Top 5 – 06.11.2013

TOP 5 HOT IDEAS

DATE: Tuesday June 11, 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. GBP/USD – RICS House Price Balance



FUNDAMENTALS
RICS House Price Balance expected @ (7:01 PM ET / 23:01 GMT)
Our View – Neutral
Reason -- Neutral
If RICS House Price Balance exceeds 5% = Buy GBP/USD
If RICS House Price Balance drops by -3% or more = Sell GBP/USD

The U.K.’s RICS house price balance is not a big market mover for the GBP unless there is a large surprise. In order for the GBP/USD to rally and for us to even consider a reactive trade to the long side, the RICS House Price Balance would need to exceed 5%. If the RICS House Price Balance drops by -3% or more, the GBP/USD could be an attractive short. REACTIVE TRADE

TECHNICALS

5500-5600 continues to hold
Consolidating at highs
Break of 5680 opens run to 5900

Cable continue to hold near its highs consolidating in the 5500-5600 range. A break above 5680 opens up a run towards 5900 while a break below 5450 would suggest that the upside is done for now.

2. AUD/USD – Australian Business Confidence



FUNDAMENTALS
Business Confidence expected @ (9:30 PM ET / 1:30 GMT)
Our View – Neutral
Reason – Neutral
If Business Confidence exceeds 0 = Buy AUD/USD
If Business Confidence is -4 or lower = Sell AUD/USD

Australian business confidence numbers are due for release this evening and should have a decent impact on the AUD/USD. The weakness of the AUD and volatility in the markets could affect confidence in many different ways but handicapping it is difficult. Therefore the data is best traded reactively. If the business confidence index exceeds 0, the AUD/USD could enjoy a relief rally. If the index drops to -4 or lower, the AUD/USD could extend its slide. REACTIVE TRADE

TECHNICALS

Gap Filled
9400 forming a base
9500 new resistance for now

The Aussie gaped lower but it slow recovery and hold of the 9400 suggests that it may be forming a near term base for now. 9500 caps the upside while a break of 9375 opens up a test of the 9350 level.

3. USD/JPY – Bank of Japan Rate Decision

FUNDAMENTALS
BoJ Rate Decision expected @ (no time set)
Our View – Neutral
Reason – Neutral
If the BoJ increases frequency of JGBs purchased = Buy USD/JPY
If BoJ leaves policy unchanged = Sell USD/JPY

Given the recent volatility in the Nikkei and the Japanese Yen, we expect tonight’s BoJ rate decision to be an interesting one. We generally like to trade these rate decisions reactively. If the BoJ increases their frequency of JGBs purchased, USD/JPY should enjoy a much stronger recovery. However if the BoJ decides to sit on their hands and leave policy unchanged, USD/JPY could resume its slide as traders sell the currency in disappointment. REACTIVE TRADE

TECHNICALS

99.00 caps the recovery
Strong rebound off 95.00
Consolidation likely

After spiking to test the lows near 95.00 level last week USD/JPY has staged an impressive rebound. But the upside has run out of momentum at 99.00 and now the pair may consolidate its recent gains, though a break of 99.00 opens up a prospect of return to 100.00

4. GBP/USD – UK Industrial Production




FUNDAMENTALS
Industrial Production expected @ 0.0% (4:30 AM ET / 8:30 GMT)
Our View – Bullish GBP
Reason – Continued Increase in PMI Manufacturing
If Industrial Production growth exceeds 0.5% = Buy GBP/USD
If Industrial Production contracts by -0.2% or more = Sell GBP/USD

We have strong reasons to believe that U.K. industrial production growth accelerated in the month of April because of the continued upside surprises in the PMI manufacturing index. Therefore the data can be traded proactively or reactively. For those who choose to wait, if industrial production growth exceeds 0.5%, GBP/USD can be bought for a move higher. If industrial production contracts by 0.2% or more, the GBP/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

5500-5600 continues to hold
Consolidating at highs
Break of 5680 opens run to 5900

Cable continue to hold near its highs consolidating in the 5500-5600 range. A break above 5680 opens up a run towards 5900 while a break below 5450 would suggest that the upside is done for now.

5. USD/MXN – Mexico Industrial Production



FUNDAMENTALS
Industrial Production expected @ 0.5% (9 AM ET / 13 GMT)
Our View – Neutral
Reason – Neutral
If Industrial Production growth drops by -0.5% or more = Buy USD/MXN
If Industrial Production growth exceeds 0.8% or more= Sell USD/MXN

Industrial production numbers are important for a country like Mexico who counts manufacturing as one of their leading industries. Unfortunately Mexican economic data is difficult to handicap and therefore best traded reactively. If industrial production dropss by -0.5% or more, USD/MXN can be bought for a move higher. If industrial production growth exceeds 0.8%, USD/MXN can be sold. REACTIVE TRADE

TECHNICALS

12.90 caps
Break opens up prospect of 13.00
12.70 holds support

USD/MXN is holding near its recent highs with 12.90 capping the action, but a break there could open a run to 13.00 while 12.70 is double bottom support

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