Top 5 – 09.02.13

TOP 5 HOT IDEAS

DATE: Monday Sept 2 & Tuesday Sept 3, 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

MONDAY Sept 2

1. AUD/USD – PMI Manufacturing



FUNDAMENTALS
PMI Manufacturing expected @ (7:30 PM ET / 23:30 GMT)
Our View – Neutral
Reason – Neutral
If PMI Manufacturing exceeds 45 = Buy AUD/USD
If PMI Manufacturing index drops below 40 = Sell AUD/USD

Australia’s PMI manufacturing index is scheduled for release Sunday evening and while stronger Chinese growth suggests that Australian manufacturing conditions may have improved, businesses remain pessimistic and for this reason we feel that the data is best traded reactively. If the PMI index exceeds 45, we expect the AUD/USD to rally in relief. If the index drops below 40, we expect AUD/USD to weaken. REACTIVE TRADE

TECHNICALS

8900 remains equilibrium
8850 key support
9000 still caps upside

The Aussie remains in tight equilibrium around the 8900 level with 8850 the absolute key support off the recent lows. 9000 caps the upside for now.

2. GBP/USD – PMI Manufacturing

FUNDAMENTALS
UK PMI Manufacturing expected @ 55 (4:30 AM ET / 8:30 GMT)
Our View – Bullish GBP
Reason – Sharp Improvement in CBI
If UK PMI exceeds 56 = Buy GBP/USD
If UK PMI drops below 52 = Sell GBP/USD

We have strong reasons to believe that U.K. manufacturing activity improved in the month of August because a similar survey conducted by the Confederation of British Industry increased. As such we feel this data can be traded proactively or reactively. For those who choose to wait, if the PMI index exceeds 56, the GBP/USD can be bought for a quick move higher. If the UK PMI index drops below 52, the GBP/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

5500 tested again
5400 key support
5600 caps the upside for now

Cable continues to test 5500 support, but the true deeper support is at the 5400 level from which the current rally broke out. 5600 caps while 5700 is very strong double top resistance.

TUESDAY Sept 3

1. AUD/USD – RBA Rate Decision

FUNDAMENTALS
RBA Rate Decision expected @ 2.50% (12:30 AM ET / 4:30 GMT)
Our View – Neutral
Reason – Neutral
If RBA tone shifts from dovish to neutral = Buy AUD/USD
If RBA remains dovish = Sell AUD/USD

The RBA is not expected to alter interest rates tonight but the tone of the central bank could have a large impact on how the AUD/USD trades. Given the recent trend of Australian data, we feel that the RBA will be dovish and leave the door open to additional easing. However with central bank decisions, it is always best to wait for the data to be released before taking a trade. If the RBA shifts its tone from dovish to neutral, the AUD/USD can be bought for a further squeeze higher. If the RBA ignores recent improvements and the decline in the AUD and remains dovish, the AUD/USD can be sold for a resumption of the downtrend. REACTIVE TRADE

TECHNICALS

8900 remains equilibrium
8850 key support
9000 still caps upside

The Aussie remains in tight equilibrium around the 8900 level with 8850 the absolute key support off the recent lows. 9000 caps the upside for now.

2. EUR/CHF – Swiss Q2 GDP

FUNDAMENTALS
Swiss GDP expected @ 0.3% (1:45 AM ET / 5:45 GMT)
Our View – Bullish CHF
Reason – Stronger Retail Sales and Trade
If GDP growth slows to 0% or declines = Buy EUR/CHF
If GDP growth exceeds 0.7% = Sell EUR/CHF

We have good reasons to believe that Swiss GDP growth accelerated in the second quarter. The two main components of GDP are retail sales and trade – both of which improved between April and June. We feel that the data can be traded proactively or reactively. For those who choose to wait, if GDP is flat or declines, EUR/CHF can be bought for a move higher. If GDP growth exceeds 0.7%, representing acceleration in Swiss growth, EUR/CHF can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

Back to 2300
2350 caps
Break of 2300 opens test of 2250

EUR/CHF is back to the 2300 level as the run to 2350 fails again. A break of 2300 opens a test of much more important support at 2250 as the pair continues to remain rangebound.

3. USD/JPY – ISM Manufacturing



FUNDAMENTALS
ISM Manufacturing expected @ 54 (10 AM ET / 14 GMT)
Our View – Neutral
Reason –Weaker Empire and Philly, Chicago?
If ISM index exceeds 57 = Buy USD/JPY
If ISM index drops below 53 = Sell USD/JPY

The national ISM manufacturing index can be an important release for the U.S. dollar. We typically like to trade this report proactively but this month, the lower Empire and Philly Fed survey was offset by the large increase in Chicago PMI, making the data difficult to call. Therefore ISM should be traded reactively. If the index exceeds 57, USD/JPY can be bought for a move higher. If it drops below 53, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS

98.50 fails to hold again
98.00 still holds
Break key to test of 99.00

USD/JPY continues to consolidate in a very tight range as 98.50 still fails to hold, but 98.00 remains support. The pair must hold the 98.50 level on closing basis which is key to making a run towards the retest of 99.00.

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