TOP 5 HOT IDEAS

DATE: Monday June 17, 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 – PMI Services

FUNDAMENTALS
PMI Services expected @ (6:30 PM ET / 22:30 GMT)
Our View – Bullish NZD
Reason – Business PMI index hits 8 Year High
If NZ PMI exceeds 58 = Buy NZD/USD
If NZ PMI is 53 or less = Sell NZD/USD

We have strong reasons to believe that service sector activity in New Zealand accelerated last month. Manufacturing activity shot to its highest level in more than 8 years, which is very encouraging for New Zealand’s outlook. As a result, we feel that Sunday’s NZ data can be traded proactively or reactively. For those who choose to wait, if the PMI index exceeds 58, the NZD/USD can be bought for a recovery trade. If it drops below 53 however, the NZD/USD can be sold for a continued move lower. PROACTIVE or REACTIVE TRADE

TECHNICALS


The rally in the NZD/USD stalled right around the 38.2% Fibonacci retracement of the sell-off that lasted from April to June and it also coincides with some highs at the end of last month. The downtrend in the NZD/USD will not be broken until the currency pair closes above 0.8125, at which point the next resistance level will be at 0.8225, the 50% Fib retracement of the same move. On the downside, 80 cents is the level to watch for support.

2. GBP/USD – Rightmove House Prices

FUNDAMENTALS
Rightmove House Prices expected @ (7:01 PM ET / 23:01 GMT)
Our View – Neutral
Reason – Neutral
If House Prices grow by 3% or more = Buy GBP/USD
If House Prices drop by 0% or more = Sell GBP/USD

The U.K.’s Rightmove house price report is not a big market mover for the GBP/USD unless there is a significant surprise. Therefore the data should only be traded reactively. If House Prices grow by 3% or more, the GBP/USD can be bought for a move higher. If House Prices drop by 0% or more, the GBP/USD can be sold. REACTIVE TRADE

TECHNICALS


The 200-day SMA is proving to be a barrier of resistance for the GBP/USD around 1.5700. The currency pair’s rally stalled at this price point for 3 straight days. Since the GBP/USD is in an uptrend according to our Double Bollinger Bands, then we are still looking for further gains with a potential move up to 1.58, the 61.8% of this year’s sell-off. Support is at 1.56, the 50% Fib of the same move and only when this level is broken to the downside would the current uptrend exhaust.

3. EUR/USD – EZ Trade Balance

FUNDAMENTALS
EZ Trade Balance expected @ (5 AM ET / 9 GMT)
Our View – Bearish EUR
Reason – Small Decline in German and French Trade
If the trade balance is 20B or higher = Buy EUR/USD
If the trade balance is 16B or lower = Sell EUR/USD

We have good reasons to believe that Eurozone trade numbers will surprise to the upside. When we look to handicap EZ data, we always turn to the releases of its 2 largest economies – Germany and France. Both countries reported deterioration in trade in the month of April. As a result, the data can be traded proactively or reactively. For those who choose to wait, if the Eurozone trade balance rises to 20B or higher, the EUR/USD can be bought for a move higher. If the trade balance drops to 16B or lower the EUR/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS


Based on the series of higher highs and higher lows in the EUR/USD, the currency pair is in a nice uptrend. It is currently flirting with the 61.8% Fibonacci retracement of the February to April sell-off and a break of 1.34 is needed to free the upside but 1.35 should be an important level of resistance. In terms support, 1.3230 is the key level to watch. A break below this level and below 1.32 would officially shift the trend for the EUR/USD.

4. USD/JPY – Empire State Manufacturing Survey

FUNDAMENTALS
Empire State Manufacturing Survey expected @ 0 (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Neutral
If Empire State index exceeds 5 = Buy USD/JPY
If Empire State index is less than -5 = Sell USD/JPY

The Empire State manufacturing survey is difficult to handicap and therefore best traded reactively. If the Empire State manufacturing index exceeds 5, USD/JPY can be bought for a move higher. If the index drops to -5 or lower, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS


From a technical perspective, now that the key 95 level is broken, the next support is at 93.20, the 38.2% Fibonacci retracement of the 2012 to 2013 rally that took the pair from a low of 77.13 cents to a high above 103.75. Below that is the April 2013 swing low of 92.57. There’s a lot of resistance above, starting with the 100-day SMA which is closing in on the 97 level.

5. USD/CAD – Canadian Existing Home Sales

FUNDAMENTALS
Existing Home Sales expected @ (9 AM ET / 13 GMT)
Our View – Neutral
Reason – Neutral
If Existing Home Sales are flat or declines = Buy USD/CAD
If Existing Home sales rise by 1% or more = Sell USD/CAD

Canadian existing home sales are scheduled for release on Friday and the data is not a huge market mover unless there is a big surprise and for this reason, we believe the data should only be traded reactively. If existing home sales is flat or declines, we expect USD/CAD to rally. If existing home sales rise by 1% or more, we expect USD/CAD to fall. REACTIVE TRADE

TECHNICALS

Based on our double Bollinger bands, USD/CAD is in a downtrend. Having just closed below the 100-day SMA, the currency pair looks poised for a move down to 1.01. If this level is broken, parity could be the pair’s next target. On the upside, the short term high of 1.0250 is the key level of resistance.