Top 5 – 04.08.13

TOP 5 HOT IDEAS

DATE: Monday April 8, 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 – PMI Construction



FUNDAMENTALS
PMI Construction expected @ (7:30 PM ET / 23:30 GMT)
Our View – Neutral
Reason – Neutral
If the PMI index exceeds 48 = Buy AUD/USD
If PMI index is less than 43 = Sell AUD/USD

Construction sector PMI numbers are scheduled for release from Australia Sunday evening and the data doesn’t usually have a huge impact on the AUD unless there is a meaningful surprise. Based on the jump in building approvals in February, the odds favor a slight improvement but the data is still best traded reactively in our opinion. Therefore if the PMI index exceeds 48, we expect a recovery in AUD/USD. If the index drops below 43, we expect the AUD/USD to extend its losses. REACTIVE TRADE

TECHNICALS

1.0400 gives way
1.0350 finds quick support
1.0450 most immediate resistance

Aussie crumbled most of the day Friday giving up 1.0400 and tumbling to 1.0350 primary support. A quick rebound there suggests a possible value area and recovery to 1.0450

2. USD/JPY -- Japanese Current Account Balance



FUNDAMENTALS
Current Account balance expected @ Y457.5B (7:50 PM ET / 23:50 GMT)
Our View – Bullish JPY
Reason – Weak Yen expected to boost exports
If the trade surplus is 100B or lower = Buy USD/JPY
If the trade surplus is 500B or higher = Sell USD/JPY

We have good reasons to believe that Japan’s current account balance improved in the month of February. Economists are already looking for a big upside surprise as the weak Yen bolsters exports. Nonetheless we still believe the data can be traded proactively or reactively. For those who choose to wait, if the trade surplus is 100B or lower, we expect USD/JPY to extend higher because the lackluster improvement in trade validates the need for aggressive easing from the BoJ. However if the trade surplus exceeds 500B, we expect USD/JPY to slide. PROACTIVE or REACTIVE TRADE

TECHNICALS

Fresh highs
98.00 next target of longs
95.50 deep support for now

USD/JPY blew through all the stops on the topside sweeping all resistance aside as it made fresh highs. 95.50 remains deep distant support while 98.00 is the next target of longs.

3. EUR/CHF – Swiss Industrial Production

FUNDAMENTALS
Industrial Production expected @ (3:15 AM / 7:15 GMT)
Our View – Neutral
Reason – Neutral
If Industrial Production rises by less than 1% = Buy EUR/CHF
If Industrial Production growth exceeds 2.8% = Sell EUR/CHF

Swiss industrial production numbers are difficult to handicap and therefore best traded reactively and only if there is a meaningful surprise. More specifically, if industrial production rises by less than 1%, we expect EUR/CHF to rally. If industrial production growth exceeds 2.8%, we expect EUR/CHF to slide. REACTIVE TRADE

TECHNICALS

Still flirting with 1.2150 support
2100 next level to test
2200 still caps

EUR/CHF remains quiet but continues to flirt with 1.2150 support which remains a key level for the pair with 2100 next level to test for the shorts while 2200 continues to cap upside action.

4. EUR/USD – German Industrial Production

FUNDAMENTALS
Industrial Production expected @ 0.3% (6 AM ET / 10 GMT)
Our View – Bullish EUR
Reason – Stronger Factory orders but PMI down
If IP growth exceeds 0.6% = Buy EUR/USD
If Industrial Production drops by -0.1% or more = Sell EUR/USD

We have good reasons to believe that German industrial production rebounded in the month of February. Factory orders, which measure a similar part of the economy soared that month even though manufacturing PMI dropped slightly. Given the rise in factory orders, we believe the data can be traded proactively or reactively. For those who choose to wait, if industrial production growth exceeds 0.6%, we expect the EUR/USD to rally. If industrial production drops by -0.1% or more, we expect the EUR/USD to weaken. PROACTIVE or REACTIVE TRADE

TECHNICALS

Impressive through 3000
3050 gap close still caps
2850 former resistance now support

EUR/USD breakout continued on Friday with 1.3000 level taken out but the pair remains capped by the 1.3050 gap close resistance while 1.2850 now acts as support.

5. USD/CAD –Canada’s Business Outlook Survey



FUNDAMENTALS
Business Outlook Future Sales expected @ 15 (10:30 AM ET / 14:30 GMT)
Our View – Neutral
Reason – Neutral
If the Future Sales Outlook index is 10 or less = Buy USD/CAD
If the Future Sales Outlook index is 18 or higher = Sell USD/CAD

Canada’s Business Outlook Survey is not a huge market mover for the Canadian dollar unless there is a meaningful surprise. As a result, the data should only be traded reactively. More specifically, if the Futures Sales Outlook index is 10 or less, we expect USD/CAD to rally. If the index rises to 18 or higher, we expect USD/CAD to fall. REACTIVE TRADE

TECHNICALS

1.0200 tested but rejected
1.0150 next target of shorts
1.0100 still stalls downside

USD/CAD broke to the upside but the quick rejection of the 1.0200 level suggests that the short continue to control the flow. 1.0150 retest is the next target of shorts while 1.0250 caps upside

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