Top 5 10.10.13

TOP 5 HOT IDEAS

DATE: Thursday Oct 10, 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 – PMI Manufacturing



FUNDAMENTALS
Business NZ PMI expected @ (5:30 PM ET / 21:30 GMT)
Our View – Neutral
Reason -- Neutral
If NZ PMI exceeds 58.5 = Buy NZD/USD
If NZ PMI is 56.5 or less = Sell NZD/USD

New Zealand’s business PMI index is scheduled for release this evening and if the data is strong enough, it could drive NZD/USD out of its recent range. Lately we have seen nice improvements in New Zealand data and the PMI report could also surprise to the upside but it is difficult to handicap and best traded reactively. If the Business PMI index exceeds 58.5, NZD/USD can be bought for a reactive trade. If the index drops to 56.5 or lower, the NZD/USD can be sold. 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. USD/JPY – Japanese Purchases of Foreign Bonds

FUNDAMENTALS
MoF Data on Japan Buying Foreign Bonds expected @ (7:50 PM ET / 23:50 GMT)
Our View – Neutral
Reason – Neutral
If Purchases exceed 100B = Buy USD/JPY
If Purchases are -100B or lower = Sell USD/JPY

An essential criteria for a resumption of the USD/JPY rally is Japanese purchases of foreign bonds. Last week Japanese investors bought foreign bonds for the third week in a row. While this data has become very important it is unfortunately difficult to handicap. The only opportunity to trade this data is reactively. If the recent rise in demand ends, USD/JPY can be sold for a quick move lower. If the +2.6% U.S. yield continues to draw demand from the Japanese, leading to an increase in purchases in excess of 100B, USD/JPY can be bought as investors start to see this as a continued trend. REACTIVE TRADE

TECHNICALS

Downside halted for now
97.50 caps upside
97.00 now support

The slide in USD/JPY hs stopped for now with the pair finding support ahead of the 96.50 level. 97.50 still caps the upside, but a break higher opens a test of 98.50

3. AUD/USD – Australian Employment

FUNDAMENTALS
AU Employment expected @ 15K (8:30 PM ET / 12:30 GMT)
Our View – Neutral
Reason – Rise in employment of services and manufacturing, drop in construction employment
If Employment Change rises by 20K or more = Buy AUD/USD
If Employment Change drops by -5K or more = Sell AUD/USD

Australian employment numbers are scheduled for release this evening and we have good reasons to believe the data will surprise to the upside because the manufacturing and service sector reported stronger employment. As a result, we believe the data can be traded proactively or reactively. For those who choose to wait, if employment increases by 20K or more, the AUD/USD can be bought for an extension higher. If employment falls by 5k or more, the AUD/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

9500 still caps
9550 key upside break
9400 supports

AUD/USD remains well bid, but 9500 still caps the upside. A break above 9550 opens a run towards 9700 while 9400 still provides strong support for now.

4. GBP/USD – BoE Rate Decision

FUNDAMENTALS
BoE Rate Decision expected @ (7 AM ET / 11 GMT)
Our View – Neutral
Reason – Neutral
If the BoE statement contains more optimism = Buy GBP/USD
If the BoE statement contains more caution = Sell GBP/USD

The Bank of England is not expected to change monetary policy this month and therefore the meeting is only tradable if they decide to release a more detailed statement. If the BoE statement contains optimistic comments, the GBP/USD can be bought for a move higher. If they release a statement containing more caution, the GBP/USD can be sold. REACTIVE TRADE

TECHNICALS

6000 broken
5900 now in view
5850 is a key hold

Cable continues to correct off the swing highs at 6250 as the pair now has broken key support at 6000. 5850 is a key hold to preserve the upside bias and a break there would signal a near term top.

5. USD/JPY – Weekly Jobless Claims





FUNDAMENTALS
Jobless Claims @ 310K (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Neutral
If jobless claims rise by 300K or less = Buy USD/JPY
If jobless claims rise by 330K or more = Sell USD/JPY

With the government shutdown delaying most U.S. data, one the most important U.S. release this week is jobless claims. Unfortunately the data is difficult to predict and therefore best traded reactively. If jobless claims rise by 300K or less, USD/JPY can be bought for a move higher. If jobless claims rise by 330K or more, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS

Downside halted for now
97.50 caps upside
97.00 now support

The slide in USD/JPY hs stopped for now with the pair finding support ahead of the 96.50 level. 97.50 still caps the upside, but a break higher opens a test of 98.50

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