Top 5 12.02.13

TOP 5 HOT IDEAS

DATE: Monday, Dec 2, 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 – PMI Manufacturing



FUNDAMENTALS
PMI Manufacturing expected @ (5:30 PM ET / 22:30 GMT)
Our View – Neutral
Reason – Neutral
If PMI Manufacturing exceeds 55 = Buy AUD/USD
If PMI Manufacturing index drops below 50 = Sell AUD/USD

Australia’s PMI manufacturing report is scheduled for release Sunday evening and while the RBA is dovish, Australian data has been mixed. Therefore this report is best traded reactively. If the PMI index exceeds 55, we expect the AUD/USD to extend its relief rally. If the index drops below 50, we expect AUD/USD to weaken. REACTIVE TRADE

TECHNICALS

9050 holds
9150 caps
Beginning of base building

Aussie may be starting to build a base as 9050 holds for 2nd day in a row and the pair looks ready to rebound. 9150 caps upside for now.

2. NZD/USD – China’s HSBC Manufacturing PMI

FUNDAMENTALS
HSBC Services PMI @ (8:45 PM ET / 0:45 GMT)
Our View – Neutral
Reason – Neutral
If PMI index exceeds 52 = Buy NZD/USD
If the PMI index drops to 50 or lower = Sell NZD/USD

Chinese economic data is notoriously difficult to handicap and this is particularly true of the second release of China’s HSBC manufacturing PMI report. Based on other Chinese data, the economy is slowing gradually but a larger surprise is needed to move the NZD/USD. Therefore we believe the data is best traded reactively. For those who choose to wait, if the PMI index exceeds 52, the NZD/USD can be bought for a move higher. If the PMI index drops to 50 or lower, the NZD/USD can be sold. REACTIVE TRADE

TECHNICALS

8100 key hold
8250 caps upside
Break opens test of 8000

The kiwi continues to just barely hold the 8100 level but the pair is vulnerable to a break lower which could open a test of the critical 8000 support.

3. EUR/USD – Eurozone PMI Manufacturing

FUNDAMENTALS
Final Eurozone Composite PMI expected @ 51.5 (4 AM ET / 9 GMT)
Our View – Neutral
Reason – Neutral
If the PMI index exceeds 52 = Buy EUR/USD
If the PMI index is less than 51 = Sell EUR/USD

Final Eurozone PMI numbers are not expected to have any impact on the euro unless there is a revision. Therefore the only opportunity is to trade the data reactively. If the PMI is revised up to 52 or higher, the EUR/USD can be bought for a move higher. If PMI is revised down to 51 or lower, the EUR/USD can be sold. REACTIVE TRADE

TECHNICALS

Stall just above 3600
3550 near term support
Break higher opens retest of swing highs

The euro rally has stalled just above the 3600 level with 3500 now providing key support. A break above opens a run towards the yearly highs.

4. GBP/USD – UK PMI Manufacturing

FUNDAMENTALS
UK PMI Manufacturing expected @ 56 (4:30 AM ET / 9:30 GMT)
Our View – Bullish GBP
Reason – Sharp Improvement in CBI
If UK PMI exceeds 57 = Buy GBP/USD
If UK PMI drops below 55 = Sell GBP/USD

We have strong reasons to believe that U.K. manufacturing activity improved in the month of November because a similar survey conducted by the Confederation of British Industry increased. As such we feel this data can be traded proactively or reactively. For those who choose to wait, if the PMI index exceeds 57, the GBP/USD can be bought for a quick move higher. If the UK PMI index drops below 55, the GBP/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

6400 in view
6200 now support
Break above opens run to 1.6500

The power move in GBP/USD continues with the pair now eying the 6400 break which could put it on a path to run the stops at the 1.6500 level. Meanwhile 1.6200 offers near term support.

5. USD/JPY – ISM Manufacturing

FUNDAMENTALS
ISM Manufacturing expected @ 55.1 (10 AM ET / 15 GMT)
Our View – Bearish USD
Reason –Weaker Empire, Philly and Chicago
If ISM index exceeds 57 = Buy USD/JPY
If ISM index drops below 53 = Sell USD/JPY

The national ISM manufacturing index is generally an important release for the U.S. dollar and based on the drop in the Empire State, Philly Fed and Chicago PMI reports, there’s strong reason to believe that manufacturing activity slowed across the nation. As such, we feel that the data can be traded proactively or reactively. If the index exceeds 57, USD/JPY can be bought for a move higher. If it drops below 53, USD/JPY can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

102.50 touched
103.00 next target of longs
101.00 support

USD/JPY broke above 102.50 and remains near the highs, suggesting that it may have power to run the 103.00 level as longs eye the yearly highs within reach.

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