Top 5 – 10.14.13

TOP 5 HOT IDEAS

DATE: Monday Oct 14, 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 PMI Services



FUNDAMENTALS
PMI Services expected @ (5:30 PM ET / 21:30 GMT)
Our View – Bearish NZD
Reason – Weaker Business PMI
If PMI index exceeds 55 = Buy NZD/USD
If PMI index is 52 or lower = Sell NZD/USD

We have strong reasons to believe that service sector activity in New Zealand slowed in the month of September because of weakness in the business PMI index. We feel that the data can be traded proactively or reactively. For those who choose to wait, if the PMI index exceeds 55, we believe the NZD/USD can be bought for a move higher. If the PMI index drops to 52 or lower, the NZD/USD can be sold for a move lower. PROACTIVE or REACTIVE TRADE

TECHNICALS

8300 still dominates
8400 caps
8200 supports

NZD/USD continues to oscillate around the 8300 level with 8400 capping upside while 8200 supports. A break of either side could trigger continuation move.

2. AUD/USD – Australian Home Loans

FUNDAMENTALS
Home Loans expected @ -2.5% (8:30PM ET / 0:30 GMT)
Our View – Neutral
Reason – Neutral
If Home Loans exceed 3% = Buy AUD/USD
If Home Loans drop by -4% or more = Sell AUD/USD

Australia’s home loans report is not a huge market mover for the AUD/USD unless there is a big surprise. Therefore Sunday’s Australian economic report is best traded reactively. If home loans exceed 3%, we expect the AUD/USD to rise. If it falls by -4% or more, we expect the AUD/USD to weaken in response. REACTIVE TRADE

TECHNICALS

Well bid at 9400
9500 still resistance
Break of 9550 opens run to 9700

Aussie remains well bid at the 9400 level but 9500 still caps the upside for now, but a break above 9550 could open a run higher toward 9700

3. USD/SGD – Singapore Retail Sales

FUNDAMENTALS
Singapore Retail Sales expected @ 4.6% (1 AM ET / 5 GMT)
Our View – Neutral
Reason – Neutral
If retail sales rises by 2% or less = Buy USD/SGD
If retail sales rises by 5% or more = Sell USD/SGD

Singapore retail sales are scheduled for release tomorrow but the data is difficult to handicap and therefore best traded reactively. If retail sales rise by 2% or less, USD/SGD can be bought for a move higher. If spending grows by 5% or more, representing acceleration in economic activity USD/SGD can be sold. REACTIVE TRADE

TECHNICALS

1.2400 key support
1.2550 caps upside
Bias bearish

The bias in USD/SGD remains down and the pair is now approaching a key downside support of 1.2400. A break opens a test of 1.2250 while upside is capped by 1.2550

4. EUR/CHF – Swiss Producer Prices

FUNDAMENTALS
Swiss PPI expected @ 0.2% (3:15 AM ET / 7:15 GMT)
Our View – Neutral
Reason – Neutral
If PPI growth falls by -0.1% or more = Buy EUR/CHF
If PPI growth rises by 0.5% or more = Sell EUR/CHF

Swiss producer prices are not a huge market mover for the Swiss Franc unless there is a meaningful surprise. As a result, we believe this data can only be traded reactively. If PPI growth falls by -0.1% or more, EUR/CHF can be bought for a quick trade higher. If PPI growth rises by 0.5% or more, EUR/CHF can be sold. REACTIVE TRADE

TECHNICALS

Strong bounce off 1.2250
1.2400 caps upside
Break opens test of 1.2500

EUR/CHF has staged a strong rally off the 1.2250 double bottom support and is now butting up against the 1.2400 resistance with break opening up the run to 1.2500

5. EUR/USD – Eurozone Industrial Production





FUNDAMENTALS
EZ Industrial Production expected @ 0.8% (5 AM ET / 9 GMT)
Our View – Bullish EUR
Reason – Rise in GE and FR IP
If IP rises by 1.2% or more = Buy EUR/USD
If IP drops by -0.5% or more = Sell EUR/USD

We have good reasons to believe that Eurozone Industrial Production improved in the month of August. Whenever we look to handicap EZ data, we always turn to the releases of its 2 largest economies – Germany and France. Both countries reported stronger industrial production activity. As a result, the data can be traded proactively or reactively. If industrial production rises by 1.2% or more, the EUR/USD can be bought for a move higher. If industrial production drops by -0.5% or more, the EUR/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

3600 fails
3500 key support
3450 deeper support

EUR/USD has now failed several times at the 1.3600 level and is now in danger of testing the 3500 support which if given opens up a test of 3450 Meanwhile 3650 caps all upside moves

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