Top 5 -10.22.2013

TOP 5 HOT IDEAS

DATE: Tuesday Oct 22, 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. EUR/CHF – Switzerland Trade Balance



FUNDAMENTALS
Swiss Trade Balance expected @ 2.01B (2 AM ET / 6 GMT)
Our View – Neutral
Reason – Neutral
If Trade Surplus is less than 1B = Buy EUR/CHF
If Trade Surplus exceeds 3B = Sell EUR/CHF

Switzerland’s trade balance report is difficult to handicap and not incredibly market moving but recently we have been seeing more improvements than disappointments in Swiss data. If the trade surplus shrinks to 1B or less, EUR/CHF can be bought for a move higher. If it exceeds 3B or more, EUR/CHF can be sold. REACTIVE TRADE

TECHNICALS

2350 proves near term top
2250 supports
Break higher opens test of 2400

EUR/CHF rally appears to have topped out at the 2350 level and the pair may now correct to 2250 support. A break above opens a run and a test of the 2450 highs.

2. USD/DKK – Denmark Retail Sales

FUNDAMENTALS
Retail Sales expected @ (3 AM ET / 7 GMT)
Our View – Neutral
Reason – Neutral
If Retail Sales fall by -0.5% or more = Buy USD/DKK
If Retail Sales rise by 0.5% or more = Sell USD/DKK

Economic data from Denmark is difficult to handicap and therefore best traded reactively. If retail sales fall by -0.5% or more, we expect USD/DKK to move higher. If retail sales rise by 0.5% or more, we expect USD/DKK to move lower. REACTIVE TRADE

TECHNICALS

5.5500 broken
5.5400 next target of shorts
5.4000 longer downside target

As we noted a while back the 5.5500 level was key support for USD/DKK and now that its broken the pair may target the 5.4000 level

3. GBP/USD – Public Sector Finances and Net Borrowing

FUNDAMENTALS
Public Sector Finances expected @ 8.2B & Public Sector Net Borrowing expected at 10B (4:30 AM ET / 8:30 GMT)
Our View – Neutral
Reason – Neutral
If Public Finances & Net Borrowing rises by less than 5B = Buy GBP/USD
If Public Finances & Net Borrowing exceeds 12B = Sell GBP/USD

The U.K’s public sector finances and data on net borrowing are due for release tomorrow. Though these reports can be market moving, they are difficult to handicap and therefore best traded reactively. If Public Finances & Net Borrowing rises by less than 5B, the GBP/USD can be bought for a move higher. If Public Finances & Net Borrowing exceeds 12B, the GBP/USD can be sold. REACTIVE TRADE

TECHNICALS

6200 caps upside
6100 near term support
6000 deeper support

Cable continues to consolidate near the highs but fails to make any upward progress as 6200 caps the upside while 600 is now deep support.

4. USD/JPY – Non-Farm Payrolls

FUNDAMENTALS
Non-Farm Payrolls expected @ 180K (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Neutral
If NFPs exceed 200K = Buy USD/JPY
If NFPs is 150K or less = Sell USD/JPY

The U.S. non-farm payrolls report is a notoriously volatile piece of data to trade and for that reason alone should only be traded reactively. This month in particular, the data could be distorted by the government shutdown and the possible need for more extrapolation. The employment component of ISM is one of our favorite leading indicators for payrolls dropped, which suggests that payrolls could fall short of expectations. Nonetheless we feel that the U.S. labor market report should only be traded reactively. If payrolls exceed 200K, USD/JPY can be bought for a squeeze higher. If it is less than 150K, USD/JPY can be sold for a stronger move lower. REACTIVE TRADE

TECHNICALS

98.00 holds
99.00 now stiff resistance
Break of 97.00 opens run o 95.00

USD/JPY continues to hold 98.00 support and a test higher would push to 99.00 resistance. Meanwhile a break of 97.00 could accelerate a move to 95.00.

5. USD/CAD – Canadian Retail Sales

FUNDAMENTALS
Retail Sales expected @ 0.3% (8:30 AM ET / 12:30 GMT)
Our View – Bearish CAD
Reason –Wholesale Sales Growth Slow
If Retail sales growth declines by -0.1% or more = Buy USD/CAD
If Retail sales growth exceeds 0.5% = Sell USD/CAD

We have good reasons to believe that Canadian retail sales will surprise to the downside because wholesale sales growth slowed in the month of August. We feel that this data can be traded proactively or reactively. For those who choose to wait, if retail sales growth declines by -0.1% or more, USD/CAD can be bought for a move higher. If retail sales growth exceeds 0.5%, USD/CAD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

1.0250 proves support
1.0350 caps upside
Break above opens run to 1.0400

Loonie remains contained on the downside with 1.0250 proving support. Meanwhile 1.0350 caps the upside for now but a break opens a run to 1.0400.

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