Top 5 – 08.26.13

TOP 5 HOT IDEAS

DATE: Monday August 26, 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 Trade Balance



FUNDAMENTALS
New Zealand Trade expected @ -16M (6:45 PM ET / 22:45 GMT)
Our View – Bullish NZD
Reason – Sharp Rise in Business and Service PMI Index
If NZ Trade Surplus exceeds 500M = Buy NZD/USD
If NZ Trade Surplus falls by -100M or more = Sell NZD/USD

We have strong reasons to believe that New Zealand’s trade data will surprise to the upside because according to the latest PMI numbers, manufacturing and service sector activity improved significantly. We feel that the data can be traded proactively or reactively. For those who choose to wait, if New Zealand’s trade surplus exceeds 500M, the NZD/USD can be bought for a move higher. If the trade surplus rises to -100M or less, the NZD/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

7700 continues to hold
8000 top of range
Break lower opens 7500

7700 continues in NZD/USD creating a possible triple bottom, but a break there opens a move to 7500. Meanwhile 8000 caps the upside.

2. USD/SGD – Singapore Industrial Production

FUNDAMENTALS
Singapore Industrial Production expected @ 0% (1 AM ET / 5 GMT)
Our View – Neutral
Reason – Neutral
If IP drops by -0.5% or more = Buy USD/SGD
If IP is rises by 1% = Sell USD/SGD

Industrial production numbers from Singapore are scheduled for release tomorrow but the data is difficult to handicap and therefore best traded reactively. If Industrial Production drops by -0.5% or more USD/SGD can be bought for a move higher. However if industrial production falls by 1% or more, USD/SGD can be sold. REACTIVE TRADE

TECHNICALS

2850 Double top
2600 next support
2500 deeper support

USD/SGD has formed a double top at 1.2850 and a move lower now looks to support at 1.2600 and deeper support at 1.2500.

3. USD/JPY – Durable Goods

FUNDAMENTALS
Durable Goods expected -4% (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Neutral
If Durable Goods orders rises by 5% or more = Buy USD/JPY
If Durable Goods orders fall by -5% or more = Sell USD/JPY

Durable goods orders are notoriously volatile and difficult to trade. So the only opportunity we see is to trade the data reactively. If durable goods orders rise by 5% or more, USD/JPY can be bought for a move higher. If orders drop by 5% or more, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS

99.00 fails to hold
98.00 new support
A break above 99.00 opens a run towards 99.50-100.50

99.00 failed to hold in USD/JPY but the positive bias remains in the pair as long as 98.00 support continues to hold firm. A break above 99.00 on a closing basis opens a run to test the key resistance at 99.50-100.50

FUNDAMENTALS
Trade Balance expected @ -900M (9 AM ET / 13 GMT)
Our View – Neutral
Reason – Neutral
If Mexico’s Trade Deficit widens to -1.1 trillion or larger = Buy USD/MXN
If Mexico’s Trade Deficit narrows to -200M or smaller = Sell USD/MXN

Economic data from Mexico is difficult to handicap and therefore best traded reactively. If Mexico’s Trade Deficit widens to -1.1 trillion or more, USD/MXN can be bought for a move higher. If Mexico’s Trade Deficit narrows to -200M or smaller, USD/MXN can be sold. REACTIVE TRADE

TECHNICALS

Major reversal at 13.200
12.5000 key near term support
Double top?

After a strong rally USD/MXN has set a possible double top at 13.2000 after putting in a major reversal. 12.5000 now becomes key support.

5. USD/CAD and Oil



FUNDAMENTALS

With no additional economic reports scheduled for release on Monday, we want to highlight the relationship between USD/CAD and oil. Historically USD/CAD has a negative relationship with oil because rising oil prices is positive for the Canadian dollar and negative for USD/CAD but at some stage all correlations will break down and in the case of USD/CAD and oil it is happening right now. USD/CAD rose to a 1 month high last month despite the high level of oil prices. This is because Canadian data has taken a turn for the worse. GDP numbers are scheduled for release next week, if there are additional downside surprises, a rise in oil will not help the pair.

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