TOP 5 HOT IDEAS

DATE: Wednesday 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. AUD/USD – Australian Retail Sales

FUNDAMENTALS
Retail Sales expected @ 0.3% @ (9:30 PM ET / 1:30 GMT)
Our View – Neutral
Reason – PMI Services released on same day
If Retail Sales exceed 0.5% = Buy AUD/USD
If Retail Sales grow by 0.1% or less = Sell AUD/USD

There are a number of Australian economic reports scheduled for release this evening and we feel that the most important will be Australian retail sales. Unfortunately this month’s data is difficult to handicap because PMI services (a key leading indicator for spending) will be released on the same day as retail sales. Also, consumer confidence declined in May and job growth slowed after a huge increase the previous month. So it is not clear how the volatility in the labor market will affect spending and therefore retail sales is best traded reactively. If retail sales grow by 0.5% or more, we expect the AUD/USD to rally. If retail sales grow by 0.1% or less, we expect the AUD/USD to extend its decline. REACTIVE TRADE

TECHNICALS

9100 lows being challenged again
Break of 9100 opens runs on 9000
9300 caps upside

The Aussie continues to retest the key support at 9100 level, which if broken opens the prospect of a run to 9000. Meanwhile 9300 caps the upside as the pair continues to consolidate at the lows.

2. GBP/USD – UK PMI Services

FUNDAMENTALS
PMI Services expected @ 54.5 (4:30 AM ET / 8:30 GMT)
Our View – Bullish GBP
Reason – Stronger PMI Manufacturing and Consumer Confidence
If the PMI Services index rises to 55 or higher = Buy GBP/USD
If the PMI index drops to 54 or lower = Sell GBP/USD

We have good reasons to believe that the PMI Services index will surprise to the upside because manufacturing activity improved and consumer confidence increased last month. The data can be traded proactively or reactively. For those who choose to wait, if the PMI index exceeds 55, we expect the GBP/USD to rally. If the index falls to 54 or lower, we expect the GBP/USD to decline. PROACTIVE or REACTIVE TRADE

TECHNICALS

5100 being tested
Break of 5100 opens a test of key 5000 level
5300 caps upside

Cable continues to grind lower as the pair now probes support near the 5100 level, a break there suggests that shorts could press the run towards 5000 while 5300 caps the upside for now.

3. EUR/USD – EZ Retail Sales

FUNDAMENTALS
EZ Retail Sales expected @ 0.3% (5 AM ET / 9 GMT)
Our View – Bullish EUR
Reason – Strong Rise in German and French Retail Sales
If Retail Sales growth exceeds 0.5% = Buy EUR/USD
If Retail Sales fall by -0.1% or more = Sell EUR/USD

We have strong reasons to believe that Eurozone retail sales increased in the month of May. Whenever we look to handicap EZ data we always turn to the releases of its 2 largest economies – Germany and France. In May, both countries reported stronger spending and as a result, we believe that the data can be traded proactively or reactively. For those who choose to wait, if retail sales growth exceeds 0.5%, we expect the EUR/USD to rally. If retail sales decline by 0.1% or more, we expect the EUR/USD to decline. PROACTIVE or REACTIVE TRADE

TECHNICALS


3000 still being tested
2950 key hold
3100 caps the upside

The euro continues to probe the 1.3000 level with 1.2950 now a key hold of support for longs. If that is given it opens the prospects of a test of swing lows near 1.2850 while 1.3100 caps the upside for now.

4. USD/JPY – US Trade Balance

FUNDAMENTALS
Trade Balance expected @ -$40.1B (8:30 AM ET / 12:30 GMT)
Our View – Bullish USD
Reason – Softer ISM Manufacturing Index
If the trade deficit is smaller than -$39.5B = Buy USD/JPY
If the trade deficit is larger than -$42B = Sell USD/JPY

We have good reasons to believe that the U.S. trade deficit narrowed in the month of May. The reason is because manufacturing activity improved, allowing us to trade the data proactively or reactively. For those who choose to wait, if the trade deficit is smaller than -$39.5B we expect USD/JPY to rally. If the trade deficit is larger than -$42B we expect USD/JPY to decline. PROACTIVE or REACTIVE TRADE

TECHNICALS

100.00 taken out
101.00 next target of longs
99.00 now becomes deep support

USD/JPY barreled through the 100.00 level and see little resistance until 102.50 for now. Meanwhile 99.00 is now support as the pair continues to push higher.

5. USD/CAD – Canadian Trade Balance

FUNDAMENTALS
Trade Balance expected @ -0.7B (8:30 AM ET / 12:30 GMT)
Our View – Bullish CAD
Reason – Stronger IVEY PMI in May
If the trade deficit is larger than -1.0B = Buy USD/CAD
If the trade deficit is smaller than -0.1B = Sell USD/CAD

Canada’s trade balance report is an important release for the country and we believe that the deficit probably narrowed because the IVEY PMI index improved significantly in the month of May. As a result, the data can be traded proactively or reactively. For those who choose to wait, if the trade deficit is larger than -1.0B, USD/CAD can be bought for a move higher. If the trade deficit is smaller than -0.1B, USD/CAD can be sold. REACTIVE TRADE

TECHNICALS

1.0600 key resistance
Break to new highs
1.0500 now near term support

USD/CAD has now broken to new highs but 1.0600 remains the key resistance for the pair and a rejection at that level could signal a topping out pattern for the near term.