Top 5 – 09.19.2013

TOP 5 HOT IDEAS

DATE: Thursday Sept 19, 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 – Q2 GDP



FUNDAMENTALS
GDP expected @ 0.2% (6:45 PM ET / 22:45 GMT)
Our View – Neutral
Reason – Weaker Trade, stronger consumer spending
If GDP growth exceeds 0.4% = Buy NZD/USD
If GDP growth is less than 0.1% = Sell NZD/USD

New Zealand GDP numbers are due for release this evening and while consumer spending improved slightly in Q2, trade activity deteriorated, which suggests the data could surprise to the downside. Given the hawkishness of the RBA, we feel New Zealand GDP figures are best traded reactively. If GDP growth exceeds 0.4%, we believe the NZD/USD can be bought for an extension higher. If GDP growth is less than 0.1%, the NZD/USD can be sold. REACTIVE TRADE

TECHNICALS

8300 taken out
8400 next in view
8200 now support

Kiwi busted out to fresh highs with 8300 taken out and 8400 no next in view on momentum alone. 8200 is now support.

2. USD/JPY – Japanese Trade Balance

FUNDAMENTALS
Trade Balance expected @ -Y819B (7:50 PM ET / 23:50 GMT)
Our View – Neutral
Reason – Neutral
If Trade Deficit exceeds –Y1Trillion = Buy USD/JPY
If Trade Deficit is smaller than –Y750M = Sell USD/JPY

Japan’s trade balance report is scheduled for release tonight and the data is not expected to have a significant impact on the JPY unless there is a big surprise. The data is also difficult to handicap and therefore best traded reactively. If the Trade Deficit exceeds –Y1Trillion, USD/JPY can be bought for a move higher. If Trade Deficit is smaller than –Y750M , USD/JPY can be sold. REACTIVE TRADE

TECHNICALS

98.00 holds for now
97.50 key support
Break opens tests of 9500

USD/JPY’s decline was not as steep as one would expect with 98.00 holding for now, but the key support for the pair is 97.50 and a break there could lead to a drop towards 95.00

3. EUR/CHF – SNB Rate Decision

FUNDAMENTALS
SNB Rate Decision expected @ 0.5% (3:30 AM ET / 7:30 GMT)
Our View – Neutral
Reason – Neutral
If SNB reaffirms commitment to Franc ceiling = No Trade
If SNB hardens commitment to Franc ceiling = Sell EUR/CHF

Central bank rate decisions are always important to a country’s currency particularly the Swiss National Bank and its currency policy. Interest rates in Switzerland are already zero so what investors will be looking for are the central bank’s comments on its currency. If the SNB reaffirms its commitment to its current Franc ceiling there may not be a trading opportunity but if the SNB hardens its stance, then EUR/CHF could rise quickly. As a result, we believe the SNB rate decision can only be traded reactively. REACTIVE TRADE

TECHNICALS

2300-2400 range persists
Low vol environment in play
Break either way could signal directional move

EUR/CHf remains in a low vol environment with 2300-2400 range dominating trade.

4. GBP/USD – UK Retail Sales

FUNDAMENTALS
Retail Sales expected @ 0.4% (4:30 AM ET / 8:30 GMT)
Our View – Bearish
Reason – Weaker BRC Retail Sales
If Retail Sales grow by 1% or more = Buy GBP/USD
If Retail Sales contract by 0.1% or more = Sell GBP/USD

We have good reasons to believe that U.K. retail sales slowed last month because despite an uptick in confidence the British Retail Consortium reported a drop in spending. We feel that the data can be traded proactively or reactively. For those who choose to wait, if retail sales grow by 1.0% or more, the GBP/USD can be bought for a recovery trade. However if retail sales contract by 0.1% or more, the GBP/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

1.6000 and 6100 broken
1.5900 near term support
1.6200 now in view

Cable busted out to fresh highs today and momentum could carry the pair towards the 1.6200 level while 1.5900 now represents support.

5. USD/JPY – Philadelphia Fed Survey



FUNDAMENTALS
Philly Fed Survey expected @ 10.3 (10 AM ET / 14 GMT)
Our View – Bearish USD
Reason – Drop in Empire State
If the Philly Fed index rises to 15 or higher = Buy USD/JPY
If the Philly Fed index falls to 7 or lower = Sell USD/JPY

A number of U.S. economic reports are scheduled for release tomorrow and we believe that the Philadelphia Fed index will be the most market moving. Based on the drop in the Empire State survey, we believe that the data can surprise to the downside and can be traded reactively. If the Philly Fed index rises to 15 or higher, USD/JPY can be bought for an extension higher. If the Philly Fed index falls to 7 or lower, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS

98.00 holds for now
97.50 key support
Break opens tests of 9500

USD/JPY’s decline was not as steep as one would expect with 98.00 holding for now, but the key support for the pair is 97.50 and a break there could lead to a drop towards 95.00

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