Top 5 10.08.13

TOP 5 HOT IDEAS

DATE: Tuesday Oct 8, 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 – NAB Confidence



FUNDAMENTALS
NAB Business Confidence expected @ (8:30PM ET / 00:30 GMT)
Our View – Neutral
Reason -- Neutral
If Business Confidence index exceeds 10 = Buy AUD/USD
If Business Confidence Index is 2 or lower = Sell AUD/USD

With the recent unevenness of Australian data and the outlook uncertain, any piece of data can have a meaningful impact on the A$. Unfortunately the data is difficult to handicap this month because of improvements in domestic activity. Therefore we feel the data is best traded reactively. If the business confidence index exceeds 10, we expect the AUD/USD to rally. If the index drops to 2 or lower, we expect the AUD/USD to slide. REACTIVE TRADE

TECHNICALS

9400 continues to hold
9500 key resistance
Break opens run to 9700

Aussie continues to perform well having held above the 9400 level against a pretty strong dollar.The pair continues to face stiff resistance at at 9450 and then 9500 but a break above can lead to a run to 9700

2. EUR/CHF – Swiss Retail Sales

FUNDAMENTALS
Swiss Retail Sales expected @ 1.5% (3:15 AM ET / 7:15 GMT)
Our View – Neutral
Reason – Neutral
If retail sales growth slows to 0.5% or lower = Buy EUR/CHF
If retail sales growth exceeds 2% = Sell EUR/CHF

Switzerland does not release many economic reports so when a piece of data is on the calendar, it can be important. This is particularly true of Tuesday’s retail sales release as consumer spending is the backbone of every economy. Unfortunately Swiss data is difficult to handicap and best traded reactively. If retail sales growth slows to 0.5% or lower, EUR/CHF can be bought for a move higher. If retail sales growth exceeds 2%, EUR/CHF can be sold. REACTIVE TRADE

TECHNICALS

1.2200 holds
1.2300 caps the moves
Tight basing

EUR/CHF continues to base near the key 1.2200 level but the pair has resistance at 1.2300 and a break below 1.2200 could open a quick run towards 1.2100.

3. EUR/USD – German Trade Balance

FUNDAMENTALS
Trade Balance expected @ 15B (2 AM ET / 6 GMT)
Our View – Neutral
Reason – PMI down but higher new and export orders
If the trade surplus exceeds 18B = Buy EUR/USD
If the trade surplus is less 13B = Sell EUR/USD

This month’s German trade balance report is a tough call because the drop in the PMI index was offset by the rise in the new orders and new export orders. This lack of consistency suggests that the should be traded reactively. If the trade surplus exceeds 18B, the EUR/USD can be bought for an extension higher. If the trade surplus is less than 13B, the EUR/USD can be sold REACTIVE TRADE

TECHNICALS

3550 holds
3600 still caps
Slow consolidation at top of range

EUR/USD continues its slow consolidation at top of range but 3600 still a tough figure to overcome while 3550 supports.

4. USD/CAD – Canadian Trade Balance

FUNDAMENTALS
Trade Balance @ -0.63B (8:30 AM ET / 12:30 GMT)
Our View – Bullish
Reason – Higher IVEY PMI
If trade deficit exceeds -1.0B = Buy USD/CAD
If trade balance is -0.3B or better = Sell USD/CAD

We have good reasons to believe that Canada’s trade balance deteriorated in the month of August because manufacturing conditions declined according to that month’s IVEY PMI index. Therefore we feel the data can be traded proactively or reactively. For those who choose to wait, if Canada’s trade deficit exceeds -1.0B, USD/CAD can be bought for a quick move higher. If the trade balance is -0.3B or better, USD/CAD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

1.0350 caps the upside
1.0250 next downside target
Consolidation in place

Loonie continues to consolidate with 1.0350 capping upside for now and 1.0250 next target for the shorts as the bias turns slightly more bearish.

5. USD/JPY – US Trade Balance





FUNDAMENTALS
Trade Balance expected @ -$39.4B (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Rise in ISM Manufacturing but drop in new orders
If Trade deficit is smaller than -$37B = Buy USD/JPY
If Trade deficit exceeds -$42B = Sell USD/JPY

This month’s U.S. trade balance report is difficult to handicap and therefore best traded reactively because the rise in ISM manufacturing was offset by a drop in new orders. If the Trade deficit is smaller than -$37B or smaller, USD/JPY can be bought for a move higher. If Trade deficit exceeds -$42B, USD/JPY can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

97.00 barely holds
96.50 next level for shorts
98.00 now caps upside

The slide in USD/JPY continues. It is slow but steady as the pair has given the 97.00 support and now sees 96.50 in view as the next target of shorts.

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