Top 5 11.20.13

TOP 5 HOT IDEAS

DATE: Wednesday, Nov 20, 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 Leading Index



FUNDAMENTALS
Leading Index expected @ (6:30 PM ET / 23:30 GMT)
Our View – Neutral
Reason – Neutral
If Leading Indicators rise by 0.5% = Buy AUD/USD
If Leading Indicators falls by more than -0.5% = Sell AUD/USD

Australian leading indicators are scheduled for release this evening and the data is not expected to have a significant impact on the AUD unless there is a big surprise. The data will most likely be weaker but is still best traded reactively. If leading indicators rise by 0.5% or more, the AUD/USD can be bought for a move higher. If leading indicators drop by 0.5% or more, the AUD/USD can be sold. REACTIVE TRADE

TECHNICALS

9400 retaken
9350 support holds
9450 key to upside

AUD/USD has held 9350 support and the pair has now retaken 9400. 9450 is now key to further upside with a break there opening up a run towards 9500.

2. EUR/USD – German Producer Prices

FUNDAMENTALS
PPI expected @ 0% (2 PM ET / 7 GMT)
Our View – Bearish EUR
Reason –Decline in Wholesale Prices
If GE PPI rises by 0.4% or more = Buy EUR/USD
If GE PPI declines by -0.2% or more = Sell EUR/USD

We have good reasons to believe that German producer prices declined in the month of Oct because wholesale prices, which measure a similar subset of goods fell and price pressures in the region in general have been muted. As a result, we believe that the data can be traded proactively or reactively. For those who choose to wait, if producer prices rise by 0.4% or more, the EUR/USD can be bought for a move higher. If PPI declines by 0.2% or more, the EUR/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

3500 proves support
Takeout out of 3550 opens 3600
3450 deeper support

EUR/USD continues to hold 3500 and the moves towards 3550 bodes well for a possible upside move towards 3600. Meanwhile 3450 provides deeper support.

3. GBP/USD – Bank of England Minutes

FUNDAMENTALS
BoE Minutes expected @ (4:30 AM ET / 9:30 GMT)
Our View – Neutral
Reason – Neutral
If one member or more votes to reduce stimulus = Buy GBP/USD
If one member or more votes to raise stimulus = Sell GBP/USD

The Bank of England minutes are scheduled for release tomorrow and given the recent deterioration in UK PMIs, the Monetary Policy Committee could remain cautious on the outlook for the economy. We don’t expect any surprises as all major announcements were probably included in the BoE minutes. So instead, the focus should be on the tally of votes. If one member or more votes to reduce stimulus the GBP/USD can be bought for an extension higher. If one member or more votes to raise stimulus, the GBP/USD can be sold. REACTIVE TRADE

TECHNICALS

6100 retaken
6150 still caps upside
6200 tougher resistance

Cable has show good support near the 6100 level but the pair must clear 6150 to make a run at the key 6200 level.

4. USD/JPY – US Retail Sales

FUNDAMENTALS
Advance Retail Sales expected @ 0.1% (8:30 AM ET / 13:30 GMT)
Our View – Bearish USD
Reason – ICSC rises slightly but Redbook down sharply
If Retail Sales rises by 0.4% or more = Buy USD/JPY
If Retail Sales drops by -0.1% or more = Sell USD/JPY

According to the consensus forecast, economists expect consumer spending growth to increase in October but with the International Council of Shopping Centers reporting only a mild rise and Johnson Redbook survey reporting a decline in spending, there is a reasonable chance of a downside surprise that could send the greenback tumbling. More specifically, according to Redbook, retail sales dropped 1.2% in October. Gas prices also trended lower. Therefore we feel that the data can be traded proactively or reactively. For those who choose to wait, if retail sales rise by 0.4% or more, USD/JPY can be bought for a move higher. However if retail sales drops by 0.1% or more USD/JPY could be sold for another drop below 100. PROACTIVE or REACTIVE TRADE

TECHNICALS

100.00 retaken
99.50 support holds
100.50 key to upside break

USD/JPY has recovered its losses from yesterday but the pair continues to stall out ahead of the 100.50 resistance. A break there opens up a run to 101.50

5. USD/CHF – FOMC Minutes

FUNDAMENTALS
FOMC Minutes expected @ (2 PM ET / 19 GMT)
Our View – Neutral
Reason – Neutral
If the FOMC minutes are less dovish = Buy USD/CHF
If there is more cautiousness in the FOMC minutes = Sell USD/CHF

One of the most important event risks for the U.S. dollar this week will be tomorrow’s FOMC minutes. The central bank will releasing the minutes from its last meeting and given the heightened sensitivity to anything that could shed light on the timing for Fed tapering, the minutes could have an unusually significant impact on the U.S. dollar. We will be looking for 2 specific details in tomorrow’s release. The first is the level of conviction for easing in December. If the minutes emphasize the progress made in the U.S. economy and the need to act quickly, the dollar could resume its rise as yields extend higher. However if the minutes contain an overall air of caution with more members wanting to wait for further improvements before changes are made, the dollar could fall sharply as U.S. yields give up recent gains. The minutes are best traded reactively. REACTIVE TRADE

TECHNICALS

9100 in view
9150 caps upside
Bearish bias in place

USD/CHF remains in a bearish bias with 9100 now in view while 9150 caps any retrace rally. A break below 9100 could open a test of the key 9000 level.

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