TOP 5 HOT IDEAS

DATE: Monday July 1, 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 – Quarterly Tankan Report

FUNDAMENTALS
Tankan Large Manufacturers Index @ 3 (7:50 PM ET / 23:50 GMT)
Our View – Bullish JPY but no Trade
Reason – Weaker Yen Bolsters Economic Activity
If Tankan Index is -1 or lower = Buy USD/JPY
If Tankan Index is 6 or better = Sell USD/JPY

Japan’s Quarterly Tankan survey is one of the country’s most important economic releases because it is a measure of business confidence. Given the recent improvements in Japanese data, the market is looking for confidence to improve. However the recent market volatility could also deter confidence. As a result, we expect a more nominal reaction in the JPY unless there is a very significant surprise. Therefore the data is best traded reactively. If the Tankan index drops to -1 or lower, we expect USD/JPY to rally. If the index rebounds to 6 or better, we expect USD/JPY to fall. REACTIVE TRADE

TECHNICALS

99.00 broken
100.00 now key test of upside
98.00 supports

USD/JPY rally continued with 99.00 taken out withe force which now puts the 100.00 barrier in view. The pair finds support at 98.00 but the challenge of 100.00 will be tough given overhead resistance from the past.

2. AUD/USD for Chinese Manufacturing PMI

FUNDAMENTALS
Chinese Mfg PMI expected @ 50.1 (9 PM ET / 1 GMT)
Our View – Neutral
Reason – Neutral
If PMI exceeds 52 = Buy AUD/USD
If PMI drops below 50 = Sell AUD/USD

The official Chinese manufacturing PMI number is due for release Sunday evening and as usual, we expect the Australian dollar to have the biggest reaction to the data. Chinese data is always difficult to handicap and therefore best traded reactively. If the PMI index exceeds 52, we expect AUD/USD to rally. If the index drops below 50, we expect the AUD/USD to weaken. REACTIVE TRADE

TECHNICALS

Fresh lows
Break of 9150 puts 9000 in view
9300 now resistance

Fresh yearly lows in Aussie suggest that downside pressure continues with the key 9000 figure now in view of the shorts while 9300 acts as resistance overhead.

3. EUR/USD – EZ PMI Manufacturing Final

FUNDAMENTALS
EZ PMI Manufacturing expected @ 48.7 (4 AM ET / 8 GMT)
Our View – Neutral
Reason – Neutral
If PMI is revised up to 49.5 or higher = Buy EUR/USD
If PMI is revised down to 47.5 or lower = Sell EUR/USD

Revisions to Eurozone PMI numbers are not expected to have any impact on the euro unless there is a revision. Therefore the only opportunity is to trade the data reactively. If the PMI is revised up to 49.5 or higher, the EUR/USD can be bought for a move higher. If PMI is revised down to 47.5 or lower, the EUR/USD can be sold. REACTIVE TRADE

TECHNICALS


1.3000 still holds
Bearish reversal
Test of 2950 key

EUR/USD continues to hold near the 1.3000 level but the days bearish reversal off the highs bodes badly for the pair and suggests that a test of the 2950 level may be in the offing.

4. GBP/USD – UK PMI Manufacturing

FUNDAMENTALS
UK PMI Manufacturing expected @ 51.4 (4:30 AM ET / 8:30 GMT)
Our View – Bullish GBP
Reason – Small Improvement in CBI Survey
If PMI Manufacturing index exceeds 52.5 = Buy GBP/USD
If PMI Manufacturing index drops to 50 or lower = Sell GBP/USD

We have good reasons to believe that U.K. manufacturing activity improved in the month of June because a similar survey conducted by the Confederation of British Industry also reported a small uptick. As a result, we believe this data can be traded proactively or reactively. For those who choose to wait, if the PMI Manufacturing index exceeds 52.5, the GBP/USD can be bought for a move higher. If the index drops to 50 or lower, the GBP/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

5200 holds
Break opens test of 5000
5300-5400 caps any rally

GBP/USD has found support at the 5200 level but the hold may be fleeting as any break lower would open the prospect of a test of 5000 while the 5300-5400 corridor now caps any upside move.

5. USD/JPY – Manufacturing ISM

FUNDAMENTALS
ISM Manufacturing expected @ 50.5 (10 AM ET / 14 GMT)
Our View – Bullish USD
Reason – Higher Empire and Philly but lower Chicago
If ISM exceeds 51 = Buy USD/JPY
If ISM is less than 49 = Sell USD/JPY

We have good reasons to believe that the ISM manufacturing report will surprise to the upside because manufacturing activity strengthened in the NY and Philadelphia region. However we have a level 2 confidence on this trade because the Chicago PMI index declined. This data can therefore be traded proactively or reactively. For those who choose to wait, if the ISM index exceeds 51, USD/JPY can be bought for a move higher. If the index drops to 49 or lower, USD/JPY can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

99.00 broken
100.00 now key test of upside
98.00 supports

USD/JPY rally continued with 99.00 taken out withe force which now puts the 100.00 barrier in view. The pair finds support at 98.00 but the challenge of 100.00 will be tough given overhead resistance from the past.