Top 5 – 08.21.2013

TOP 5 HOT IDEAS

DATE: Wednesday August 21, 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 – Westpac Leading Index



FUNDAMENTALS
Leading Index expected @ (8:30 PM ET / 0:30 GMT)
Our View – Neutral
Reason – Neutral
If Leading Indicators exceed 0.7% = Buy AUD/USD
If Leading Indicators is flat or declines = Sell AUD/USD

Australian leading indicators are scheduled for release tonight and the data is not expected to have a significant impact on the AUD unless there is a big surprise. The data will most likely be weaker but still best traded reactively. If leading indicators exceed 0.7%, the AUD/USD can be bought for a move higher. If leading indicators is flat or declines, the AUD/USD can be sold. REACTIVE TRADE

TECHNICALS

9100 given
9000 holds for now
9000-9200 new channel

The Aussie selloff continued with 9100 given overnight, but the pair managed to find support ahead of 9000 and is now carving out a new channel between 9000-9200.

2. NZD/USD – New Zealand Credit Card Spending

FUNDAMENTALS
Credit Card Spending expected @ (6:45PM ET / 20:45)
Our View – Neutral
Reason -- Neutral
If Credit Card Spending rises by 3.5% or more = Buy NZD/USD
If Credit Card Spending rises by 1% or less = Sell NZD/USD

New Zealand credit card spending is not a huge market mover for the NZD/USD unless there is a big surprise. Therefore the data is best traded reactively. If credit card spending rises by 3.5% or more, the NZD/USD can be bought for a move higher. If credit card spending falls by 1% or less, the NZD/USD can be sold. REACTIVE TRADE

TECHNICALS

Break of 8000 bearish
7900 holds for now
8100 now triple top

The kiwi selloff suggests further weakness as the pair has given up the key 8000 support level and is now holding just above 7900. A break there opens a test of the 7700. Meanwhile 8100 caps upside with a triple top.

3. GBP/USD – Public Sector Finances and Net Borrowing

FUNDAMENTALS
Public Sector Finances expected @ -8.7B & Public Sector Net Borrowing expected at -5B (4:30 AM ET / 8:30 GMT)
Our View – Neutral
Reason – Neutral
If Public Finances & Net Borrowing drops by -10B or more = Buy GBP/USD
If Public Finances & Net Borrowing exceeds 5B = Sell GBP/USD

The U.K’s public sector finances and data on net borrowing are due for release tomorrow. Though these reports can be market moving, they are difficult to handicap and therefore best traded reactively. If Public Finances & Net Borrowing drops by -10B or more, the GBP/USD can be bought for a move higher. If Public Finances & Net Borrowing exceeds 5B, the GBP/USD can be sold. REACTIVE TRADE

TECHNICALS

5700 strong resistance
5650 near term support
Break above opens run to 5750

Cable has found a cement ceiling at the 5700 level and has been rejected there several times today. A break above opens a run to test the swing highs at 5750 while 5650 is near term support.

4. EUR/USD – US Existing Home Sales

FUNDAMENTALS
Existing Home Sales expected @ 1.4% (10 AM ET / 14 GMT)
Our View – Neutral
Reason – Neutral
If Existing Home Sales drop by -1% or more = Buy EUR/USD
If Existing Home Sales rise by 5% or more = Sell EUR/USD

According to the Federal Reserve’s Beige Book report, the housing market continues to recover but existing home sales is difficult to handicap and therefore best traded reactively. If existing home sales drop by -1% or more, the EUR/USD should rally. If Existing Home Sales rise by 5% or more, the EUR/USD should fall. REACTIVE TRADE

TECHNICALS

3400 taken out
3450 caps for now
3350 near term support

The EUR/USD finally broke through the 3400 barrier but 3450 caps the upside for now, but the pair remains on upward trajectory with 3500 in view.

5. USD/JPY – FOMC Minutes



FUNDAMENTALS
FOMC Minutes expected @ (2 PM ET / 18 GMT)
Our View – Neutral
Reason – Neutral
If GDP growth is 0% or lower = Buy USD/MXN
If GDP growth is 0.6% or higher = Sell USD/MXN

The most important event risk for the U.S. dollar this week will be tomorrow’s FOMC minutes. The central bank will releasing the minutes from its June meeting and given the heightened sensitivity to anything that could shed light on the timing for Fed tapering, the minutes could have an unusually significant impact on the U.S. dollar. We will be looking for 2 specific details in tomorrow’s release. The first is the level of conviction for easing in September. If the minutes emphasize the progress made in the U.S. economy and the need to act quickly, the dollar could resume its rise as yields extend higher. However if the minutes contain an overall air of caution with more members wanting to wait for further improvements before changes are made, the dollar could fall sharply as U.S. yields give up recent gains. We will also be looking for details on which assets the Fed will taper. The choice is between Treasuries and mortgage backed securities and if the Fed opts for only one and it would be Treasuries, the dollar should slide as this would represent a smaller initial move. If the minutes reveal plans to taper both, it would be positive for the dollar because it gives hope for a more aggressive reduction. The minutes are best traded reactively. REACTIVE TRADE

TECHNICALS

97.00 continues to hold
Break below opens test of 96.50
98.00 relieves bearish bias

USD/JPY continues to hold the 97.00 level which remains key support. A break there opens a run towards 96.00 while a takeout of 98.00 relieves bearish bias.

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