Top 5 – 04.09.13

TOP 5 HOT IDEAS

DATE: Tuesday April 9, 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 – NAB Business Confidence and Chinese CPI



FUNDAMENTALS
NAB Business Confidence & Chinese CPI expected 2.5% @ (9:30 PM ET / 1:30 GMT)
Our View – Neutral
Reason – Neutral
If NAB Confidence exceeds 3 and/or CPI exceeds 3.5% = Buy AUD/USD
If NAB Confidence is less than 0 and/or CPI is less than 2% = Sell AUD/USD

Australian business confidence and Chinese CPI numbers will be released simultaneously this evening. The data is difficult to handicap but if we had to guess, it would probably be weaker and not stronger. However, these reports are probably best traded reactively and only if there is a meaningful surprise. More specifically, if the NAB business confidence index exceeds 3 or Chinese consumer prices grow by 3.5% or more, we expect the AUD/USD to rally. If the confidence index drops to 0 or lower and/or CPI growth slows to 2%, we expect the AUD/USD to decline. REACTIVE TRADE

TECHNICALS

1.0350 still supports
1.0450 most immediate resistance
1.0400 new equilibrium

Aussie continues to find support at 1.0350 but is capped t 1.0450 for now.

2. EUR/CHF – Swiss Unemployment



FUNDAMENTALS
Swiss Unemployment expected @ 3.3% (1:45 AM ET / 5:45 GMT)
Our View – Weaker CHF
Reason – Lower PMI Manufacturing and Industrial Production
If the Unemployment Rate exceeds 3.5% = Buy EUR/CHF
If the Unemployment Rate is less than 3.1% = Sell EUR/CHF

We have good reasons to believe that Switzerland’s unemployment rate may have increased in the month of March. There have been a lot more disappointments than upside surprises in Swiss data over the past month, which may have led to greater job losses. As a result, we believe that the data can be traded proactively or reactively. For those who choose to wait, if the unemployment rate exceeds 3.5%, we expect EUR/CHF to rally. If the unemployment rate is less than 3.1%, we expect EUR/CHF to slide. PROACTIVE or REACTIVE TRADE

TECHNICALS

1.2150 still holds
1.2200 caps
Range persists

The key 1.2150 level continues to hold in EURCHF as the pair continues to range in a very tight vol environment.

3. EUR/USD – German Trade and Current Account

FUNDAMENTALS
Trade Balance expected @ 15B & Current Account balance expected @ 14.2B (2 AM / 6 GMT)
Our View – Neutral
Reason – Neutral
If Trade or Current Account balance exceeds 15.5B = Buy EUR/USD
If Trade or Current Balance is less than 14B = Sell EUR/USD

German trade and current account numbers are scheduled for release tomorrow and this month’s numbers are a tough call because there have been both improvement and deterioration in the manufacturing sector. More specifically, German industrial production and factory orders soared but manufacturing activity dropped to a 3 month low according to the PMI index. As a result, we believe that the data is best traded reactively. If the Trade or Current Account balance exceeds 15.5B, we expect EUR/USD to rally. If Trade or Current Balance is less than 14B, we expect the EUR/USD to weaken. REACTIVE TRADE

TECHNICALS

3050 caps for now
3000 support holds
2950 deeper support

EUR/USD remains relatively well bid, but 3050 caps the upside for now as the gap remains open.

4. GBP/USD – U.K. Industrial Production and Trade

FUNDAMENTALS
Industrial Production expected @ 0.4% & Visible Trade Balance expected @ -GBP8600M (4:30 AM ET / 8:30 GMT)
Our View – Bearish GBP
Reason – PMI index increased but new orders and export orders declined
If IP growth exceeds 0.6% or Trade Balance is -8200 or better = Buy GBP/USD
If IP growth is less than 0.2% or Trade Balance is -8700 or worse = Sell GBP/USD

We have good reasons to believe that U.K. industrial production and trade activity weakened in February. While the PMI index increased last month, new orders and export orders declined. As a result, we believe the data can be traded proactively or reactively. For those who choose to wait, if IP growth exceeds 0.6% or the trade balance narrows to -8200M or better, we expect the GBP/USD to rise. If industrial production grows by 0.2% or less or the trade balance is -8700 million or worse, we expect the GBP/USD to weaken. PROACTIVE or REACTIVE TRADE

TECHNICALS

Failure at 1.5350
5200 in view
5150 deeper support

Cable saw string reversal at 1.5350 today suggesting that the pair is capped at that level for now. A break of 1.5200 would open up a test of stronger support at 1.5150.

5. USD/CAD – Housing Starts & Building Permits



FUNDAMENTALS
Housing Starts expected @ 175K (8:15 AM ET / 12:15 GMT) & Building Permits expected @ 3% (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Neutral
If Housing Starts is less than 165K AND Building Permits rise by 1.5% or less = Buy USD/CAD
If Housing Starts exceed 190K AND Building Permits rise by 3% or more = Sell USD/CAD

Canada’s housing market numbers are scheduled for release tomorrow and the data could impact the CAD if there are large enough surprises. The data should only be traded reactively. More specifically, if housing starts rise by 165K or less and building permits increase by less than 1.5%, we expect USD/CAD to extend its gains. However if housing starts exceed 190K and building permits rise by 3% or more, we expect USD/CAD to sell off. REACTIVE TRADE

TECHNICALS

1.0150 continues to stabilize
1.0100 next target of shorts
1.0200 caps upside

1.0200 continues to cap the upside in loonie as the pair now drifts towards the 1.0150 level which if broken opens up a run to 1.0100.

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