Top 5 – 07.02.2013

*Top 5 Archive Members Only Top 5


DATE: Tuesday July 2, 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 – ANZ Commodity Prices

ANZ Commodity Prices expected @ (7 PM ET / 00 GMT)
Our View – Neutral
Reason – Neutral
If Commodity Prices exceed 0.5% = Buy NZD/USD
If Commodity Prices fall by 2% or more = Sell NZD/USD

New Zealand’s ANZ Commodity Price index is not an exceptionally market moving piece of data for the NZD/USD. However if the surprise is large enough, it can be important because commodity prices are a measure of inflationary pressures and potential profitability for commodity producers. The data should only be traded reactively and on a big surprise. Therefore if commodity prices grow by 0.5% or more, we expect the NZD/USD to rally. If commodity prices fall by 2% or more, we expect NZD/USD to decline. REACTIVE TRADE


7700 forms a wide base
7850 still caps
Break opens run to 8000

NZD/USD is making a wide base near the 7700 level suggesting the pair enjoys deep support near that level. 7850 still caps upside, but a break here opens the possibility of a run to 8000.

2. AUD/USD – RBA Rate Decision

RBA Rate Decision expected @ 2.75% (12:30 PM ET / 4:30 GMT)
Our View – Neutral
Reason – Neutral
If RBA grows less dovish = Buy AUD/USD
If RBA retains bias to ease = Sell AUD/USD

The Reserve Bank of Australia meets tonight and despite the improvement in manufacturing conditions, we believe that the central bank will maintain its bias to ease. The problem is China. Chinese manufacturing activity slowed to almost a halt in the month of June and with export prices moving lower, the RBA will be reluctant to remove their one source of support – its weaker currency. We suspect that the central bank realizes that short Australian dollar positions are at record highs. If they sound overly optimistic, those could be squeezed out, driving the AUD sharply higher. Rate decisions are best traded reactively. If the RBA grows less dovish, the AUD/USD should rally on a pure short squeeze basis. If they retain the bias to ease, the AUD/USD should decline. REACTIVE TRADE


9100 still key low
9300 caps upside
Break of 9100 opens the key support of 9000

AUD/USD has staged a mild comeback, but the 9300 level still caps the upside and any test of 9100 could open a break towards the key support of 9000.

3. GBP/USD – UK Construction PMI

PMI Construction expected @ 51.2 (4:30 AM ET / 9:30 GMT)
Our View – Higher House Prices
Reason – Bullish GBP
If PMI Construction rises to 52 or higher = Buy GBP/USD
If PMI Construction falls to 49.5 or lower = Sell GBP/USD

We have good reasons to believe that the PMI Construction index will surprise to the upside because house prices have been on the rise in the U.K. As a result, we believe that the data can be traded proactively or reactively. For those who choose to wait, if the construction PMI index exceeds 52, we expect the GBP/USD to rally. If the index falls to 49.5 or lower, we expect the GBP/USD to decline. PROACTIVE or REACTIVE TRADE


5250 fails to hold
5150-5200 still supports
5250 key to upside move

Cable failed to take out the key 5250 level, and the rejection there suggests that the overhead remains in place with 5150-5200 acting a near term support. The consolidation continues and only a strong takeout of the 5250 level creates upside momentum.

4. EUR/USD – Eurozone Producer Prices

PPI expected @ -0.2% (5 AM ET / 10 GMT)
Our View – Bearish EUR
Reason – Softer German and French PPI
If PPI exceeds 0.3% = Buy EUR/USD
If PPI growth drops by -0.8% or more = Sell EUR/USD

We have good reasons to believe that Eurozone producer prices decreased in the month of May. The reason is because both German and French PPI growth declined. Therefore we believe the data can be traded proactively or reactively. For those who choose to wait, if the PPI index exceeds 0.3%, we expect the EUR/USD to rally. If it falls by -0.8% or more we expect EUR/USD to decline. PROACTIVE or REACTIVE TRADE


1.3000 continues to hold
1.3100 still caps
Broader base could lead to bigger upside move

Euro remains well bid at the 1.3000 level and as long as the pair continues to remain above that level the base could be building for a broader upside move, but for now the 1.3100 level contains.

5. USD/JPY – Factory Orders

Factory Orders expected @ 2% (10 AM ET / 14 GMT)
Our View – Neutral
Reason – Neutral
If Factory Orders rise by 3% or more = Buy USD/JPY
If Factory Orders stagnate or declines = Sell USD/JPY

U.S. factory orders is not a major market moving report for USD/JPY unless there is a big surprise. Therefore the data should only be traded reactively. If factory orders rise by 3% or more, we expect USD/JPY to rally. If factory orders stagnate or decline, we expect USD/JPY to fall. REACTIVE TRADE


99.00 holds
99.50 taken out
100.00 still in view

USD/JPY rally continues with 99.50 taken out with 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.