Top 5 11.21.13

TOP 5 HOT IDEAS

DATE: Thursday, Nov 21, 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 – Chinese Manufacturing PMI



FUNDAMENTALS
HSBC Flash PMI expected @ 50.8 (8:45 PM ET / 0:45 GMT)
Our View – Neutral
Reason – Neutral
If the PMI index exceeds 51.5 = Buy AUD/USD
If the PMI index is less than 50 = Sell AUD/USD

Chinese manufacturing PMI numbers can have a big impact on the AUD because China is Australia’s number one trade partner. Given the vulnerability of the AUD rally, the currency can be particularly sensitive to incoming data. Since Chinese economic reports are difficult to handicap, we feel they are best traded reactively. If the PMI index exceeds 51.5, meaning that Chinese manufacturing activity increased, the AUD/USD can be bought for a recovery trade. If the index drops below 50 on the other hand, the AUD/USD can be sold for a more aggressive move lower. REACTIVE TRADE

TECHNICALS

9350 broken
9300 next target of shorts
9400 caps upside

AUD/USD made a very very ugly bearish engulfing candle today suggesting further downside pressure with 9300 next level in view. Meanwhile 9400 caps upside.

2. NZD/USD – Credit Card Spending

FUNDAMENTALS
Credit Card Spending expected @ (9PM ET / 2 GMT)
Our View – Neutral
Reason -- Neutral
If Credit Card Spending rises by 1% or more = Buy NZD/USD
If Credit Card Spending falls by 1% or more= Sell NZD/USD

New Zealand credit card spending is not a huge market mover for the NZD/USD unless there is a big surprise. Therefore the data is best traded reactively. If credit card spending rises by 1% or more, the NZD/USD can be bought for a move higher. If credit card spending falls by 1% or less, the NZD/USD can be sold. REACTIVE TRADE

TECHNICALS

Major reversal
8250 in view
8350 caps upside

The kiwi like the Aussie traced out a reversal candle on the daily charts and looks like it may test the 8250 support. Meanwhile 8350 caps the upside.

3. USD/JPY – Bank of Japan Rate Decision

FUNDAMENTALS
BoJ Announcement expected @ (TBD but usually around 1 AM ET / 6 GMT)
Our View – Neutral
Reason – Neutral
If BoJ leaves monetary policy unchanged = No Trade
If BoJ Eases monetary policy = Buy USD/JPY

This month’s Bank of Japan meeting is expected to be a nonevent for the Yen because the central bank is comfortable with the current level of policy. If the BoJ leaves their asset purchase program and interest rates unchanged like we expect, the BoJ meeting will be a nonevent for USD/JPY, which is why we think the meeting can only be traded reactively. However if for whatever reason the BoJ decides to ease monetary policy, which we don’t expect, then we believe USD/JPY can be bought for a stronger move higher. REACTIVE TRADE

TECHNICALS

100.00 tested repeatedly
Inside day
Failure at 100.50 bodes badly for upside

USD/JPY failure to take out the 100.50 level for the third day in a row bodes badly for the pair with 99.50 key downside support while 100.50 still remains the upside level to conquer.

4. EUR/USD – Eurozone PMIs

FUNDAMENTALS
Eurozone Composite PMI expected @ 52 (4 AM ET / 9 GMT)
Our View – Neutral
Reason – Higher ZEW, Industrial Production and Factory Orders Down
If the PMI index exceeds 53 = Buy EUR/USD
If the PMI index is less than 51 = Sell EUR/USD

This month’s PMI report from the Eurozone is difficult to handicap because a higher ZEW is offset by weaker industrial production and factory orders. As such we feel that the data should only be traded reactively. For those who choose to wait, if the PMI index exceeds 53, the EUR/USD can be bought for a move higher. If the index drops below 51, the EUR/USD can be sold. REACTIVE TRADE

TECHNICALS

3450 cracks
3400 next target of shorts
3500 now resistance

The turn to the downside and break of the 3450 level suggests that euro may see further downside action with 3400 now in view while 3500 caps the upside moves.

5. USD/JPY -- Philadelphia Fed Survey

FUNDAMENTALS
Philly Fed Survey expected @ 15 (10 AM ET / 15 GMT)
Our View – Bearish USD
Reason – Drop in Empire State
If the Philly Fed index rises to 20 or higher = Buy USD/JPY
If the Philly Fed index falls to 13 or lower = Sell USD/JPY

A number of U.S. economic reports are scheduled for release tomorrow but we believe that the Philadelphia Fed index will be the most market moving. Based on the drop in the Empire State survey, we believe that the data can surprise to the downside and be traded reactively. If the Philly Fed index rises to 20 or higher, USD/JPY can be bought for an extension higher. If the Philly Fed index falls to 13 or lower, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS

100.00 tested repeatedly
Inside day
Failure at 100.50 bodes badly for upside

USD/JPY failure to take out the 100.50 level for the third day in a row bodes badly for the pair with 99.50 key downside support while 100.50 still remains the upside level to conquer.

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