Top 5 09.25.13


DATE: Wednesday Sept 25, 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

New Zealand Trade expected @ -700M (6:45 PM ET / 22:45 GMT)
Our View – Bearish NZD
Reason – Drop in Business PMI Index
If NZ Trade deficit is -200M or smaller = Buy NZD/USD
If NZ Trade Deficit exceeds -1 Billion = Sell NZD/USD

We have good reasons to believe that New Zealand’s trade surplus will surprise to the downside. While the RBNZ is hawkish, the business PMI index declined, signaling weaker manufacturing activity. We feel the data can be traded proactively or reactively. For those who choose to wait, if New Zealand’s trade deficit is -200 million or smaller, the NZD/USD can be bought for an extension higher. If the trade deficit is -1 Billion or larger, the NZD/USD can be sold. PROACTIVE or REACTIVE TRADE


Correction accelerates
8250 tested
8200 key long term support

Kiwi came under heavy selling in overnight trades as profit taking accelerated sending the pair to a test of 8250. A break there opens a much bigger test of support at 8200.

2. EUR/CHF – UBS Consumption Index

UBS Consumption Indicator @ (2AM ET / 7GMT)
Our View – Neutral
Reason – Neutral
If UBS Consumption Indicator is less than 1.20 = Buy USD/CHF
If UBS Consumption Indicator exceeds 1.60 = Sell USD/CHF

Switzerland’s economic calendar is generally very light but there are a handful of releases worth watching and this includes the UBS Consumption indicator which is a measure of demand. Unfortunately the data is difficult to handicap and therefore best traded reactively and only if there is a meaningful surprise. If the index drops to 1.20 or lower, EUR/CHF can be bought for an extension higher. If it is rises to 1.60, EUR/CHF can be sold. REACTIVE TRADE


2300 continues to hold
Possible triple bottom
A break opens test of 2200

EUR/CHF remains under heavy selling assault but continues to hold the 2300 level forming a possible triple bottom. A break however could quickly trigger a move to 2200.

3. EUR/USD – German GfK Confidence

GfK Consumer Confidence expected @ 7 (2AM ET / 7GMT)
Our View – Neutral
Reason – Neutral
If GfK exceeds 7.5 = Buy EUR/USD
If GfK is less than 6.5 = Sell EUR/USD

German consumer confidence numbers are difficult to handicap and not incredibly market moving for the euro unless there is a big surprise. As a result, we believe that the GfK survey should be traded reactively. If the GfK index exceeds 7.5, we expect the EUR/USD to rise. If the index falls to 6.5 or lower, we expect the EUR/USD to fall. REACTIVE TRADE


Profit taking kicks in
1.3450 key support
Break opens unwind to 1.3300

The upward bias in EUR/USD has clearly stalled and the pair is under moderate amount of profit taking pressure with 1.3450 still holding -- a move through that level could trigger an unwind all the way to 1.3300.

4. GBP/USD – CBI Reported Sales

CBI Reported Sales expected @ 23 (7 AM ET / 11 GMT)
Our View – Neutral
Reason – General Improvement in Data and labor market conditions
If CBI exceeds 30 = Buy GBP/USD
If CBI is less than 21 = Sell GBP/USD

We have good reasons to believe that the CBI reported sales index improved in the month of August because there has been a general trend of positive data in UK data that even prompted less dovishness from the BoE. Unfortunately the data does not have a big impact on the GBP unless there is a big surprise, which is why we believe the data is best traded reactively. If the CBI index exceeds 30, the GBP/USD can be bought for a move higher. If the CBI index drops to 21 or lower, the GBP/USD can be sold. REACTIVE TRADE


1.6000 continues to hold
1.6150 key to upside
1.5900 deeper support

Cable remains one of the better bid anti-dollars still holding support at 1.6000. However the key to upside is a break of 1.6150 recent highs while a move lower finds deeper support at 1.5900.

5. USD/JPY – New Home Sales

New Home Sales expected @ 6.6% (10 AM ET / 14 GMT)
Our View – Neutral
Reason – Slower Growth in Existing Home Sales but Rebound expected after very Weak Month
If New Home Sales rise by 8% or more = Buy USD/JPY
If New Home Sales rise by 5% or less = Sell USD/JPY

U.S. new home sales are due for release tomorrow and given the slowdown in existing home sales, we believe there’s scope for an downside surprise. The only issue is that sales collapsed the previous month so a recovery would be natural. As a result, we feel that the data is best traded reactively. If new home sales rise by 8% or more, USD/JPY can be bought for a quick move higher. If New Home Sales rise by less than 5%, USD/JPY can be sold PROACTIVE or REACTIVE TRADE


Mild downward bias
98.50 holds for now
98.00 deeper support

USD/JPY maintains its mild downward bias but 98.50 holds for now. The pair faces resistance at 99.50 and strong support at 98.00

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