Top 5 11.28-29.13

TOP 5 HOT IDEAS

DATE: Thursday, Nov 28, 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. USD/JPY – Japanese Retail Sales



FUNDAMENTALS
Retail Sales expected @ -0.5% (6:50 PM ET / 23:50 GMT)
Our View – Neutral
Reason – Neutral
If Retail Sales decline by 1% or more = Buy USD/JPY
If Retail Sales rise by 0.5% or more = Sell USD/JPY

Retail sales is one of the most important pieces of data that a country can release and in the case of Japan, steady spending before the consumption tax hike is essential. Unfortunately spending in October is expected to decline but thankfully this pullback should be temporary. Japanese data is difficult to handicap and tradable only if there is a big surprise. If retail sales drop by 1% or more, USD/JPY can be bought for a move higher. If Retail Sales rise by 0.5% or more, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS

102.00 taken out
Strong upside reversal
Yearly highs in view

USD/JPY has posted a strong upside reversal taking out the key 102.00 level. The upside break now puts the yearly highs squarely in view while 101.00 supports.

2. EUR/CHF – Switzerland GDP

FUNDAMENTALS
Swiss Q3 GDP expected @ 0.4% (1:45 AM ET / 6:45 GMT)
Our View – Bearish CHF
Reason – Weaker Retail Sales, Smaller Trade Surplus
If Swiss GDP growth is less than 0.3% = Buy EUR/CHF
If Swiss GDP growth exceeds 0.6% = Sell EUR/CHF

Third quarter GDP numbers are scheduled for release on Thursday. Whenever we look to handicap GDP data, we always turn to the 2 most important components of GDP -- retail sales and trade. In the third quarter, consumer spending growth slowed and the trade surplus declined and for these reasons we believe that GDP growth could surprise to the downside. If Q3 GDP growth in Switzerland is less than 0.3%, EUR/CHF can be bought for a move higher. If GDP growth exceeds 0.6%, EUR/CHF can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

2300 holds
2350 caps
Range still in place

EUR/CHF continues to go nowhere as the 2300-2350 range remains in place and volatility continues to compress.

3. EUR/USD – German Unemployment

FUNDAMENTALS
German Unemployment expected @ 0K (3:55 AM ET / 8:55 GMT)
Our View – Bullish EUR
Reason – Marginal improvement in employment according to PMIs
If unemployment rolls drop by 10K or more = Buy EUR/USD
If unemployment rolls rise by 10K or more = Sell EUR/USD

We have good reasons to believe that German labor market conditions improved in the month of November because the employment component of the PMI index increased slightly. As such, we feel that the data can be traded proactively or reactively. If German unemployment rolls drop by 10K or more, we expect the EUR/USD to rise. If unemployment rolls rise by 10K or more, we expect the EUR/USD to decline. PROACTIVE or REACTIVE TRADE

TECHNICALS

3600 taken out but not held
Upward bias remains in place
3500 still downside support

EUR/USD managed to run through the stops at the 1.3600 level but was not able to sustain the move. The upward bias remains in place as long as 3500 support holds.

DATE: Thursday, Nov 29, 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. USD/JPY – Japanese Industrial Production

FUNDAMENTALS
Industrial Production expected @ 2.1% (6:50 PM ET / 23:50 GMT)
Our View – Neutral
Reason – Neutral
If Industrial Production rises by 1.5% or less = Buy USD/JPY
If Industrial Production rises by 3% or more = Sell USD/JPY

A number of Japanese economic reports are scheduled for release this evening but we feel that industrial production will be the most important because it is an activity index that can provide clues on how the economy will perform going forward. Unfortunately the data is difficult to handicap and therefore best traded reactively. If industrial production rises by 1.5% or less, USD/JPY can be bought for a move higher. If industrial production rises by 3% or more, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS

102.00 taken out
Strong upside reversal
Yearly highs in view

USD/JPY has posted a strong upside reversal taking out the key 102.00 level. The upside break now puts the yearly highs squarely in view while 101.00 supports.

2. EUR/USD – German Retail Sales

FUNDAMENTALS
German Retail Sales expected @ 0.4% (2 AM ET / 7 GMT)
Our View – Neutral
Reason – Stronger Confidence, Markit Retail PMI released later
If retail sales exceeds 0.6% = Buy EUR/USD
If retail sales growth declines by 0.1% or more = Sell EUR/USD

German retail sales are due for released on Friday but we feel that this month’s report should be traded reactively because the Retail PMI index will not be released until later. If German retail sales exceed 0.6%, the EUR/USD can be bought for a move higher. If retail sales growth declines by 0.1% or more the EUR/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

3600 taken out but not held
Upward bias remains in place
3500 still downside support

EUR/USD managed to run through the stops at the 1.3600 level but was not able to sustain the move. The upward bias remains in place as long as 3500 support holds.

3. USD/CAD – Canadian GDP

FUNDAMENTALS
Q3 GDP expected @ 2.4% (8:30 AM ET / 13:30 GMT)
Our View – Bearish CAD
Reason – Weaker Retail Sales, No Major Changes in Trade
If GDP growth is less than 1.5% = Buy USD/CAD
If GDP growth exceeds 2.5% = Sell USD/CAD

Canada’s third quarter GDP report is scheduled for release on Friday. The 2 main components of GDP are retail sales and trade and in the third quarter, retail sales weakened but there was no major change in trade. Due to the weakness in consumer spending, we feel the data can be traded proactively or reactively. If GDP growth is less than 1.5%, USD/CAD can be bought for a move higher. If GDP growth exceeds 2.5%, USD/CAD can be sold. REACTIVE TRADE

TECHNICALS

1.0600 tested again
Triple top?
Break opens run to 1.0800

USD/CAD is once again testing the swing highs at 1.0600. A failure here would create a triple top, but a break above opens a runt towards 1.0800.

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