Top 5 – 11.07.13

TOP 5 HOT IDEAS

DATE: Thursday Nov 8, 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 Employment



FUNDAMENTALS
AU Employment expected @ 10K (7:30 PM ET / 0:30 GMT)
Our View – Neutral
Reason – Employment Increased Slightly in Services and Manufacturing
If Employment Change rises by 15K or more = Buy AUD/USD
If Employment Change is flat or declines = Sell AUD/USD

Australian employment numbers are scheduled for release this evening and we have good reasons to believe that the data will surprise to the upside. According to the PMI reports, labor market conditions improved in both the manufacturing and service sector although manufacturing only saw a modest rise. We feel the data can be traded proactively or reactively. For those who choose to wait, if employment increases by 15K or more, the AUD/USD can be bought for an extension higher. If employment is flat or falls the AUD/USD can be sold.

TECHNICALS

9550 caps
9450 key support holds
9500 equilibrium level

The Aussie rally has run out of gas ahead of the 9550 level but the pair sees support at 9500 and deeper support at 9450 as it remains in a slow and steady recovery.

2. EUR/USD – German Industrial Production

FUNDAMENTALS
German IP expected @ 0% (6:00 AM ET / 11 GMT)
Our View – Neutral
Reason – PMI declined, factory orders up
If German IP grows by 0.5% or more = Buy EUR/USD
If German IP falls by -0.5% or more = Sell EUR/USD

German industrial production numbers are scheduled for release tomorrow and this month’s release should only be traded reactively because a decline in the PMI manufacturing report was offset by a rise in factory orders. If industrial production grows by 0.5% or more, we expect the EUR/USD to rally. If industrial production falls by -0.5% or more we expect the EUR/USD to decline. REACTIVE TRADE

TECHNICALS

3450 still key support
3500 retaken
3600 major resistance

The euro continues to find support at the 3450 level and having taken out 3500 it has formed a decent base, but a run higher faces resistance at 3600 while a brea could open a move towards 3350.

3. GBP/USD – BoE Rate Decision

FUNDAMENTALS
BoE Rate Decision expected @ (7 AM ET / 12 GMT)
Our View – Neutral
Reason – Neutral
If the BoE statement contains more optimism = Buy GBP/USD
If the BoE statement contains more caution = Sell GBP/USD

The Bank of England is not expected to alter interest rates tomorrow and for this reason, the BoE announcement should be a nonevent for the GBP. The only situation in which the currency will move is if the central bank releases a detailed statement and as a result, the BoE meeting should only be traded reactively. If the central bank releases a detailed monetary policy statement that contains more optimism, the GBP/USD can be bought for a move higher. If they release a statement containing more caution, the GBP/USD can be sold. REACTIVE TRADE

TECHNICALS

1.6100 popped but not held
1.6000 now support
1.6100 retake key to upside

Cable continues its recovery rally but the 1.6100 has not held and the pair needs to close above that figure to make a credible challenge of the yearly highs. 1.6000 remains support for now.

4. EUR/USD – ECB Rate Decision

FUNDAMENTALS
ECB President Draghi’s Press Conference scheduled for 8:30 AM ET / 13:30 GMT
Our View – Bearish EUR
Reason – Weaker data and softer inflation suggests ECB will prepare market for easing
If Draghi sounds more optimistic about economy = Buy EUR/USD
If Draghi talks about the possibility of a December rate cut = Sell EUR/USD

When it comes to the ECB rate announcement, Draghi’s press conference is generally the most important part of the meeting. Economic data since the last meeting has been weak and we expect the central bank to prepare the market for easing, which should be negative for the euro. As a result, we feel that the rate decision can be traded proactively or reactively. If Draghi raises the possibility of a December rate cut, we expect the EUR/USD to fall aggressively. If he overlooks the deterioration in data and does not talk about lower rates, the EUR/USD could be bought for a squeeze higher. PROACTIVE or REACTIVE TRADE

TECHNICALS

3450 still key support
3500 retaken
3600 major resistance

The euro continues to find support at the 3450 level and having taken out 3500 it has formed a decent base, but a run higher faces resistance at 3600 while a brea could open a move towards 3350.

5. USD/JPY – Q3 GDP

FUNDAMENTALS
Q3 GDP expected @ 2% (8:30 AM ET / 13:30 GMT)
Our View – Bearish USD
Reason – Weaker Retail Sales
If GDP growth exceeds 2.5% = Buy USD/JPY
If GDP growth is 1.5% or less = Sell USD/JPY

U.S. Q3 GDP figures are scheduled for release on Thursday. Whenever we look to handicap GDP, we always look at the 2 main underlying components (trade and retail sales). In the third quarter, U.S. retail sales weakened significantly while trade improved modestly. As such, we feel that GDP will surprise to the downside and the data can be traded proactively or reactively. For those who choose to wait, if GDP growth exceeds 2.5%, USD/JPY can be bought for a move higher. If GDP growth is 1.5% or less, USD/JPY can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

Holds above 98.50
99.00 Still key to upside
98.00 support

USD/JPY remains in a well supported mode, but the 99.00 level is proving to be key resistance for now while 98.00 is support for the pair. A break above puts the 100.00 figure in view.

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