TOP 5 HOT IDEAS

DATE: Friday May 31, 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 Data Dump

FUNDAMENTALS
Industrial Production expected @ 0.6% (7:50 PM ET / 23:50 GMT)
Our View – Neutral
Reason – Neutral
If Industrial Production rise by 0.2% or less = Buy USD/JPY
If Industrial Production rises by 1.2% or more = Sell USD/JPY

There are a number of Japanese economic reports scheduled for release this evening but we feel that industrial production will be the most important. The data is difficult to handicap and therefore best traded reactively. If industrial production rises by 0.2% or less, USD/JPY can be bought for a recovery trade. If industrial production rises by 1.2% or more, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS

100.50 tested several times
101.50 caps
Key test of 100.00 possible

USD/JPY continues to find support ahead of the 100.50 level, but the pair is getting battered to the downside, ending near the lows of the session which suggests that the shorts are gearing up for an a assault on the key 100.00 level.

2. NZD/USD – ANZ Business Confidence

FUNDAMENTALS
Business Confidence expected @ (9 PM ET / 1:30 GMT)
Our View – Neutral
Reason – Neutral
If Business Confidence exceeds 35 = Buy NZD/USD
If Business Confidence is less than 30 = Sell NZD/USD

New Zealand business confidence numbers are due for release this evening and generally not a big market mover for the NZD unless there is a significant surprise. Therefore the data is best traded reactively. If business confidence exceeds 35, the NZD/USD can be bought for a move higher. If business confidence index drops to 30 or lower, the NZD/USD can be sold. REACTIVE TRADE

TECHNICALS

8000 holds
Rebound suggests possible bounce
8150 first key resistance

Although the kiwi set fresh yearly lows, the rebound in the pair suggests that it may have made a near term bottom at the .8000 level and could now possibly bounce to 8150

3. EUR/CHF – German Retail Sales

FUNDAMENTALS
German Retail Sales expected @ 0.2% (2 AM ET / 6 GMT)
Our View – Bullish EUR
Reason – Stronger Retail PMI and Consumer Confidence
If Retail Sales exceeds 0.5% = Buy EUR/USD
If Retail sales grows is flat or declines = Sell EUR/USD

We have good reasons to believe that German retail sales increased in April. Consumer confidence improved and according to Markit Economics, spending was the strongest since June 2012. This data can therefore be traded proactively or reactively. For those who choose to wait, if retail sales growth exceeds 0.5%, the EUR/USD can be bought for a move higher. If retail sales growth is flat or declines, the EUR/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

A break above 3000 holds
3100 next in view
2900 now support

The break of EURUSD above the 1.3000 suggests further upside ahead with the longs now targeting the 1.3100 barrier next.

4. USD/CAD – Canadian GDP

FUNDAMENTALS
Q1 GDP expected @ 2.3% (8:30 AM ET / 12:30 GMT)
Our View – Bullish CAD
Reason – Retail Sales and Trade up in Q1
If GDP growth is 0.6% or less = Buy USD/CAD
If GDP growth is 2.5% or more = Sell USD/CAD

While we have strong reasons to believe that Canadian GDP growth will surprise to the upside, economists are already looking for a healthy increase in growth, which means that the data may be difficult to beat. Therefore we feel that Q1 GDP is best traded reactively. If GDP growth is less than 0.6%, USD/CAD can be bought for a move higher. If GDP growth exceeds 2.5%, USD/CAD can be sold. REACTIVE TRADE

TECHNICALS

1.0400 caps for now
1.0300 close suggest more downside
1.0250 next support

The USD/CAD pair appears to be topped out at the 1.0400 level and the close at the lows suggests there may be more momentum to come with 1.0250 the next level of the shorts.

5. USD/JPY – Chicago PMI

FUNDAMENTALS
Chicago PMI expected @ 50 (9:45 AM ET / 13:45 GMT)
Our View – Bearish USD
Reason – Weaker Empire and Philly
If Chicago PMI exceeds 51 = Buy USD/JPY
If Chicago PMI is less than 48 = Sell USD/JPY

We have good reasons to believe that the Chicago PMI report will surprise to the downside because manufacturing activity weakened in the Chicago and Philadelphia region. This data can therefore be traded proactively or reactively. For those who choose to wait, if the Chicago PMI index exceeds 51, USD/JPY can be bought for a move higher. If the index drops to 48 or lower, USD/JPY can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

100.50 tested several times
101.50 caps
Key test of 100.00 possible

USD/JPY continues to find support ahead of the 100.50 level, but the pair is getting battered to the downside, ending near the lows of the session which suggests that the shorts are gearing up for an a assault on the key 100.00 level.