With the decline in the Empire State manufacturing survey, we have good reasons to believe that manufacturing conditions in the Philadelphia region also deteriorated in the month of May. As a result, the data can be traded proactively or reactively. For those who choose to wait, if the Philly Fed index drops to 1 or lower, the EUR/USD can be bought for a recovery trade. If the index exceeds 5, the EUR/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

2900 and 2850 given
Major breakdown suggests further downside
2750 key support

The EUR/USD crashed and burned today with key support levels taken out. The pair found some support at 2850 but remained near the lows of the day suggesting that it may want to test the yearly swing lows at 2750. Only a move above 3000 relieves the downside pressure.