Top 5 – 08.23.13

TOP 5 HOT IDEAS

DATE: Friday August 23, 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. EUR/USD – Revisions to Q2 GDP



FUNDAMENTALS
Q2 GDP expected @ 0.7% (2 AM ET / 6 GMT)
Our View – Neutral
Reason – Neutral
If GE GDP is revised up to 0.9% or better = Buy EUR/USD
If GE GDP is revised down to 0.5% or worse = Sell EUR/USD

Revisions to second quarter GDP are due for release tomorrow and no major changes are expected so if GDP is revised significantly higher or lower, there could be a big reaction in the EUR/USD. It is best to wait for the data to be released to take a trade and only if there is a large enough surprise. If second quarter GDP is revised up to 0.9% or higher, we expect the EUR/USD to rise. If GDP is revised down to 0.5% or lower, we expect the EUR/USD to fall.

TECHNICALS

3300 holds
3450 still caps
Range remains in place

The 3300-3450 range in EUR/USD remains in place as the pair continues to consolidate its breakout. A break above 3450 opens the run towards the swing highs at 3700.

2. GBP/USD – Revisions to Q2 GDP

FUNDAMENTALS
Q2 GDP expected @ 0.6% (4:30 AM ET / 9:30 GMT)
Our View – Neutral
Reason – Neutral
If UK GDP is revised up to 0.8% or better = Buy GBP/USD
If UK GDP is revised down to 0.4% or worse = Sell GBP/USD

Revisions to second quarter GDP are due for release tomorrow and no major changes are expected so if GDP is revised significantly higher or lower, there could be a big reaction in the GBP/USD. It is best to wait for the data to be released to take a trade and only if there is a large enough surprise. If second quarter GDP is revised up to 0.8% or higher, we expect the GBP/USD to rise. If GDP is revised down to 0.4% or lower, we expect the GBP/USD to fall. REACTIVE TRADE

TECHNICALS

5700 may have set a double top
5550 next support
5500 deeper support

GBP/USD look like it may have set a lower double top at the 5700 level as it failed to broach that level and now looks to the next support at 5550 with 5500 closely following.

3. USD/CAD – Canadian CPI

FUNDAMENTALS
CPI expected @ 0.2% (8:30 AM ET / 12:30 GMT)
Our View – Bullish CAD
Reason – Higher IVEY PMI and Industrial Product Prices
If CPI is -0.2% or lower = Buy USD/CAD
If CPI exceeds 0.5% = Sell USD/CAD

We have good reasons to believe that Canadian consumer prices increased in the month of July. According to the IVEY PMI report, prices rose last month and an increase was also seen in industrial product prices. As a result, we believe the data can be traded proactively or reactively. For those who choose to wait, if CPI drops by -0.2% or more, USD/CAD can be bought for a reactive move higher. If CPI exceeds 0.5%, USD/CAD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

Inside day
1.0500 taken out
1.0600 now in view
1.0450 becomes support

The breakout in USD/CAD has propelled through the 1.0500 level and now puts 1.0600 in view while 1.0450 now becomes the support.

4. USD/JPY – New Home Sales

FUNDAMENTALS
New Home Sales expected @ -2% (10 AM ET / 14 GMT)
Our View – Bullish USD
Reason – Existing Home Sales increase but home sales rose sharply previous month
If New Home Sales rise by 2.0% or more = Buy USD/JPY
If New Home Sales falls by -4% or more = Sell USD/JPY

U.S. new home sales are due for release tomorrow and given the sharp rise in existing home sales, we believe there’s scope for an upside surprise. As a result, we feel that the data can be traded proactively or reactively. If new home sales rise by 2% or more, USD/JPY can be bought for a quick move higher. If New Home Sales fall by -4% or more, USD/JPY can be sold PROACTIVE or REACTIVE TRADE

TECHNICALS

98.50 taken out
Negative bias relieved
99.00 now in view

USD/JPY took out the 98.50 level relieving its bearish bias and now has 99.00 in view.

5. USD/CHF – Jackson Hole Summit



FUNDAMENTALS
Jackson Hole Summit expected @ (No Set Time)
Our View – Neutral
Reason – Neutral

So far no comments have come out of the annual 3 day monetary policy symposium in Jackson Hole, which ends on Saturday. We will continue to watch the newswires, but market-moving comments should be limited because Fed Chairman Ben Bernanke won’t be attending. Two months ago, he dismissed the significance of the meeting by saying, “There’s a perception that the Jackson Hole conference is a Federal Reserve system-wide conference; it’s not” and therefore no fireworks are expected. Nonetheless if Fed officials express any support or caution on tapering, it could affect pairs such as USD/CHF. REACTIVE TRADE

TECHNICALS

9300 badly rejected
9200 now in view
Reversal suggests more downside

USD/CHF has been rejected strongly at the 9300 level suggesting that the pair may now turn downward and target 9200 as next target of shorts.

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