Top 5 – 07.10.2013

TOP 5 HOT IDEAS

DATE: Wednesday July 10, 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 – Australian Consumer Confidence



FUNDAMENTALS
Consumer Confidence expected @ (8:30PM ET / 00:30 GMT)
Our View – Neutral
Reason – Neutral
If Confidence exceeds 5% = Buy AUD/USD
If Confidence is 1% or less = Sell AUD/USD

Australian consumer confidence numbers are due for release this evening and the only opportunity we see is to trade the data reactively. Employment conditions have been flat and business confidence measures are mixed. According to the latest report, business conditions plunged but confidence improved. As result it is best to wait for the data to be released and only take a trade if the surprise is significant enough. If Consumer Confidence exceeds 5%, we expect AUD/USD to rise. If Consumer Confidence grows by 1% or less, we expect AUD/USD to fall. Traders should be out of any positions before the China’s trade balance report 90 minutes later. REACTIVE TRADE

TECHNICALS

Shows relative strength
9200 still key to upside
Break of 9200 opens up run to 9300

The Aussie has shown relative strength all day long and a takeout of 9200 to the upside would open the run towards the key 9300 resistance level.

2. NZD/USD – Chinese Trade Balance



FUNDAMENTALS
China Trade Balance expected @ 27B (10PM ET / 2 GMT)
Our View – Neutral
Reason -- Neutral
If exports grow by 5% or more = Buy NZD/USD
If exports grow by less than 1% = Sell NZD/USD

Chinese trade numbers are scheduled for release this evening and as usual, we expect the commodity currencies to have the biggest reaction. Both AUD and NZD should respond to Chinese data. Unfortunately Chinese economic reports are notoriously difficult to handicap. While we believe that trade activity should be weaker because Chinese growth is slowing, economists are looking for an upside surprise. The focus should be on exports. If exports grow by 5% or more, the NZD/USD can be bought for an extension higher. However if exports grow by less than 1%, the NZD/USD can be sold. REACTIVE TRADE

TECHNICALS

7850 taken out
7900 next upside target
8000 major upside resistance

The recovery in kiwi continues with 7850 now taken out and the pair now eying the 7900 figure. A break to the upside would open the run to the key 8000 resistance while 7700 supports the downside.

3. USD/JPY – Japanese Consumer Confidence

FUNDAMENTALS
Consumer Confidence expected @ 45.6 (1AM ET / 5 GMT)
Our View – Neutral
Reason – Neutral
If Confidence is less than 42 = Buy USD/JPY
If Confidence exceeds 47 = Sell USD/JPY

Japanese consumer confidence numbers are scheduled for release this evening and we do not expect the report to have a significant impact on the Yen unless there is a big surprise. Therefore the data is best traded reactively. If confidence is less than 42, USD/JPY can be bought for a move higher. If confidence exceeds 47, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS

101.50 still caps
100.50 supports
101.50-100.50 consolidation continues

USD/JPY continues to consolidate its recent gains by trading in the 100.50-101.50 corridor. A move through 102.50 would open the test of the yearly highs at 103.40 while 100.00 remains the deep support to the downside.

4. USD/DKK – Danish CPI

FUNDAMENTALS
CPI expected @ -0.2% (3 AM ET / 7 GMT)
Our View – Neutral
Reason – Neutral
If CPI falls by -0.5% or more = Buy USD/DKK
If CPI grows by 0.1% or more = Sell USD/DKK

Consumer prices are expected from Denmark tomorrow morning. The data is not expected to have a significant impact on the currency unless there is a big surprise which is why it is best traded reactively. If CPI falls by 0.5% or more, USD/DKK can be bought for a move higher. If CPI grows by 0.1% or more, USD/DKK can be sold. REACTIVE TRADE

TECHNICALS

5.8500 triple top break
5.8000 support
Eying upside break

USD/DKK is eying an upside break at 5.8500 which would clear the triple top resistance while the downside is supported by 5.8000.

5. EUR/USD – FOMC Minutes



FUNDAMENTALS
FOMC Minutes expected @ (2 PM ET / 18 GMT)
Our View – Neutral
Reason – Neutral
If the FOMC minutes provide no new clues = No Trade
If FOMC minutes show widespread discussion about tapering in September = Sell EUR/USD

The big focus this week for the U.S. dollar is the FOMC minutes and Bernanke’s speech on economic policy in Boston, both of which are expected tomorrow. Given how much the dollar has risen, the question now is whether the minutes will reveal enough new information to extend the gains for the greenback. When the Fed last met, Bernanke said point blank that they may moderate asset purchases this year and end them completely by mid 2014. The exit is clearly marked so even if the FOMC minutes reveal nothing new, we expect Fed Chairman Ben Bernanke to confirm that the central bank is on track to reduce asset purchases this year, which is why there should be no trade. For the FOMC minutes to drive the dollar sharply higher, we need it to show significant support for tapering in September at which point USD/JPY can be bought for an extension higher. REACTIVE TRADE

TECHNICALS

Yearly lows in view
Break of 2700 opens run to 2500
2900 caps upside

EUR/USD continues to drift lower and now has the yearly lows near 1.2730 in view. A break through 1.2700 would open a run towards the 1.2500 level while 1.2900 and then 1.3000 caps the upside for now.

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