Top 5 11.14.12

DATE: Nov 14, 2012

1. AUD/USD = Westpac Consumer Confidence

Westpac Consumer Confidence expected @ (6:30PM ET / 23:30GMT)
Our View – Neutral
Reason – Stronger employment but weaker business confidence
If Consumer Confidence rises by 2% or more = Buy AUD/USD
If Consumer Confidence is 0% or lower = Sell AUD/USD

Australian consumer confidence numbers are due for release this evening and if the surprise is large enough, we could see a meaningful reaction in the AUD/USD. However, forecasting the surprise in consumer confidence is difficult because improvements in labor market conditions are offset by weaker business confidence. Nonetheless if the Westpac Consumer Confidence index rises by 2% or more, we could see a further rally in AUD/USD. But if consumer confidence falls alongside business confidence, the AUD/USD could resume its slide. REACTIVE TRADE

1.0450 key to upside
Higher lows in place
Break of 1.0400 put bears in command

AUDUSD has been in a stealth rally as it trades in the 1.0400-1.0450 zone but it needs to recapture the 1.0450 level with conviction in order to keep the uptrend moving towards the key 1.0500 level.

Risk slightly negative all day Dow -0.46% Europe 0.76% Nikkei -0.18% Oil 85.50 Gold 1725 -5

2. GBP/USD – UK Employment and Inflation Report

Jobless Claims expected @ 0.0k (4:30AM ET / 9:30 GMT) & BoE Inflation Report @ (5:30AM ET / 10:30 GMT)
Our View – Neutral
Reason – Neutral
If Jobless Claims is -10k or lower = Buy GBP/USD
If Jobless Claims is 10K or greater = Sell GBP/USD

Between a labor market report and the Bank of England’s Quarterly Inflation report, tomorrow should be a big day for the British pound. However with the service sector reporting more job losses and the manufacturing sector reporting fewer job losses, the change in jobless claims is a tough call. Yet employment numbers can create a big reaction in a currency so if the surprise is large enough, there could be an opportunity to trade the GBP/USD reactively. More specifically if jobless claims falls by 10k or more, the GBP/USD could extend higher. If claims are 10k or greater, meaning more people are filing for jobless benefits, then support at 1.5850 could be broken. Aside from the Labor Market report, the Quarterly Inflation Report could also cause some volatility in the GBP but we expect the report to support the GBP because the recent rise in CPI should make policymakers less dovish. REACTIVE TRADE

Reversal at 1.5900 as highs don’t hold
Momentum turning positive
5850 key support

Cable now finds itself at a key technical point as today’s rally to 5900 failed to hold sending a negative signal on the close. Still momentum remains slightly positive and as long as 5850 holds the pair may gather some upside strength to make another run at 1.5900 as it tries to form a base.

Risk slightly negative all day Dow -0.46% Europe 0.76% Nikkei -0.18% Oil 85.50 Gold 1725 -5

3. EUR/USD – Eurozone Industrial Production

Industrial Production expected @ -2% (5AM ET / 10GMT)
Our View – Bearish EUR
Reason – Sharp decline in German and French Industrial Production
If EZ IP exceeds 1.0% = Buy EUR/USD
If EZ IP is less than -3% = Sell EUR/USD

We have strong reasons to believe that Eurozone industrial production fell sharply in the month of September. Whenever we look to forecast Eurozone data, we always turn to the economic reports of the region’s 2 largest economies – Germany and France. In Germany, industrial production plunged 1.8%, which was the steepest decline in 5 months and in France, IP dropped 2.5%, which isn’t a major milestone but still a significant contraction. There’s an opportunity to trade Eurozone industrial production proactively or reactively but with economists already looking for a 2% decline, it may be better to wait for a large surprise (decline of 3% or lower) to take the trade. PROACTIVE or REACTIVE TRADE

Near term bottom may be in
2660 key support
Positive Momentum expanding

The EURUSD may be in the process of putting in a short term bottom as long as the 2660 lows from today hold. Positive momentum is expanding and 2750 holds key to the upside.

Risk slightly negative all day Dow -0.46% Europe 0.76% Nikkei -0.18% Oil 85.50 Gold 1725 -5

4. USD/JPY – US Retail Sales

Retail Sales expected @ -0.2% (8:30AM ET / 13:30GMT)
Our View – Bullish USD
Reason – Rise in Payrolls, Consumer Confidence and stronger ICSC
If Retail Sales exceeds 0.0% = Long USD/JPY
If Retail Sales is -0.5% or less = Short USD/JPY

We have good reasons to believe that U.S. retail sales will surprise to the upside. Non-farm payrolls in October beat expectations and consumer confidence rose across the board last month, which should be positive for consumer spending. While there’s no question that the recent slide in stocks probably made Americans more nervous and less willing to spend but economists are looking for a very small increase in retail sales last month and it may not take much for the data to beat. Aside from solid job growth last month and increase in confidence, the International Council of Shopping Centers reported a 4.4% increase in sales compared to a year earlier. Spending was particularly strong at wholesale clubs such as BJ’s and Costco where pre-Sandy buying drove up sales. If retail sales beat expectations, it could simultaneously lift USD/JPY and risk appetite. Yet don’t expect spending to exceed September’s levels because a similar survey from Johnson Redbook actually reported a decline in spending. If retail sales turn positive, we expect a rally in USD/JPY. If it falls by 0.5% or more, USD/JPY could extend its losses. PROACTIVE or REACTIVE TRADE

Support at 79.00 holds
79.50 remains resistance
79.65 puts 80.00 back in view

USDJPY has held the 79.00 support for 2nd day in a row but the overhead resistance at 79.50 still caps any gains. A break of 79.65 opens a way for retest of 80.00

Very mild risk off day in holiday trade Dow -0.25% Europe -0.30% and Nikkei -0.93% Oil 84.5 -.5 Gold 1728 -3

5. NZD/USD – Will Business Confidence Decline?

Business NZ PMI expected @ (4:30PM ET / 21:30GMT)
Our View – Bearish NZD
Reason – Sharp Rise in Unemployment Suggests Weaker Business Conditions
If Business PMI is greater than 50 = Buy NZD/USD
If Business PMI is less than 47 = Sell NZD/USD

We have good reasons to be believe that business activity declined in the month of October primarily due to the sharp increase in unemployment. Businesses in New Zealand would not cut workers at the fastest pace in 13 years unless they grew more optimistic about future activity. Instead, slow growth in major economies has hit NEW Zealand’s export sectors very hard and therefore we believe the odds favor weaker business PMI. There’s an opportunity to trade NZ PMI proactively or reactively and for those who have the patience to wait, a greater than 50 Business PMI print will be good for the NZD/USD whereas a below 47 print will be bearish. REACTIVE TRADE

81.50 key near term support
Break there opens way for test of 81.00
82.00 caps upside

Kiwi has been reversed at 82.00 resistance but remains above the intermediate support of 81.50 for now. A break there augurs a run towards very key 81.00 level.

Risk slightly negative all day Dow -0.46% Europe 0.76% Nikkei -0.18% Oil 85.50 Gold 1725 -5

Top 5 Archive

Top 5 11.08.12
Top 5 11.06.12
Top 5 11.01.12

*Top 5 Archive Members Only

Leave a Comment

Your email address will not be published. Required fields are marked *