Top 5 – 11.05.13


DATE: Tuesday Nov 5, 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 Rate Decision

RBA Rate Decision expected @ 2.50% (12:30 AM ET / 4:30 GMT)
Our View – Neutral
Reason – Neutral
If RBA drops option to lower rates in the future = Buy AUD/USD
If RBA keeps all options open = Sell AUD/USD

The RBA is not expected to alter interest rates tonight but the central bank’s statement could have a large impact on how the AUD/USD trades. Given the recent uptrend in Australian data, we feel that the RBA could drop its option to ease in the future. If the central banks removes the line in the RBA statement that mentions the potential for lower rates, the AUD/USD can be bought for a further recovery. If the RBA ignores recent improvements and leaves all options open, the AUD/USD can be sold for a resumption of the downtrend. REACTIVE TRADE


9500 retaken
9450 key support holds
9550 next target for longs

The Aussie has found support at 9450 and now climbing towards 9550 as it tries to make a V bottom after a week of selling off.

2. EUR/CHF – Switzerland Consumer Prices

Swiss CPI expected @ 0.1% (3:15 AM ET / 7:15 GMT)
Our View – Neutral
Reason – Neutral
If CPI declines = Buy EUR/CHF
If CPI rises by 0.5% or more = Sell EUR/CHF

Switzerland’s consumer price report is not a huge market mover for the Swiss Franc unless there is a meaningful surprise so the data is best traded reactively. If consumer prices decline by any amount, EUR/CHF can be bought for a move higher. If CPI rises by 0.5% or more, EUR/CHF can be sold. REACTIVE TRADE


2300 continues to hold
2400 caps
Bottom probed

EUR/CHF remains at the bottom of its range as it continues to probe the bottom of the recent levels with bias still tilted slightly to the downside. A break open a run to 2250.

3. GBP/USD – PMI Services

UK PMI Services expected @ 60 (4:30 AM ET / 8:30 GMT)
Our View – Bearish GBP
Reason – Drop in PMI Manufacturing and Consumer Confidence
If UK PMI exceeds 62 = Buy GBP/USD
If UK PMI drops below 58 = Sell GBP/USD

We have strong reasons to believe that U.K. service activity deteriorated last month because manufacturing activity slowed and consumer confidence declined. This signals that the U.K. recovery is losing momentum, a dynamic that could continue to pressure sterling lower. We feel this data can be traded proactively or reactively. For those who choose to wait, if the PMI index exceeds 62 the GBP/USD can be bought for a move higher. If the UK PMI index drops below 58, the GBP/USD can be sold. PROACTIVE or REACTIVE TRADE


1.6000 still caps
1.5900 holds support
Consolidation in place

Cable tried to stabilize today as 5900 proved to be support, but the pair failed to take out the 1.6000 level which is key to further upside move in the near term.

4. EUR/USD – Eurozone Producer Prices

PPI expected @ 0.2% (5 AM ET / 9 GMT)
Our View – Bullish EUR
Reason – Stronger German and French PPI, Sept CPI Increased
If PPI growth exceeds 0.5% = Buy EUR/USD
If PPI drops by -0.5% or more = Sell EUR/USD

We have good reasons to believe that Eurozone producer prices increased in the month of September because CPI also rose that month and the 2 largest economies in the Eurozone reported an uptick in producer price growth. Therefore we believe the data can be traded proactively or reactively. For those who choose to wait, if the PPI index exceeds 0.5%, we expect the EUR/USD to rally. If it falls by -0.5% or more we expect EUR/USD to decline. REACTIVE TRADE


3500 retaken
3450 holds as long term support
3600 now caps

The EUR/USD found support at the long term level of 3450 and bounced over 3500 as it now tries to recover with 3600 the next level of resistance in view.

5. USD/JPY – US ISM Non-Manufacturing

ISM expected @ 54 (10 AM ET / 15 GMT)
Our View – Neutral
Reason – Stronger manufacturing ISM, lower confidence
If ISM rises to 56 or higher = Buy USD/JPY
If ISM falls to 52 or lower = Sell USD/JPY

The ISM non-manufacturing report can be a very market moving release for the U.S. dollar. Unfortunately this month’s number is a tough call because the ISM manufacturing index surprised to the upside but consumer confidence has fallen sharply. Therefore we feel the data is best traded reactively. If the ISM index rises to 56 or higher, USD/JPY can be bought for a move higher. If the ISM index falls to 52 or lower, USD/JPY should be sold for a move lower. REACTIVE TRADE


Upside bias remains in place
98.50 continues to hold
99.00 next key upside level

USD/JPY remains in a bullish mode as it holds the 98.50 support but it need to take out 99.00 to take the rally to the next level.

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