Top 5 12.05.13

TOP 5 HOT IDEAS

DATE: Thursday Dec 5, 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 Trade Balance



FUNDAMENTALS
Trade Balance expected @ -350M (7:30 PM ET / 0:30 GMT)
Our View – Bullish
Reason – Rise in Manufacturing PMI in Oct
If Trade deficit is less than -200M = Buy AUD/USD
If Trade deficit exceeds -400M = Sell AUD/USD

We have good reasons to believe that Australia’s trade deficit improved in the month Oct because the PMI manufacturing index increased that month. The export component of the PMI report also firmed, validating our belief that external demand accelerated. The data can be traded proactively or reactively. For those who choose to wait, if the Trade deficit is less than -200M, we believe the AUD/USD can be bought for a brief recovery. If Trade deficit exceeds -400M, the AUD/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

9000 tested
9150 caps
8900 possible downside move

With 9000 tested amidst a negative candle the Aussie is now vulnerable to further downside at 8900.

2. GBP/USD – BoE Rate Decision

FUNDAMENTALS
BoE Rate Decision expected @ (7 AM ET / 12 GMT)
Our View – Neutral
Reason – Neutral
If the BoE statement contains more optimism = Buy GBP/USD
If the BoE statement contains more caution = Sell GBP/USD

The Bank of England is not expected to alter interest rates tomorrow and for this reason, the BoE announcement should be a nonevent for the GBP. The only situation in which the currency will move is if the central bank releases a detailed statement, which we do not anticipate and as such, the BoE meeting should only be traded reactively. If the central bank releases a detailed monetary policy statement that contains more optimism, the GBP/USD can be bought for a move higher. If they release a statement containing more caution, the GBP/USD can be sold. REACTIVE TRADE

TECHNICALS

6440 key to upside
6350 key support
Consolidation in place

The key to the upside in cable still remains the 6440 level which if cleared opens a run to 6500.

3. EUR/USD – ECB Rate Decision

FUNDAMENTALS
ECB President Draghi’s Press Conference scheduled for 8:30 AM ET / 13:30 GMT
Our View – Neutral
Reason – Neutral
If Draghi sounds more optimistic about economy = Buy EUR/USD
If Draghi stresses the possibility of negative rates = Sell EUR/USD

When it comes to the ECB rate announcement, Draghi’s press conference is generally the most important part of the meeting. Economic data since the last meeting has been mixed so we do not anticipate any major changes in the central bank’s stance. However if Draghi sounds more optimistic, the EUR/USD could move higher. If he overlooks the improvements and focuses on the possibility of easier monetary policy, the EUR/USD could weaken. REACTIVE TRADE

TECHNICALS

3625 still caps
3500 supports
Break either way could extend move

The euro remains in a very tight consolidation range between 3625 and 3500 with a break either way signaling possible direction and extension of the move.

4. USD/JPY – Final Q3 GDP

FUNDAMENTALS
US Q3 GDP expected @ 3.1% (8:30 AM ET / 13:30 GMT)
Our View – Neutral
Reason – Neutral
If US GDP is revised up to 3.1% or higher = Buy USD/JPY
If US GDP is revised down to 2.7% or lower = Sell USD/JPY

Revisions to final GDP figures are always difficult to handicap and best traded reactively. If US GDP growth is revised up to 3.1% or higher, we expect USD/JPY to rise. If Eurozone GDP is revised down to 2.7% or lower, USD/JPY can be sold for a move PROACTIVE or REACTIVE TRADE

TECHNICALS

102.00 tested again
103.00 now caps
A break opens run to 101.00

USD/JPY remains in a corrective phase with 103.30 now signaling a possible double top for now and a further test of 102.00 opens a run to 101.00

5. USD/CAD – IVEY PMI

FUNDAMENTALS
IVEY PMI expected @ 59.5 (10 AM ET / 15 GMT)
Our View – Bearish CAD
Reason – Weaker Wholesale sales
If the PMI index drops below 59 = Buy USD/CAD
If the PMI index exceeds 63 = Sell USD/CAD

We have good reasons to believe that Canadian manufacturing conditions deteriorated in November. Economic activity in general has been mixed with wholesale sales ticking lower. As such, we feel that the data can be traded proactively or reactively. For those who choose to wait, if the PMI index drops below 59, USD/CAD can be bought for a move higher. If it exceeds 63, USD/CAD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

1.0700 taken out but not held
1.0600 supports
Break higher opens runt to 1.0800

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

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