Top 5 11.13.13

TOP 5 HOT IDEAS

DATE: Tuesday Nov 13, 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 – Westpac Consumer Confidence



FUNDAMENTALS
Consumer Confidence expected @ (6:30PM ET / 23:30 GMT)
Our View – Neutral
Reason – Neutral
If Confidence rises by 2% or more = Buy AUD/USD
If Confidence falls by -3% or more = Sell AUD/USD

Australian consumer confidence is due for release tonight and while it is a difficult release to handicap, it can be an important report for the AUD/USD. Given the deterioration in business confidence and weakness in the labor market, the odds favor a softer release. However our confidence is not high and so we feel that the event risk is best traded reactively. If confidence rises by 2% or more, we expect the AUD/USD to rally. If confidence drops by 3% or, we expect the AUD/USD to fall. REACTIVE TRADE

TECHNICALS

Downdraft relentless
9300 tested
Possible support?

The Aussie correction is relentless with the pair crashing through the 9300 level before finally finding some buyers. 9300 may offer a pause of support for now but the bearish bias remains in place.

2. USD/JPY – Japanese Machine Orders

FUNDAMENTALS
Machine Orders expected @ -1.8% (6:50 PM ET / 23:50 GMT)
Our View – Neutral
Reason – Neutral
If Machine Orders drop by 4% or more = Buy USD/JPY
If Machine Orders rise by 5% or more = Sell USD/JPY

Japan’s report on machine orders is not a big mover for the Japanese Yen unless there is a meaningful surprise. As a result, the data should only be traded reactively. If Machine Orders drop by 4% or more, USD/JPY can be bought for a quick move higher. If Machine Orders rise by 5% or more, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS

99.50 taken out
100.00 in view
99.00 support

USD/JPY moved above 99.50 as it continues to base before the assault on the key 100.00 level. Meanwhile 99.00 now acts as support.

3. EUR/GBP – UK Jobless Claims

FUNDAMENTALS
Jobless Claims Change expected @ -30K (4:30 AM ET / 9:30 GMT)
Our View – Bullish GBP
Reason – Stronger Job Growth in Services and Construction,
If Jobless Claims Drop by 15K or less = Buy EUR/GBP
If Jobless Claims Drop by 40K or more = Sell EUR/GBP

We have good reasons to believe that U.K. labor market conditions improved last month because the service and construction sectors added jobs at a faster pace. The manufacturing sector experienced weaker job growth but it is coming off a 27 month peak. As a result, we believe that UK Employment numbers can be traded proactively or reactively. For those who choose to wait, if jobless claims drop by 15K or less, EUR/GBP can be bought for a continued move higher. If claims drop by 40K or less, EUR/GBP can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

8450 former support now resistance
Break opens test of 8500
8400 now support

EUR/GBP continues its recovery but is now approaching the key 8450 level which was former support and is now likely to prove resistance. A break above opens run to 8500 while 8400 supports the downside.

4. EUR/USD – Eurozone Industrial Production

FUNDAMENTALS
EZ Industrial Production expected @ -0.3% (5 AM ET / 10 GMT)
Our View – Bearish EUR
Reason – Sharp Drop in GE and FR IP
If IP rises by 0.3% or more = Buy EUR/USD
If IP drops by -0.6% or more = Sell EUR/USD

We have strong reasons to believe that Eurozone Industrial Production will surprise to the downside. Whenever we look to handicap EZ data, we always turn to the release of its 2 largest economies – Germany and France. Both countries reported a decrease in industrial production in the month of September. As a result, the data can be traded proactively or reactively. If industrial production rises by 0.3% or more, the EUR/USD can be bought for a move higher. If industrial production drops by 0.6% or more, the EUR/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

3400 taken out
3450 proves resistance
A break above opens run to 3500

EUR/USD continues to display very strong price action as it has taken out 3400 but stalled at former support of 3450. A break there opens a run towards 3500 and beyond.

5. GBP/USD – BoE Quarterly Inflation Report

FUNDAMENTALS
BoE Quarterly Report expected @ (5:30 AM ET / 10:30GMT)
Our View – Neutral
Reason – Neutral
If Inflation Report sounds neutral = Buy GBP/USD
If Inflation Report sounds dovish = Sell GBP/USD

The Bank of England’s Quarterly Inflation report is very important for the GBP because it usually contains clues about monetary policy. Recent weakness in U.K. data has led many investors to believe that the BoE could keep monetary policy easy for an extended period of time. The report also contains changes to the central bank’s growth and inflation forecasts. Reports from central banks are generally best traded reactively. If the Inflation Report is neutral or the BoE upgrades its inflation / gdp forecasts, we expect the GBP/USD to rise. If the Inflation Report sounds dovish, we expect the GBP/USD to decline. REACTIVE TRADE

TECHNICALS

5900 tested but recovered
6000 now resistance
5800 deep support

Cable was tested to the downside as the pair dipped below the key 5900 level today buy managed to recover. It has deeper support at 5800 and sees resistance at 1.6000 as it consolidates its correction.

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