Top 5 – 05.08.2013

TOP 5 HOT IDEAS

DATE: Wednesday May 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 – Chinese Trade Balance



FUNDAMENTALS
China Trade Balance expected @ 16.15B (TBD)
Our View – Neutral
Reason -- Neutral
If exports grow by 13% or more = Buy AUD/USD
If exports grow by 7% or less = Sell AUD/USD

Chinese trade numbers are scheduled for release this evening and as usual, we can expect the report to have a meaningful impact on the AUD. Unfortunately there is no set time for the release so the data can only be traded reactively. Furthermore, when it comes to Chinese trade numbers, the key figure to watch is exports. If exports grow by 13% or more, the AUD/USD can be bought for a recovery trade. However if exports grow by 7% or less, the AUD/USD can be sold. REACTIVE TRADE

TECHNICALS


1.0225 Breaks
1.0150 holds for now
Break opens run to 1.0100

The Aussie gave up the key 1.0225 level but was able to hold just above the 1.0150 support for now. The pair now faces resistance at former support while break below 1.0150 opens up a run to 1.0100

2. EUR/CHF – Swiss CPI



FUNDAMENTALS
Swiss CPI expected @ 0.1% (3:15 AM ET / 7:15 GMT)
Our View – Neutral
Reason – Neutral
If CPI declines = Buy EUR/CHF
If CPI rises by 0.5% or more = Sell EUR/CHF

Switzerland’s consumer price report is not a huge market mover for the Swiss Franc unless there is a meaningful surprise so the data is best traded reactively. If consumer prices decline by any amount, EUR/CHF can be bought for a move higher. If CPI rises by 0.5% or more, EUR/CHF can be sold. REACTIVE TRADE

TECHNICALS

Breakout above 1.2300 cant hold
1.2250 supports
Mild up bias remains

The EUR/CHF breakout above 1.2300 was turned back, but the pair remains supported at the 1.2250 level and the small upside bias is still in place.

3. EUR/USD – German Industrial Production

FUNDAMENTALS
German IP expected @ -0.1% (6 AM ET / 10 GMT)
Our View – Neutral
Reason –PMI Manufacturing dropped but Factory orders increased
If German Industrial Production rises by 0.3% or more = Buy EUR/USD
If German Industrial Production drops by 0.3% or more = Sell EUR/USD

This month’s German industrial production report is a tough call because manufacturing conditions declined according to the PMI report but factory orders soared. As a result, the data is best traded reactively. If German industrial production rises by 0.3% or more, the EUR/USD can be bought for a move higher. If it drops by 0.3% or more, the EUR/USD can be sold. REACTIVE TRADE

TECHNICALS

1.3125 continues to cap
1.3050 still supports
Consolidation continues

The EUR/USD remains in a very tight consolidation range, but the 1.3125 level continues to cap any upside moves. A break of 1.3050 opens way for a test of 1.3000

4. USD/CAD – Canadian Housing Starts


FUNDAMENTALS
Housing Starts expected @ 175K (8:15 AM ET / 12:15 GMT)
Our View – Neutral
Reason – Neutral
If Canadian housing starts drop to 160K = Buy USD/CAD
If Canadian housing starts rise by 190K = Sell USD/CAD

Like many of today’s other economic reports, Canadian housing starts are not a huge market mover for the Canadian dollar unless there is a big surprise. Therefore the data is best traded reactively. If Canadian housing starts drop to 160K or lower, we expect USD/CAD to rally. If starts rise by 190K or more, we expect USD/CAD to slide. REACTIVE TRADE

TECHNICALS

Back to 1.0050
1.0100 caps upside
Parity in view

USD/CAD looks like its pressing its way towards parity as it now trades below the 1.0050 level. 1.0100 caps the upside for now as price action remains biased lower.

5. USD/JPY Update



FUNDAMENTALS
While there are no U.S. or Japanese economic reports on the calendar over the next 24 hours, traders will continue to watch to see if USD/JPY extends its losses or continues to aim towards 100. Fundamentals will come into play Thursday but for the time being, technical are key.

TECHNICALS

99.50 still unreached
99.00 continues to support
Break above 99.50 puts 100.00 in play

USD/JPY is stalling underneath the 99.50 level and the slowdown may be troubling for the bulls especially if pair starts to slip towards 98.50 which would indicate yet another short term top.

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