Top 5 10.09.13

TOP 5 HOT IDEAS

DATE: Wednesday Oct 9, 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 Credit Card Spending



FUNDAMENTALS
Credit Card Spending expected @ 0.4% (5:45 PM ET / 22:45 GMT)
Our View – Neutral
Reason – Neutral
If Credit Card Spending exceeds 1.0% = Buy NZD/USD
If Credit Card Spending is less than 0.0% = Sell NZD/USD

New Zealand credit card spending numbers are difficult to handicap and not particularly market moving for the NZD unless there is a big surprise. The only opportunity in our opinion then is to trade the data reactively. If credit card spending exceeds 1.0%, we expect the NZD/USD to rise. If spending growth is flat or declines, we expect the NZD/USD to decline. REACTIVE TRADE

TECHNICALS

8300 strong congestion zone
8400 caps upside
8200 supports

The kiwi continues to consolidate at the 8300 level which proving to be a very steady equilibrium in the 8400-8200 zone.

2. AUD/USD – Westpac Consumer Confidence

FUNDAMENTALS
Consumer Confidence expected @ (7:30PM ET / 12:30 GMT)
Our View – Neutral
Reason – Neutral
If Confidence rises by 5% or more = Buy AUD/USD
If Confidence grows by 4% or less = Sell AUD/USD

Australian consumer confidence is due for release tonight and while it is a difficult release to handicap, it can be an important report for the AUD/USD. Given the previous job losses, the odds favor a softer release. However the RBA recently cut interest rates and that may support sentiment. If confidence rises by 5% or more, we expect the AUD/USD to rally. If confidence grows by 4% or less, we expect the AUD/USD to fall. REACTIVE TRADE

TECHNICALS

9500 still caps
9400 supports
Bias still up

AUD/USD remains in upward bias mode, but 9500 is proving to be tough overhead resistance while 9400 provides support for now. A break opens a test of the 9300 level.

3. GBP/USD – UK Industrial Production

FUNDAMENTALS
Industrial Production @ 0.4% (4:30 AM ET / 8:30 GMT)
Our View – Bearish GBP
Reason – Slight Decline in PMI, Smaller Rise in New orders and Export orders
If Industrial Production rises by 0.6% or more = Buy GBP/USD
If Industrial Production falls by -0.2% or more = Sell GBP/USD

UK industrial production is scheduled for release tomorrow. We have good reasons to believe that the data will surprise to the downside because manufacturing activity slowed according to the latest PMI numbers with particular weakness in new orders and export orders. This data can therefore be traded proactively or reactively. For those who choose to wait, if industrial production rises by 0.6% or more, the GBP/USD should rally. However if industrial production falls by -0.2% or more, the currency pair can be sold for a move lower. PROACTIVE or REACTIVE TRADE

TECHNICALS

6100 can’t hold
6000 strong support
Break of 6250 key to upside

Cable remains well bid with 1.6000 providing support, but the pair is still capped at the 1.6200 level and a failure to hold 1.6100 suggests near term exhaustion.

4. EUR/USD – German Industrial Production

FUNDAMENTALS
German IP expected @ 1% (6:00 AM ET / 10:30 GMT)
Our View – Bearish EUR
Reason – PMI declined, weaker German Trade and Factory Orders
If German IP grows by 1.3% or more = Buy EUR/USD
If German IP grows by 0.5% or less = Sell EUR/USD

We have good reasons to believe that German industrial production declined in the month of Aug. According to the latest PMI numbers, manufacturing activity contracted at a faster pace. German trade and factory orders also declined. Therefore the data can be traded proactively or reactively. For those who choose to wait, if industrial production grows by 1.3% or more, we expect the EUR/USD to rally. If industrial production grows by 0.5% or less we expect the EUR/USD to decline. PROACTIVE or REACTIVE TRADE

TECHNICALS

3600 taken but not held
3550 near term support
3650 key to upside break

The euro remains in tight formation as volatility remains low. 3550 offers support, but the 3600 level needs to be held for a sustained upside rally to continue.

5. USD/JPY – FOMC Minutes



FUNDAMENTALS
FOMC Minutes expected @ (2 PM ET / 18 GMT)
Our View – Neutral
Reason – Neutral
If talk of tapering asset purchases was a very close call = Buy USD/JPY
If most FOMC voters felt worried about the consequences of tapering prematurely = Sell USD/JPY

Given that the Federal Reserve surprised the market by refraining from tapering asset purchases at their last meeting, investors will be eager to see how close the vote was. The market will be very sensitive to the minutes and as a result, it should only be traded reactively. If talk of tapering asset purchases was a very close call and there are indications that the central bank still wants to move this month we expect USD/JPY to rally. If most FOMC voters felt worried about the consequences of tapering prematurely, we expect USD/JPY to weaken. REACTIVE TRADE

TECHNICALS

Downside still in play
97.50 caps upside
96.50 possible retest of shorts

The slide in USD/JPY continues and any rebound has been anemic with 97.50 capping any upside action. A move towards 96.50 retest is possible and break there opens a run towards 95.00

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