Top 5 -10.29.13

TOP 5 HOT IDEAS

DATE: Tuesday Oct 29, 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/JPY – Japanese Retail Sales



FUNDAMENTALS
Retail Sales expected @ 0.5% (7:50 PM ET / 23:50 GMT)
Our View – Neutral
Reason – Neutral
If retail sales rises by 0.2% or less = Buy USD/JPY
If retail sales rises by 1.2% or more = Sell USD/JPY

A number of Japanese economic reports are scheduled for release this evening and we believe that retail sales will be one of the most important. Overall, tonight’s data economic releases are expected to show further improvements in Japan’s economy, which should be good for USD/JPY. However the data is difficult to handicap and therefore best traded reactively. If retail sales rises by 0.2% or less, USD/JPY can be bought for a move higher. If retail sales rise by 1.2% or more, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS

97.00 continues to hold
Making higher lows
98.00 next target of longs

USD/JPY remains well bid and continues to make higher lows. It’s held above the 97.50 and now eyes 98.00 to topside while 97.00 is the near term support.

2. GBP/USD – Mortgage Approvals

FUNDAMENTALS
Mortgage Approvals expected @ 66K (4:30 AM ET / 9:30 GMT)
Our View – Neutral
Reason – Neutral
If Mortgage Approvals exceed 70K = Buy GBP/USD
If Mortgage Approvals are less than 60K = Sell GBP/USD

A number of U.K. housing market reports are due for release tomorrow and we believe the most important report will be mortgage approvals. U.K. housing market activity has been steady thanks to the low level of interest rates and the government’s Funding for Lending Scheme. Mortgage approvals are not a huge market mover for the GBP/USD, unless there is a big surprise. Therefore, we feel that the data is probably best traded reactively. If mortgage approvals exceed 70K, we expect the GBP/USD to rise. If approvals fall to 60K or lower, we expect the GBP/USD to fall REACTIVE TRADE

TECHNICALS

6200 still caps for now
6100 supports but probed
Range persists

Cable continues to be pressured to the downside with 6100 probed today, but the pair essentially remains in a very tight 6200-6100 with a mild downside bias for now.

3. EUR/USD – US Retail Sales

FUNDAMENTALS
Advance Retail Sales expected @ 0.0% (8:30 AM ET / 12:30 GMT)
Our View – Bearish USD
Reason – Slightly stronger ICSC but drop in Redbook
If Retail Sales decline = Buy EUR/USD
If Retail Sales rises by 0.4% or more = Sell EUR/USD

The US retail sales report is one of the most anticipated pieces of data scheduled for release this week. According to the consensus forecast, economists expect consumer spending growth to stagnate but with the International Council of Shopping Centers reporting a small uptick and the Johnson Redbook survey reporting a steep decline, there is a reasonable chance of a downside surprise that could extend the greenback’s losses. We feel that tomorrow’s retail sales report can be traded proactively or reactively. For those who choose to wait, if spending growth declines, we expect the EUR/USD to extend higher. If retail sales rise by 0.4% or more, we expect the EUR/USD to give up its gains. PROACTIVE or REACTIVE TRADE

TECHNICALS

3830 still caps
3850 next barrier for longs
3750 holds

EUR/USD continues to consolidate at the 3800 level with 3850 now the next target for longs but the topside is proving difficult to take out. Meanwhile 3750 supports downside.

4. USD/CAD – Industrial Product Prices

FUNDAMENTALS
Industrial Product Prices expected @ -0.1% (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Neutral
If Industrial Product Prices drops by 0.5% or more = Buy USD/CAD
If Industrial Product Prices rises by 0.5% or more = Sell USD/CAD

Industrial product prices are notoriously volatile and difficult to trade. So the only opportunity is to trade the data reactively. If industrial product prices drops by 0.5% or more, USD/CAD can be bought for a move higher. If prices rise by 0.5% or more, USD/CAD can be sold. REACTIVE TRADE

TECHNICALS

1.0450 near term top
1.0350 near term support
Correction due

USD/CAD may have reached a near term top at the 1.0450 level and could see a correction towards 1.0350, but the upside move remains in tact for now.

5. USD/JPY – Consumer Confidence

FUNDAMENTALS
Consumer Confidence expected @ 75 (10 AM ET / 14 GMT)
Our View – Bearish USD
Reason – IBD and UMich declined
If the index is 80 or higher = Buy USD/JPY
If the index drops to 70 or lower = Sell USD/JPY

We have strong reasons to believe that the U.S. Conference Board consumer confidence index declined in the month of October. According to similar surveys conducted by Investors Business Daily and the University of Michigan, sentiment deteriorated this month due in part to the deterioration in U.S. data and government shutdown. As such, we feel this data can be traded proactively or reactively. If the index rises to 80 or higher, we expect USD/JPY to rally. If the index drops to 70 or lower, we expect USD/JPY to fall.

TECHNICALS

97.00 continues to hold
Making higher lows
98.00 next target of longs

USD/JPY remains well bid and continues to make higher lows. It’s held above the 97.50 and now eyes 98.00 to topside while 97.00 is the near term support.

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