TOP 5 HOT IDEAS
DATE: Wednesday August 14, 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 – Q2 New Zealand Retail Sales
FUNDAMENTALS
Q2 Retail Sales expected @ 1.5% (6:45 PM ET / 22:45 GMT)
Our View – Bullish NZD
Reason – Sharp Rise in Retail Sales in Q2
If Retail Sales exceeds 2% = Buy NZD/USD
If Retail Sales growth is flat or declines = Sell NZD NZD/USD
We have good reasons to believe that New Zealand retail sales increased in the second quarter because credit card spending has been strong. Therefore we feel that this data can be traded proactively or reactively. For those who choose to wait, if retail sales exceed 2%, NZD/USD can be bought for a move higher. If retail sales growth is flat or declines, NZD/USD can be sold. PROACTIVE or REACTIVE TRADE
TECHNICALS
7900 still holds
8000 continues to cap
Range compresses
NZD/USD range continues to compress as the pair consolidates between 7900-8000 as a break either way likely creates directional signal.
2. AUD/USD – Westpac Consumer Confidence
FUNDAMENTALS
Consumer Confidence expected @ (8:30PM ET / 0:30 GMT)
Our View – Neutral
Reason – Neutral
If Confidence rises by 0.5% or more = Buy AUD/USD
If Confidence falls by -0.5% or more = Sell AUD/USD
Australian consumer confidence is due for release tonight and while it is a difficult release to handicap, it can be an important report for the AUD/USD. Given the deterioration in business confidence and report of job losses, the odds favor a softer release. However the RBA recently cut interest rates and it appears that Chinese data may have turned a corner, so we feel that the data is best traded reactively. If confidence rises by 0.5% or more, we expect the AUD/USD to rally. If it declines by -0.5% or more, we expect the AUD/USD to fall. REACTIVE TRADE
TECHNICALS
9100 holds
9200 caps
Consolidation tightens
Much like kiwi the Aussies range continues to compress between 9200-9100 and a break of range could be a directional clue as well.
3. EUR/USD – German Q2 GDP
FUNDAMENTALS
German Q2 expected @ 0.6% (2 AM ET / 6 GMT)
Our View – Bearish EUR
Reason – Slight Uptick in German Trade, But Sharp Decline in Retail Sales
If GE GDP growth exceeds 0.8% = Buy EUR/USD
If GDP Growth is 0.1% or less = Sell EUR/USD
GDP numbers are scheduled for release from Germany, France and the Eurozone tomorrow. Amongst these reports, we feel that the German data will be the most market moving because it is the first released. Economists have high expectations for the report and based on trade activity alone, GDP growth should accelerate. However we feel there is scope for a downside surprise because the improvement in trade was small while the decline in retail sales in Q2 was larger. Therefore we believe German GDP numbers can be traded proactively or reactively. If GDP growth exceeds 0.8%, the EUR/USD can be bought for a move higher. If GDP growth is less than 0.1%, the EUR/USD can be sold. PROACTIVE or REACTIVE TRADE
TECHNICALS
1.3200 holds for now
Bias remains negative
Break of 3200 opens run to 3100
EUR/USD remains in a negative bias for now but 3200 continues to hold and a bounce here could put the bias back to neutral, but a break could open the run to 3100.
4. GBP/USD – UK Employment and BoE Minutes
FUNDAMENTALS
UK Jobless Claims Change expected @ -15K (4:30 AM ET / 8:30 GMT)
Our View – Neutral
Reason – PMIs report increase in employment in manufacturing and service sector
If Jobless Claims drop by 30K or more AND BoE Minutes is less dovish= Buy GBP/USD
If Jobless Claims rise by 5K or more AND BoE Minutes is more dovish = Sell GBP/USD
Wednesday is a big day for the GBP/USD. The employment report and Bank of England minutes are both important pieces of data that could potentially trigger a big reaction in sterling. It is difficult to handicap the BoE minutes but what we are looking for is the voting record on QE and the new unemployment rate threshold. If we learn that some members voted for additional asset purchases and the decision for an unemployment rate threshold was unanimous, the GBP/USD could experience additional losses. However if no one favored more QE and some members opposed the threshold, which was the BoE’s attempt to stress their plans to keep monetary policy easy for a very long time, the GBP/USD could break above 1.56. As for the unemployment report, an increase in the employment component of both the service and manufacturing PMI suggests that the data will be stronger but we still feel that tomorrow’s UK event risks are best traded reactively. REACTIVE TRADE
TECHNICALS
5400 holds
5600-5400 range persists
Break 5400 opens test of 5250
Cable continues to hold 5400 as it works off the overbought condition from the recent rally, but a break below could open a test of 5250 as bias turns more negative.
5. USD/JPY – US Producer Prices
FUNDAMENTALS
PPI expected @ 0.3% (8:30 AM ET / 12:30 GMT)
Our View – Bearish USD
Reason – Significant Slowdown in Import Price Growth
If PPI grows by 0.8% or more = Buy USD/JPY
If PPI contracts by -0.1% or more = Sell USD/JPY
The U.S. producer price report is not a major market mover for the dollar unless there is a significant surprise but we have reason to believe that inflationary pressures in the U.S. declined in the month of July. Import prices, which measures a similar set of goods grew at a very slow pace last month. As a result, we feel that PPI can be traded proactively or reactively. For those who choose to wait, if PPI growth exceeds 0.8%, USD/JPY can be bought for a move higher. If it contracts by -0.1% or more, USD/JPY can be sold. PROACTIVE or REACTIVE TRADE
TECHNICALS
98.50 caps rebound
97.00 now support
Break higher opens test of 99.50-100.50 range
USD/JPY recovery rally ran out of steam ahead of the 98.50 rally and 97.00 now becomes support, but a break above would open a retest of the key 99.50-100.50 resistance.
