Top 5 09.17.13

TOP 5 HOT IDEAS

DATE: Tuesday Sept 17, 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 – RBA Minutes



FUNDAMENTALS
RBA Minutes expected @ (9:30 PM ET / 1:30 GMT)
Our View – Neutral
Reason -- Neutral
If RBA Minutes are optimistic = Buy AUD/USD
If RBA minutes are dovish = Sell AUD/USD

The minutes from the most recent Reserve Bank of Australia monetary policy meeting will be released this evening. While the market was surprised by the weakness in the labor market, the RBA left interest rates unchanged at their last meeting and removed the words “scope to easing policy further” from their September statement which many interpreted to mean no more rate cuts this year. Minutes are difficult to handicap and therefore best traded reactively. If the RBA minutes convey an overall sense of optimism, the AUD/USD can be bought for a potential test of 94 cents. However if the RBA minutes remain dovish, the AUD/USD can be sold in anticipation of a short term reversal in the pair. REACTIVE TRADE

TECHNICALS

9400 tops out
9300 supports
Break lower opens run back to 9200

Aussie topped out at 9400 on the gap higher and has drifted lower towards 9300 as the day progressed. 9300 now is a key hold and a break lower opens run to 9200.

2. GBP/USD – UK CPI

FUNDAMENTALS
Consumer Prices expected @ 0.5% (4:30 AM ET / 8:30 GMT)
Our View – Neutral
Reason – PPI released at same time as CPI, Shop Prices Decline as Same Pace
If CPI rises by 0.8% or more = Buy GBP/USD
If CPI rises by 0.1% or less = Sell GBP/USD

U.K. consumer prices are scheduled for release tomorrow and inflationary pressures are expected to accelerate. Unfortunately PPI is released at the same time and shop prices fell by the same amount as the previous, providing very little insight on the direction on CPI. Therefore we feel the data is best traded reactively. If CPI rises by 0.8% or more, the GBP/USD can be bought for a move higher. If CPI rises by -0.1% or less, the GBP/USD can be sold. REACTIVE TRADE

TECHNICALS

Stalls ahead of 1.6000
1.5800 key holds
1.5900 near tern support

GBP/USD has stalled ahead of the key 1.6000 level and has drifted towards 1.5900. The upward bias is still in place but 1.5800 hold is key to maintaining it.

3. EUR/USD – German ZEW

FUNDAMENTALS
ZEW Survey expected @ 45.5 (5 AM ET / 9 GMT)
Our View – Recent Deterioration in Data and Berlusconi Risk
Reason – Bearish EUR
If the ZEW survey exceeds 48 = Buy EUR/USD
If the ZEW survey is less than 40 = Sell EUR/USD

The German ZEW survey is a fairly important release for the EUR/USD but one that can be difficult to handicap. This month, we believe that German investors have reason to be less optimistic. Between the deterioration in data, the risk posed by the Italian Senate subcommittee vote on Berlusconi and Syria, we have good reasons to believe that the ZEW survey declined. As a result, we feel the data can be traded proactively or reactively. If the ZEW survey exceeds 48, the EUR/USD can be bought for a quick move higher. If the ZEW survey drops to 40 or lower, the EUR/USD can be sold.

TECHNICALS

3400 still out of reach
3300 near term support
3250 deeper support

Euro still cannot break the 3400 level as the run higher failed, but the pair is finding good support at 3300 with even deeper support at 3250 which are likely to hold for the time being.

4. USD/JPY – U.S. Consumer Prices

FUNDAMENTALS
US CPI expected @ 0.2% (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Slight Uptick in PPI, Lower Gas Prices
If CPI exceeds 0.5% = Buy USD/JPY
If CPI declines by 0.1% or more = Sell USD/JPY

With inflationary pressures in the U.S. virtually nonexistent, the U.S. CPI reports have had very little impact on USD/JPY. However the Fed decision is right around the corner and therefore every piece of data is worth watching. Since PPI increased but gas prices declined, we feel the U.S. CPI report is best traded reactively. If CPI growth exceeds 0.5%, USD/JPY can be bought for a move higher. If CPI declines by 0.1% or more, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS

98.00 holds
99.00 still key level
100.00 looms on horizon.

USD/JPY continues to hold in the 98.00-100.00 range and is likely to remain there with a break either way leading to more significant directional move.

5. USD/CAD – Canadian Manufacturing Sales



FUNDAMENTALS
Manufacturing Sales expected @ 0.5% (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Neutral
If Manufacturing sales drop by -1% or more = Buy USD/CAD
If Manufacturing sales rise by 1% or more = Sell USD/CAD

Canada’s manufacturing sales report is not a huge market mover for the Canadian dollar unless there is a big surprise. As a result, the data is best traded reactively. If Manufacturing sales drop by 1% or more, USD/CAD can be bought for a quick move higher. If Manufacturing sales rise by 1% or more, USD/CAD can be sold. REACTIVE TRADE

TECHNICALS

1.0280 spike bottom
Possible double bottom
1.0400 topside resistance

USD/CAD may be carving out a possible double bottom as 1.0300 holds and 1.0400 now becomes the next resistance to the upside. A break below through 1.0250 would open a key test of 1.0100

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