Top 5 11.01.13

TOP 5 HOT IDEAS

DATE: Friday Nov 1, 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 – Australian PMI Manufacturing



FUNDAMENTALS
PMI Manufacturing expected @ (6:30 PM ET / 22:30 GMT)
Our View – Neutral
Reason – Neutral
If PMI Manufacturing exceeds 53 = Buy AUD/USD
If PMI Manufacturing index drops below 48 = Sell AUD/USD

Australia’s PMI manufacturing index is scheduled for release tonight and while stronger Chinese growth suggests that Australian manufacturing conditions may have improved, businesses remain nervous and for this reason we feel that the data is best traded reactively. If the PMI index exceeds 53, we expect the AUD/USD to rally in relief. If the index drops to 48 or lower, we expect AUD/USD to weaken. REACTIVE TRADE

TECHNICALS

9500 fails hold
9450 in view
Break opens test of 9400

The Aussie rally failed at the 9500 figure and the flameout suggests further weakness ahead that could test the 9450 and possible 9400 level.

2. NZD/USD – Chinese PMI Manufacturing

FUNDAMENTALS
Chinese PMI Manufacturing expected @ 51.2 (9 PM ET / 1:30 GMT)
Our View – Bullish NZD
Reason – Rise in HSBC Flash PMI
If PMI Manufacturing exceeds 53 = Buy NZD/USD
If PMI Manufacturing index is 49 or lower = Sell NZD/USD

The rise in the HSBC Chinese PMI Manufacturing index points to a potential improvement in the government’s official report, scheduled for release this evening. While the AUD/USD is generally the most receptive to Chinese data, the NZD/USD should also be affected. Given the rise in the flash PMI, we feel that China’s PMI report can be traded proactively or reactively. For those who choose to wait, if the PMI index exceeds 53, the NZD/USD can be bought for a move higher. If the PMI index drops to 49 or lower, the NZD/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

8300 topside
8200 bottomside
Strong volatility at the edges

The kiwi tested both the topside at 8300 and the bottom at 8200 creating a wide volatility range where the break of either edge could signal the next directional move.

3. EUR/CHF – Swiss PMI Manufacturing

FUNDAMENTALS
PMI Manufacturing expected @ 55.2 (3:30 AM ET / 7:30 GMT)
Our View – Neutral
Reason – Neutral
If the PMI index drops below 53 = Buy EUR/CHF
If the PMI index exceeds 57 = Sell EUR/CHF

Swiss PMI Manufacturing numbers are scheduled for release and given that the data is difficult to handicap, we feel that it is best traded reactively. If the PMI index drops below 53, EUR/CHF can be bought for a move higher. If the PMI index exceeds 57, EUR/CHF can be sold. REACTIVE TRADE

TECHNICALS

Back to 2300
2350 caps
Break opens run to 2250

EUR/CHF failed at the 2350 level and now returns to long term support at 2300. A break there could open a run to 2250 and possibly 2200 as the pair now looks downward biased on the charts.

4. GBP/USD – PMI Manufacturing

FUNDAMENTALS
UK PMI Manufacturing expected @ 56.4 (4:30 AM ET / 8:30 GMT)
Our View – Bearish
Reason – Sharp drop in CBI
If UK PMI exceeds 57.5 = Buy GBP/USD
If UK PMI drops below 55 = Sell GBP/USD

We have strong reasons to believe that U.K. manufacturing activity deteriorated in the month of October because a similar survey conducted by the Confederation of British Industry dropped significantly. As such we feel this data can be traded proactively or reactively. For those who choose to wait, if the PMI index exceeds 57.5, the GBP/USD can be bought for a quick move higher. If the UK PMI index drops below 55, the GBP/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

1.6000 holds
1.6100 key break to upside
1.6200 offers stronger resistance

Cabl continue to hold above the 1.6000 level which is now building to be a base for a move towards 1.6100. A break there opens a test of stiffer resistance at 1.6200.

5. USD/JPY – ISM Manufacturing

FUNDAMENTALS
ISM Manufacturing expected @ 55 (10 AM ET / 14 GMT)
Our View – Neutral
Reason –Weaker Empire and Philly, Stronger Chicago
If ISM index exceeds 57 = Buy USD/JPY
If ISM index drops below 53 = Sell USD/JPY

The national ISM manufacturing index can be an important release for the U.S. dollar. We typically like to trade this report proactively but this month, the lower Empire and Philly Fed survey was offset by the large increase in Chicago PMI, making the data difficult to call. Therefore ISM should be traded reactively. If the index exceeds 57, USD/JPY can be bought for a move higher. If it drops below 53, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS

98.50 proves resistance
98.00 continues to hold
99.00 next key upside level

USD/JPY is consolidating but the failure to hold 98.50 may give bulls some pause as the upside momentum appears to have stalled and a break below 98.00 could open another test of the 97.00 level.

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