Top 5 – 05.24.2013

*Top 5 Archive Members Only Top 5


DATE: Friday May 24, 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 – Trade Balance

Trade Balance expected @ 515M (6:45 PM ET / 22:45 GMT)
Our View – Bullish NZD
Reason – Increase in Business PMI Index
If Trade Surplus exceeds 720M = Buy NZD/USD
If Trade Surplus shrinks to 500M or less = Sell NZD/USD

We have strong reasons to believe that New Zealand’s trade balance could surprise to the upside. Despite the recent decline in the currency we have actually seen some nice upside surprises in the business and service PMI numbers. According to the business PMI index, new orders and deliveries increased. As a result, we believe the trade numbers can be traded proactively or reactively. For those who choose to wait, if the trade surplus exceeds 720M, the NZD/USD can be bought for a move higher. If the trade surplus shrinks to 500M or less, the NZD/USD can be sold. PROACTIVE or REACTIVE TRADE


Big recovery to 81.50
80.50 now deep support
82.00 next target for longs

The kiwi made a very strong recovery leaving 8050 support in the dust. Longs will now try to target the .8200 level as the short squeeze continues.

2. EUR/USD – German IFO

German IFO expected @ 104.4 (4 AM ET / 8 GMT)
Our View – Bullish EUR
Reason – Stronger IFO, industrial production and factor orders but lower ZEW
If the IFO index exceeds 105 = Buy EUR/USD
If the IFO index is less than 104 = Sell EUR/USD

We have good reasons to believe that the German IFO report will show an improvement in business confidence. The currency has weakened, the ECB cut interest rates and the PMI reports surprised to the upside all of which should contribute to a stronger IFO report. Therefore the data can be traded proactively or reactively. For those who choose to wait, if the IFO index exceeds 105, the EUR/USD can be bought for an extension higher. If the index drops below 104, it can be sold. PROACTIVE or REACTIVE TRADE


2900 retaken
2800 now deep support
2950 and 3000 key targets in recovery

The EUR/USD staged a key recovery as it held the 2800 figure and climbed back above 2900. 2950 is now minor resistance but longs will keep their eye on the 1.3000 prize as they try to push the pair higher.

3. GBP/USD – BoE Comments

BoE Fisher speaking @ (3 AM ET / 7 GMT)
Our View – Neutral
Reason – Neutral
If BoE Fisher sounds optimistic = Buy GBP/USD
If BoE Fisher sounds dovish = Sell GBP/USD

Bank of England policymaker Fisher will be speaking tomorrow morning. Given the focus on monetary policy, any comments related to the economy or his policy bias could affect how the GBP/USD trades. The data is best traded reactively. If Fisher sounds optimistic, the GBP/USD can be bought for a potential move higher. If Fisher sounds dovish, the GBP/USD can be sold. REACTIVE TRADE


Retakes 5100
5200 still key resistance
1.5000 holds for now

The bounce in the pound was not as strong as in the other pairs but the unit managed to retake the 1.5100 level. 1.5200 still represents major resistance while 1.5000 holds support for now.

4. USD/JPY – Durable Goods

Durable Goods expected 1.5% (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Neutral
If Durable Goods orders rises by 3% or more = Buy USD/JPY
If Durable Goods orders rises by 0.5% or less = Sell USD/JPY

Durable goods orders are notoriously volatile and difficult to trade. So the only opportunity we see is to trade the data reactively. If durable goods orders rise by 3% or more, USD/JPY can be bought for a move higher. If orders rise by 0.5% or less, USD/JPY can be sold. REACTIVE TRADE


Swift correction to 100.80
Rebound suggest buyers still dominate
103.75 key level to upside

The vicious selloff in USD/JPY suggests that a correction may be in the process, but bargain hunters rule. Still the upside is capped unless 103.75 is taken out.

5. AUD/USD Outlook


There are no Australian economic reports scheduled for release tomorrow but we have seen a nice recovery in the AUD/USD. A large reason for that is the recovery in gold. Data from China wasn’t good and if not for the rebound in the yellow metal, the AUD would be trading much weaker. In fact, relative to the NZD, it is a big underperformer. So if gold prices start to reverse, fundamentals could come back to haunt the AUD and drive to 95 cents.


Massive reversal off new lows
9800 now next target
9600 new deep support

The doji reversal for the Aussie suggests the pair may have bottomed with 9600 acting as spike low support. The pair now targets 9800 in its path to recovery but 9900 and parity act as very stiff resistance