Top 5 – 08.07.2013

TOP 5 HOT IDEAS

DATE: Wednesday August 7, 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. NZD/USD – New Zealand Unemployment

FUNDAMENTALS
NZ Unemployment expected @ 6.3% (6:45 PM ET / 22:45 GMT)
Our View – Neutral
Reason – Business Confidence Increased but Unemployment Rate Dropped Sharply Previous Q
If Unemployment Rate exceeds 6.4% = Buy NZD/USD
If Unemployment Rate is 6.2% or less = Sell NZD/USD

While we have good reasons to believe that employment conditions in New Zealand improved last quarter because job advertisements ticked up and business confidence increased, the unemployment rate dropped steeply in Q1 and now payback is expected in Q2. It is for this reason why we feel that New Zealand’s employment numbers are best traded reactively. If the country’s unemployment rate rises to 6.4% or more, the NZD/USD could reverse its recent rise. If the unemployment rate remains at 6.2% or declines, NZD/USD could extend its gains. REACTIVE TRADE

TECHNICALS

7900 retaken
Strong bounce off 7750 support
8000 caps for now

The kiwi rebounded strongly for the second day in row retaking the 7900 level but 8000 figure is likely to prove much stiffer resistance.

2. EUR/CHF – Swiss CPI



FUNDAMENTALS
Swiss CPI expected @ -0.4% (3:15 AM ET / 7:15 GMT)
Our View – Neutral
Reason – Neutral
If CPI drops by -0.8% or more = 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 0.8% or more, 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

2250 holds
2350 next resistance levels
Consolidation continues

EUR/CHF has managed to hold support at the 1.2250 level but 2350 remains upside resistance and consolidation continues.

3. GBP/USD – BoE Quarterly Inflation Report

FUNDAMENTALS
BoE Quarterly Inflation Reported expected @ (4:30 AM ET / 8:30 GMT)
Our View – Neutral
Reason – Neutral
If BoE Guidance suggests no change in stimulus plans = Buy GBP/USD
If BoE Guidance suggests that central bank wants to ease again = Sell GBP/USD

Tomorrow’s BoE Quarterly Inflation report could be a very big market mover for the GBP. The central bank has said big changes are underway and depending on the type of guidance that the central bank provides, the impact on sterling could be significant. Unfortunately exactly how the central bank will provide guidance on interest rate direction is difficult to predict and therefore the announcement is best traded reactively. If the BoE Guidance suggests no change in stimulus plans, the GBP/USD could be bought for a move higher. If BoE Guidance suggests that central bank wants to ease again, the GBP/USD can be sold. REACTIVE TRADE

TECHNICALS

5400 still caps upside
Break above 5400 opens the run to 5700
5300 supports

Cable continues its recovery but 5400 still out of its grasp as the pair fails once again to capture that level. A break above would open the run to 5700.

4. EUR/USD – German Industrial Production

FUNDAMENTALS
German IP expected @ 0.3% (6 AM ET / 10 GMT)
Our View – Bullish EUR
Reason – German factory orders and PMI increased
If German Industrial Production rises by 0.6% or more = Buy EUR/USD
If German Industrial Production drops by 0.3% or more = Sell EUR/USD

We have strong reasons to believe that German industrial production increased in the month of June. Manufacturing conditions have improved significantly according to the latest PMI and factory orders reports. Therefore we feel that the data can be traded proactively or reactively. For those who choose to wait, if German industrial production rises by 0.6% 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. PROACTIVE or REACTIVE TRADE

TECHNICALS

1.3300 take out
But 3350 still caps
Break opens run to 3400

The EUR/USD continues to inch higher having taken out 1.3300 but 1.3350 still caps although a break there opens run to 1.3400.

5. USD/CAD – Canadian IVEY PMI



FUNDAMENTALS
IVEY PMI expected @ 57 (10 AM ET / 14 GMT)
Our View – Neutral
Reason – Neutral
If the PMI index drops below 55= Buy USD/CAD
If the PMI index exceeds 58 = Sell USD/CAD

Canada’s IVEY PMI index is scheduled for release tomorrow and without the guidance of wholesale sales, the data is difficult to handicap and can therefore only be traded reactively in our opinion. If the IVEY PMI index drops below 55, USD/CAD can be bought for a move higher. If it exceeds 58, USD/CAD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

1.0400 caps topside
1.0300 support
Consolidation continues

Loonie continues to consolidate but 1.0400 rejected for now now and the pair eyes 1.0300 on the move lower

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