Top 5 12.04.13

TOP 5 HOT IDEAS

DATE: Wednesday Dec 4, 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 – Australian Q3 GDP



FUNDAMENTALS
AU Q3 GDP expected @ 0.7% (7:30 PM ET / 0:30 GMT)
Our View – Bullish AUD
Reason – Stronger Retail Sales, Trade down slightly
If GDP growth exceeds 0.8% = Buy AUD/USD
If GDP growth is less than 0.6% = Sell AUD/USD

Australian Q3 GDP numbers are scheduled for release this evening and this report generally elicits a reaction in AUD. The 2 most important components of GDP are trade and retail sales and in the third quarter, retail sales growth rose materially while trade deteriorated only slightly. As a result, we feel that this data can be traded proactively or reactively. If GDP growth exceeds 0.8%, we expect the AUDUSD to extend higher. If GDP growth is less than 0.6%, we expect AUD/USD to weaken. PROACTIVE or REACTIVE TRADE

TECHNICALS

9050 finds bottom
9150 caps
9250 possible upside move

Aussie has found a near term bottom at 9050 and the pair can now target 9250 if it can clear resistance at 9150.

2. GBP/USD – PMI Services

FUNDAMENTALS
UK PMI Services expected @ 62 (4:30 AM ET / 9:30 GMT)
Our View – Bullish GBP
Reason – Gfk Down, Rise in UK PMI Manufacturing
If UK PMI exceeds 63 = Buy GBP/USD
If UK PMI drops below 61 = Sell GBP/USD

We have good reasons to believe that U.K. service activity improved in the month of November because manufacturing and construction activity accelerated. Consumer confidence deteriorated slightly but that is not a major concern. As such we feel this data can be traded proactively or reactively. For those who choose to wait, if the PMI index exceeds 63 the GBP/USD can be bought for a quick move higher. If the UK PMI index drops below 61, the GBP/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

6440 key to upside
6350 key support
Consolidation in place

Cable managed to stem the correction from the day prior but the key to the upside still remains the 6440 level which if cleared opens a run to 6500.

3. EUR/USD – Eurozone Final Q3 GDP

FUNDAMENTALS
EZ GDP expected @ 0.1% (5 AM ET / 10 GMT)
Our View – Neutral
Reason – Neutral
If EZ GDP is revised up to 0.2% or higher = Buy EUR/USD
If EZ GDP is revised down to 0% or lower = Sell EUR/USD

Revisions to final GDP figures are always difficult to handicap and best traded reactively. If Eurozone GDP growth is revised up to -0.2% or higher, we expect the EUR/USD to rise. If Eurozone GDP is revised down to 0% or lower, we expect the EUR/USD to fall. PROACTIVE or REACTIVE TRADE

TECHNICALS

3625 still caps
3500 supports
Break either way could extend move

The euro remains resilient but the 3625 level caps for the third day a row and suggests that if not broken soon as test of 3500 will come.

4. USD/CAD – Bank of Canada Rate Decision


FUNDAMENTALS
BoC Decision expected @ 1% (10 AM ET / 15 GMT)
Our View – No Trade
Reason – No Trade
If BoC grows more dovish = Buy USD/CAD
If BoC maintains current stance = No Trade

Wednesday is a busy day for the Canadian dollar with a central bank rate decision and trade numbers scheduled for release. Naturally the rate decision will be the more important event risk of the two and the deciding factor of whether USD/CAD will hit 1.07. There hasn’t been much change in Canada’s economy since the last meeting but U.S. economic activity improved. We expect the BoC to remain neutral but if they grow more dovish, it should drive USD/CAD higher. The event risk is best traded reactively. If the BoC increases its level of dovishness, USD/CAD can be bought for a move higher. If the BoC maintains its current stance, there is no clear trading opportunity in USD/CAD. REACTIVE TRADE

TECHNICALS

Fresh yearly highs not held
1.0600 supports
Break higher opens runt to 1.0800

USD/CAD made fresh yearly highs bu could not hold them. 1.0600 is near term support while a break above 1.0700 opens a run to long term swing highs at 1.0850.

5. USD/JPY – ISM Non-Manufacturing

FUNDAMENTALS
ISM expected @ 55 (10 AM ET / 15 GMT)
Our View – Bullish USD
Reason – Stronger manufacturing ISM and confidence
If ISM rises to 56 or higher = Buy USD/JPY
If ISM falls to 54 or lower = Sell USD/JPY

We have good reasons to believe that U.S. service activity accelerated last month because manufacturing activity increased and confidence improved. As such we feel the data can be traded proactively or reactively. For those who choose to wait, if the ISM index rises to 56 or higher, USD/JPY can be bought for a move higher. If the ISM index falls to 54 or lower, USD/JPY should be sold for a move lower. PROACTIVE or REACTIVE TRADE

TECHNICALS

Major reversal
102.00 tested
A break opens runt to 101.00

USD/JPY recorded a major reversal today with 103.30 failing as a possible double top for now and a further test of 102.00 opens a run to 101.00

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