Top 5 – 08.22.13

TOP 5 HOT IDEAS

DATE: Thursday August 22, 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 – Chinese HSBC Flash Manufacturing PMI



FUNDAMENTALS
HSBC Flash PMI expected @ 48.2 (9:45 PM ET / 1:45 GMT)
Our View – Neutral
Reason – Neutral
If the PMI index exceeds 50 = Buy AUD/USD
If the PMI index is less than 50 = Sell AUD/USD

China is Australia’s number one trade partner which means Chinese manufacturing PMI numbers can have a big impact on the AUD. Given the recent uncertainty in the Australian dollar, the currency can be particularly sensitive to incoming data. Since Chinese economic reports are difficult to handicap, they are best traded reactively. If the PMI index exceeds 50, meaning that Chinese manufacturing activity increased in the month of August, the AUD/USD can be bought as a recovery trade. If the index drops below 47, representing a deeper contraction, the currency can be sold for a continued move lower. REACTIVE TRADE

TECHNICALS

9000 given
8850 key test of double bottom
9200 now caps

The Aussie selloff continued unabated with 9000 now given. The downward path now put the pair on a retest of double bottom lows at 8850 while 9200 caps the upside.

2. EUR/CHF – Swiss Trade Balance

FUNDAMENTALS
Swiss Trade Balance expected @ 2.60B (2 AM ET / 6 GMT)
Our View – Neutral
Reason – Neutral
If Trade Surplus is less than 1.5B = Buy EUR/CHF
If Trade Surplus exceeds 3B = Sell EUR/CHF

Switzerland’s trade balance report is difficult to handicap and not incredibly market moving but recently we have been seeing more disappointments than upside surprises in Swiss data. If the trade surplus shrinks to 1.5B or less, EUR/CHF can be bought for a move higher. If it exceeds 3B or more, EUR/CHF can be sold. REACTIVE TRADE

TECHNICALS

2300 holds
Base building continues
2400 upside resistance

EUR/CHF continues to hold its base at 2300 with 2400 as upside resistance while 2250 is key support.

3. EUR/USD – Eurozone Composite PMI

FUNDAMENTALS
Eurozone Composite PMI expected @ 50.9 (4 AM ET / 8 GMT)
Our View – Bullish EUR
Reason – Stronger Industrial Production and Factory Orders
If the PMI index exceeds 51.5 = Buy EUR/USD
If the PMI index is less than 50 = Sell EUR/USD

We have strong reasons to believe that the Eurozone PMI index could surprise to the upside. Given the rise in equities, the slide in the euro and the rebound in industrial production and factory orders, we expect to see some improvements in the region’s economy. Therefore we feel that the data can be traded proactively or reactively. For those who choose to wait, if the PMI index exceeds 51.5, the EUR/USD can be bought for a move higher. If the index drops below 50, the EUR/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

Inside day
3450-3300 near term range
Break either way signals possible direction

The euro posted an inside day today as the 3450-3300 range continues to dominate trade. A break on either side signals possible directional move.

4. USD/JPY – Jobless Claims

FUNDAMENTALS
Jobless Claims @ 330K (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Neutral
If jobless claims rise by 320K or less = Buy USD/JPY
If jobless claims rise by 345K or more = Sell USD/JPY

News that jobless claims dropped to its lowest level since 2007 last week sent the dollar soaring. Traders will be watching this week’s number closely to see if the downtrend continued. The data is difficult to predict and therefore best traded reactively. If jobless claims rise by 320K or less, USD/JPY can be bought for a move higher. If jobless claims rise by 345K or more, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS

97.00-98.00 range persists
97.00 building support
Break below opens run to 96.00

USD/JPY continues to consolidate in a very tight 97.00-98.00 range today with 97.00 continuing to be a solid base for now.

5. USD/CAD – Canadian Retail Sales



FUNDAMENTALS
Retail Sales expected @ -0.4% (8:30 AM ET / 12:30 GMT)
Our View – Bearish CAD
Reason – Sharp drop employment and wholesale sales
If Retail Sales fall by -0.8% or more = Buy USD/CAD
If Retail Sales grow by 0.5% or more = Sell USD/CAD

We have strong reasons to believe that Canadian retail sales growth slowed in the month of June. Between a sharp decline in jobs and a large drop in wholesale sales, retail sales will most likely surprise to the downside. We believe the data can be traded proactively or reactively. For those who choose to wait, if retail sales fall by -0.8% or more, USD/CAD can be bought for a move higher. If retail sales grow by 0.5% or more, USD/CAD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

Big breakout at 1.0450
1.0600 now next target of longs
1.0350 new support

USD/CAD has broken to the upside by taking out resistance at the 1.0450 level and now puts 1.0600 swing highs in view. 1.0350 becomes new support.

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