TOP 5 HOT IDEAS

DATE: Thursday June 13, 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 Purchases of Foreign Bonds

FUNDAMENTALS
Japan Buying Foreign Bonds expected @ (7:50 PM ET / 23:50 GMT)
Our View – Neutral
Reason – Neutral
If Japan Buys more than Y100B worth of foreign bonds= Buy USD/JPY
If Japan Sells more than –Y100B worth of foreign bonds = Sell USD/JPY

In order for USD/JPY to extend higher, Japanese investors need to buy foreign bonds. The Ministry of Finance’s weekly report of Japanese investments will be released this evening and the outcome could have a meaningful impact on USD/JPY. Unfortunately it is difficult to handicap and therefore best traded reactively. If Japanese investors buy more than Y100B worth of foreign bonds, USD/JPY can be bought for a move higher. If they sell –Y100B worth of foreign bonds or more, USD/JPY can be sold REACTIVE TRADE

TECHNICALS

95.00 retested
Range continues
Break of 95.00 opens 93.00

USD/JPY continues its range trading path as retests support at 95.00 level but so far the double bottom holds, though a break would open the possibility of decline to 93.00.

2. AUD/USD – Australian Employment

FUNDAMENTALS
Employment Change expected @ -10K (9:30 PM ET / 1:30 GMT)
Our View – Neutral
Reason – PMI Shows Stronger Mfg and Construction Employment but Weaker Services
If Employment rises by 20K or more = Buy AUD/USD
If Employment drops by -20K or more = Sell AUD/USD

Employment numbers are important for every country and Australia is no exception. However this month’s Australian labor market numbers are difficult to handicap because the PMIs show fewer jobs cut in the manufacturing and construction sectors but greater job losses in the service sector. As such this data is best traded reactively. If employment rise by 20K or more, the AUD/USD can be bought for a further recovery. However if employment declines by 20K or more, the AUD/USD can be sold. REACTIVE TRADE

TECHNICALS

9500 gap filled
9600 caps rebound
9300 now near term low

Aussie finally put in a first positive performance in days filling the gap at 9500 but 9600 caps the upside for now. Meanwhile 9300 looks to be the new near term bottom.

3. EUR/CHF – Switzerland Producer Prices

FUNDAMENTALS
Swiss PPI expected @ 0% (3:15 AM ET / 7:15 GMT)
Our View – Neutral
Reason – Neutral
If PPI drops by -0.2% or more = Buy EUR/CHF
If PPI rises by 0.3% or more = Sell EUR/CHF

Switzerland’s producer price report is not a big market mover for the Franc unless there is a significant surprise. Therefore this data is best traded reactively. If PPI drops by -0.2% or more, EUR/CHF can be bought for a move higher. If PPI rises by 0.3% or more, EUR/CHF can be sold. REACTIVE TRADE
> PROACTIVE or REACTIVE TRADE

TECHNICALS

Testing 2250 support
2400 caps upside
Break opens run to 2100

EURCHF continues to test support at 2250 as it tries to make another double bottom. Meanwhile 1.2400 caps the upside and a break of 2250 could push the unnwind all the way to 1.2100

4. USD/CAD – New Housing Price Index

FUNDAMENTALS
New Housing Price Index expected @ 0.1% (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Neutral
If House Prices grow by 0% or less = Buy USD/CAD
If House Prices grow by 0.4% or more = Sell USD/CAD

Canadian house prices are scheduled for release on Thursday and the report is not materially market moving for USD/CAD unless there is a big surprise. Therefore like the rest of today’s reports, the data should be traded reactively. If house prices grow by 0% or less, we expect USD/CAD to rally. If house prices grow by 0.4% or more, we expect USD/CAD to slide. REACTIVE TRADE

TECHNICALS

1.0150 support does not budge
1.0250 still topside cap
Vol compresses

USDCAD remains in a downward bias the volatility continues to compress as the pair remains with a very tight 1.0150-1.0250 range with the lower end refusing to give way.

5. EUR/USD – US Retail Sales

FUNDAMENTALS
US Retail Sales expected @ 0.4% (8:30 AM ET / 12:30 GMT)
Our View – Bullish USD
Reason – Stronger ICSC and Johnson Redbook Survey
If Retail Sales rise by 0.1% or less = Buy EUR/USD
If Retail Sales rise by 0.6% or more = Sell EUR/USD

We have strong reasons to believe that U.S. retail sales increased in the month of May. According to reports from the International Council of Shopping Centers and Johnson Redbook, consumer spending accelerated last month, which should be good for the dollar. The data can therefore be traded proactively or reactively. For those who choose to wait, if retail sales rise by 0.1% or less, the EUR/USD can be bought. If retail sales rise by 0.6% or more, the EUR/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

Upside move continues
3350 taken out
Longs target 3400-3500 range

The upside move in EUR/USD continues with 1.3350 now giving way as the pair clears the last of topside resistance and opens the path to test the 1.3400-1.3500 corridor. 1.3200 supports the downside.