Top 5 12.06.13

TOP 5 HOT IDEAS

DATE: Friday Dec 6, 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 PMI Construction



FUNDAMENTALS
PMI Construction expected @ (5:30 PM ET / 22:30 GMT)
Our View – Neutral
Reason – Neutral
If the PMI index exceeds 56 = Buy AUD/USD
If the PMI index is less than 54 = Sell AUD/USD

Australia’s PMI Construction index is not a huge market mover for the Australian dollar unless there is a big surprise so the only opportunity is to trade the report reactively. If the PMI index exceeds 56, the AUD/USD can be bought for a move higher. If the PMI index drops to 54 or less, the AUD/USD can be sold. REACTIVE TRADE

TECHNICALS

9000 holds
9100 now resistance
Break opens move back to 9150.

Aussie has held the 9000 level for the second day in a row and now targets 9100 as the next level in recovery.

2. EUR/CHF – Swiss Consumer Prices

FUNDAMENTALS
Swiss CPI expected @ -0.2% (3:15 AM ET / 8:15 GMT)
Our View – Neutral
Reason – Neutral
If CPI declines by -0.3% or more = Buy EUR/CHF
If CPI rises by 0.3% or more = Sell EUR/CHF

Switzerland’s consumer price report is not a huge market mover for the Swiss Franc unless there is a meaningful surprise so the data is best traded reactively. If consumer prices decline by -0.2% or more, EUR/CHF can be bought for a move higher. If CPI rises by 0.3% or more, EUR/CHF can be sold. REACTIVE TRADE

TECHNICALS

2300 caps
Downside bias
2200 next target of shorts

EUR/CHF is pressing to the lower end of its range as shorts try to push towards the 2200 support area after a failure to hold 2300.

3. USD/CAD – CAD Employment

FUNDAMENTALS
Canadian Employment expected @ 12K (8:30 AM ET / 13:30 GMT)
Our View – Bullish CAD
Reason – Rise in employment component of IVEY PMI
If Employment is less than 5K = Buy USD/CAD
If Employment exceeds 20K = Sell USD/CAD

Despite the drop in the IVEY PMI index, we have good reasons to believe that Canadian employment numbers could surprise to the upside because the employment component of the same report rose sharply. Therefore we feel the data can be traded proactively or reactively. For those who choose to wait, if Canadian employment rises by 5K or less, USD/CAD can be bought for a extension higher. However if Canadian employment exceeds 20K, USD/CAD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

1.0700 caps the rally
1.0600 supports
Consolidation of the move

USD/CAD has consolidated its move higher as 1.0700 now caps the rally, but if 1.0600 is given a near term top may be in place.

4. USD/JPY – Non-Farm Payrolls

FUNDAMENTALS
Non-Farm Payrolls expected @ 180K (8:30 AM ET / 13:30 GMT)
Our View – Neutral
Reason – Neutral
If NFPs exceed 200K = Buy USD/JPY
If NFPs is 150K or less = Sell USD/JPY

The U.S. non-farm payrolls report is a notoriously volatile piece of data to trade and should only be traded reactively. While the employment component of non-manufacturing ISM increased, pointing to the potential for a downside surprise, many other reports increased, implying a stronger release. The U.S. labor market report should only be traded reactively. If payrolls exceed 200K, USD/JPY can be bought for a squeeze higher. If it is less than 150K, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS

101.50 supports
102.50 caps
A break opens run to 101.00

USD/JPY remains in a corrective phase with 102.given today and a further test of 101.50 opens a run to 101.00. Meanwhile break above 103.00 revives upside bias.

5. EUR/USD – University Michigan Index

FUNDAMENTALS
UMich expected @ 76 (9:55 AM ET / 13:55 GMT)
Our View – Bullish USD
Reason – Rise in IBD/TIPP
If the UMich index drops to 74 or lower = Buy EUR/USD
If the UMich index rises to 77 or higher = Sell EUR/USD

The University of Michigan consumer confidence report is scheduled for release tomorrow and based on the rise in the IBD/TIPP index, confidence should have improved in the month of December. As such we l feel this data can be traded proactively or reactively. For those who chose to wait, if the UMich index exceeds 86, USD/JPY can be bought for a move higher. If the UMich index drops below 82, USD/JPY can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

3625 taken out
3700 next target of longs
3500 supports

EUR/USD took out the multi-day resistance at 3625 and is now pushing towards the 3700 level while 3500 remains solid support for the pair

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