Top 5 – 08.08.2013

TOP 5 HOT IDEAS

DATE: Thursday August 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. NZD/USD – Chinese Trade Balance



FUNDAMENTALS
China Trade Balance expected @ 26.9B (9 PM ET / 1 GMT)
Our View – Neutral
Reason -- Neutral
If exports grow by 5% or more = Buy NZD/USD
If exports fall by- 1% or more = Sell NZD/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 commodity currencies. Usually we look for a potential reaction in the AUD but with Australian employment numbers scheduled for release on the same day, we have chosen to focus on the NZD. When it comes to Chinese trade numbers, the key figure to watch is exports. If exports grow by 5% or more, the NZD/USD can be bought for a recovery trade. However if exports fall by 1% or more, which would be representative of weaker Chinese growth, the NZD/USD can be sold. REACTIVE TRADE

TECHNICALS

7950 retaken
Strong rebound continues
8000 still caps for now

The kiwi rebounded strongly for the third day in row retaking the 7950 level but 8000 figure is still capping at the key resistance point.

2. AUD/USD – AU Employment

FUNDAMENTALS
AU Employment expected @ 6K (9:30 PM ET / 1:30 GMT)
Our View – Neutral
Reason – Drop in employment component of manufacturing but rise in service and construction PMI
If Employment Change rises by 25K or more = Buy AUD/USD
If Employment Change declines by 5K or more = Sell AUD/USD

Australian employment numbers are expected to have a big impact on the AUD. Unfortunately this month’s release is difficult to handicap because while the manufacturing sector reported weaker labor market conditions, job growth improved in the service and construction sectors. As a result, we believe the data is best traded reactively. For those who choose to wait, if employment increases by 25K or more, the AUD/USD can be bought for a recovery trade. If employment drops by 5K or more, the AUD/USD can be sold. REACTIVE TRADE

TECHNICALS

9000 taken out
8850 now near term bottom
9100 next upside level resistance

The Aussie continued its recovery today and was finally able to retake the 9000 level as it has now formed a clear bottom at 8850. 9100 next upside challenge for longs.

3. EUR/CHF – Swiss Unemployment Rate

FUNDAMENTALS
Swiss Unemployment expected @ 2.9% (1:45 AM ET / 5:45 GMT)
Our View – Neutral
Reason – Neutral
If Switzerland’s unemployment rate is 3.1% or higher = Buy EUR/CHF
If Switzerland’s unemployment rate is 2.7% or less = Sell EUR/CHF

No major changes are expected in Switzerland’s unemployment rate, which means the data is best traded reactively. If Switzerland’s unemployment rate is 3.1% or higher EUR/CHF can be bought for a move higher. If the unemployment rate drops to 2.7% or lower, EUR/CHF can be sold. REACTIVE TRADE

TECHNICALS

2250 holds but still below 2300
2350 next resistance levels
Consolidation continues

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

4. EUR/USD – German Trade Balance

FUNDAMENTALS
Trade Balance expected @ 15B (2 AM / 6 GMT)
Our View – Bullish EUR
Reason – Stronger Industrial Production, Factory Orders and PMI
If Trade balance exceeds 17B = Buy EUR/USD
If Trade Balance is less than 12B = Sell EUR/USD

We have strong reasons to believe that German trade activity improved in the month of June. The country’s manufacturing PMI report ticked upwards along with industrial production and factory orders. Therefore we believe that the data can be traded proactively or reactively. For those who choose to wait, if Germany’s Trade balance exceeds 17B, we expect EUR/USD to rally. If the Trade Balance is less than 12B, we expect the EUR/USD to weaken. REACTIVE TRADE

TECHNICALS

1.3350 still caps upside
1.3250 near term support
Break opens run to 3400

The EUR/USD continues to inch higher having taken out 1.3300 but 1.3350 continues to cap although a break there could open a run to 1.3400.

5. USD/JPY – Jobless Claims



FUNDAMENTALS
Jobless Claims @ 335K (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Neutral
If jobless claims rise by 325K or less = Buy USD/JPY
If jobless claims rise by 350K or more = Sell USD/JPY

Jobless claims are scheduled for release tomorrow and given the sharp improvement the week prior, all eyes will be on whether the decline was sustained. In general, the data is difficult to predict and therefore best traded reactively. If jobless claims rise by 325K or less, USD/JPY can be bought for a move higher. If jobless claims rise by 350K or more, USD/JPY can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

97.00 given
96.50 near term support
Liquidation persists

USD/JPY continues to decline with 97.00 now given and 96.50 the next test of the shorts as the pair slide could now face 96.00 before it finds support.

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