Top 5 – 10.15.2013


DATE: Tuesday Oct 15, 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 – RBA Minutes

RBA Minutes expected @ (8:30 PM ET / 0:30 GMT)
Our View – Neutral
Reason -- Neutral
If RBA Minutes are neutral = Buy AUD/USD
If RBA minutes are dovish = Sell AUD/USD

The RBA minutes are due for release tonight. When the central bank last met, their less dovish tone drove the Australian dollar sharply higher. At the time, the RBA left interest rates unchanged and noted the improvement in business and consumer confidence. They did not mention the level of the currency, which suggests they were comfortable with the AUD/USD rate at the time. However growth in the Australian economy has been sluggish overall and the positive momentum in China has begun to fade. As a result, the RBA minutes may not be as optimistic as the tone of the RBA statement suggest. Therefore the event risk is best traded reactively. If the RBA shifts to neutral, a short squeeze could rally the AUD/USD. If the RBA leaves the door open to additional easing, the AUD/USD could extend its losses. REACTIVE TRADE


9500 taken
9550 next target of longs
9400 now deep support

The Aussie has now been able to retake the 9500 level and the pair targets a break above 9550 which could open a run towards 9700. Meanwhile 9400 provides strong support.

2. GBP/USD – UK Consumer Prices

Consumer Prices expected @ 0.0% (4:30 AM ET / 8:30 GMT)
Our View – Bullish GBP
Reason – Smaller Decline in BRC Shop Prices and Rise in PMI Prices
If CPI rises by 0.6% or more = Buy GBP/USD
If CPI rises by 0.1% or less = Sell GBP/USD

U.K. consumer prices are scheduled for release tomorrow and we believe that inflationary pressures could surprise to upside given the smaller decline in shop prices according to the British Retail Consortium and the rise in prices as per the PMI reports. Therefore we feel that the data can be traded proactively or reactively. For those who choose to wait, if CPI rises by 0.5% or more, the GBP/USD can be bought for a move higher. If CPI rises by 0.1% or less, the GBP/USD can be sold. PROACTIVE or REACTIVE TRADE


6000 remains resistance
5900 supports
Break opens run to 5850
Break of 9550 opens run to 9700

The cable rally once again ran into resistance above the 1.6000 level with the pair now trading in a narrow 1.5900-1.6000 range as the break of either side could open a deeper directional move.

3. EUR/USD – German ZEW

ZEW Survey expected @ 49.6 (5 AM ET / 9 GMT)
Our View – Bearish EUR
Reason – U.S. Fiscal Uncertainty to Deter Sentiment
If the ZEW survey exceeds 51 = Buy EUR/USD
If the ZEW survey is less than 48 = Sell EUR/USD

The German ZEW survey is a fairly important release for the EUR and given the uncertainty created by the U.S. fiscal debt crisis, we believe that investor confidence could have declined. Therefore we feel that the data can be traded proactively or reactively. For those who choose to wait if the ZEW survey exceeds 51, the EUR/USD can be bought for a quick move higher. If the ZEW survey drops to 48 or lower, the EUR/USD can be sold. PROACTIVE or REACTIVE TRADE


3600 still caps
3500 is support
3450 is deeper support

The euro continues to bump against the 1.3600 resistance level and would need to break above 3650 to have a clean move higher. Meanwhile 1.3500 and 1.3450 provide support.

4. USD/JPY – Empire State Manufacturing Survey

Empire State Manufacturing Survey expected @ 8 (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Neutral
If Empire State index exceeds 10 = Buy USD/JPY
If Empire State index is less than 6 = Sell USD/JPY

As one of the first manufacturing reports out of the U.S., the Empire State survey is difficult to handicap and therefore best traded reactively. If the Empire State manufacturing index exceeds 10, USD/JPY can be bought for a move higher. If the index drops to 6 or lower, USD/JPY can be sold. REACTIVE TRADE


98.50 taken
99.00 next target for longs
98.00 now support

USD/JPY has managed to hold the 98.00 support and the pair now taken the 98.50 level targets 99.00 as the bias has turned mildly bullish. If 99.00 can be taken out the pair could push towards 100.00 on momentum flows.

5. USD/CAD – Canadian Existing Home Sales

Existing Home Sales expected @ (9 AM ET / 13 GMT)
Our View – Neutral
Reason – Neutral
If CAD Existing home Sales fall by -1% or more = Buy USD/CAD
If CAD Existing home Sales rise by 3% or more = Sell USD/CAD

Canadian existing home sales is a difficult piece of data to handicap and also not incredibly market moving for the CAD unless there is a big surprise. Therefore the data can only be trade reactively. If existing home sales fall by -1% or more, we expect USD/CAD to rise. If existing home sales rise by 3% or more, we expect USD/CAD to fall. REACTIVE TRADE


1.0400 caps upside
1.0300 is support
Break opens a test of 1.0200

The USD/CAD counter trend rally has run out of gas at the 1.0400 level and the pair now targets 1.0300 support. A break there could set up a retest of double bottom at 1.0200

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