Top 5 10.11.13

TOP 5 HOT IDEAS

DATE: Friday Oct 11, 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. USD/TRY Turkish Unemployment Rate



FUNDAMENTALS
Unemployment Rate expected @ 9% (3 AM ET / 7 GMT)
Our View – Neutral
Reason -- Neutral
If the unemployment rate increases to 9% = Buy USD/TRY
If the unemployment rate drops to 8.7% = Sell USD/TRY

Turkey’s unemployment rate is difficult to predict but potentially market moving for the Lira and should therefore only be traded reactively. If the unemployment rate drops to 8.7%, we expect USD/TRL to weaken. If the unemployment rate rises to 0%, we expect USD/TRL to rise. REACTIVE TRADE

TECHNICALS

Lower highs
1.9300 support
Headed for double bottom?

USD/TRL has made lower highs and is in a longer term downtrend. For now the 1.9500 level is holding but if that level breaks a test of double bottom at 1.9300 is possible.

2. GBP/USD – UK Construction Output

FUNDAMENTALS
Construction Output expected @ 0.8% (4:30 AM ET / 8:30 GMT)
Our View – Neutral
Reason – Neutral
If Construction Output exceeds 1.5% more = Buy GBP/USD
If Construction Output drops by 0.5% or lower = Sell GBP/USD

UK Construction Output is not a huge market mover for the British pound unless there is a meaningful surprise. Therefore we feel this data can only be traded reactively. If UK construction Output rises by 1.5% or more, the GBP/USD could extend its gains. If construction output drops to 0.8% or lower, the GBP/USD could weaken. REACTIVE TRADE

TECHNICALS

5900 bounces again
6000 caps for now
5850 key hold

Cable continues to hold the 5900 level but a break below would be bearish with 5850 then a key hold for longs. 6000 caps the upside for now.

3. USD/CAD – Canadian Employment


FUNDAMENTALS
Canadian Employment expected @ 15K (8:30 AM ET / 12:30 GMT)
Our View – Bullish CAD
Reason – Employment component of IVEY PMI Increased
If Employment is less than 5K = Buy USD/CAD
If Employment exceeds 30K = Sell USD/CAD

We have good reasons to believe that Canadian employment numbers could surprise to the upside because the employment component of IVEY PMI rose, pointing to healthier labor market conditions. Therefore we feel the data can be traded proactively or reactively. For those who choose to wait, if Canadian employment rises by 5K or less, USD/CAD can be bought for a resumption of the uptrend. However if Canadian employment exceeds 30K, USD/CAD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

1.0400 tested
1.0450 next upside resistance
1.0350 now support

Loonie has now moved into the 1.0400 level and has clearly weakened over the past several days as a break above 1.0400 now opens a run to 1.0450 while 1.0350 is new support.

4. USD/MXN – Mexican Industrial Production

FUNDAMENTALS
Industrial Production expected @ 0.1% (9AM ET / 14GMT)
Our View – No Trade
Reason – No Trade
If Industrial Production falls by -0.3% or more = Buy USD/MXN
If Industrial Production exceeds 0.3% = Sell USD/MXN

Mexico’s industrial production report is difficult to predict but potentially market moving for the Peso. It should only traded reactively. If industrial production falls by -0.3% or more, we expect USD/MXN to rise. If industrial production grows by 0.3% or more, we expect USD/MXN to rise. REACTIVE TRADE

TECHNICALS

13.2000 strong resistance
13.0000 support
Range break favors downside

USD/MXN is trapped in the 13.2000-13.0000 range but the 13.0000 level appears to be more vulnerable to a downside break as 13.2000 is formidable resistance

5. USD/JPY – University of Michigan Consumer Sentiment Index





FUNDAMENTALS
UMich expected @ 77 (9:55 AM ET / 13:55 GMT)
Our View – Bearish USD
Reason – Sharp Drop in IBD
If the UMich index exceeds 80 = Buy USD/JPY
If the UMich index drops below 75 = Sell USD/JPY

We have strong reasons to believe that the University of Michigan will report a drop in consumer confidence. Between the US fiscal debt crisis and the sell-off in stocks, Americans have every reason to be nervous. The IBD/TIPP index, which is another measure of confidence plunged in the month of October. As a result, we feel that this data can be traded proactively or reactively. For those who chose to wait, if the UMich index exceeds 80, USD/JPY can be bought for a move higher. If the UMich index drops below 75, USD/JPY can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

98.00 retaken
Bias turns neutral
97.00 now support

The slide in USD/JPY has stopped for now with the pair finding support at 97.00 and with 98.00 retaken the bias has turned neutral. 98.50 next target of longs as recovery continues.

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