Top 5 12.11.13

TOP 5 HOT IDEAS

DATE: Wednesday Dec 11, 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 – Westpac Consumer Confidence



FUNDAMENTALS
Consumer Confidence expected @ (6:30PM ET / 23:30 GMT)
Our View – Neutral
Reason – Neutral
If Confidence rises by 3% or more = Buy AUD/USD
If Confidence falls by -2% or more = Sell AUD/USD

Australian consumer confidence is due for release tonight and while it is a difficult release to handicap, it can be an important report for the AUD/USD. Given the overall softness in Australian data, the odds favor a weaker release. However our confidence is not high and so we feel that the event risk is best traded reactively. If confidence rises by 3% or more, we expect the AUD/USD to rally. If confidence drops by -2% or more, we expect the AUD/USD to fall. REACTIVE TRADE

TECHNICALS

9150 taken out
9200 next level
Bottom in place at 9000

Aussie continues to extend its recovery as 9150 is taken out. 9000 now solid support and the pair eyes 9200 next.

2. USD/JPY – Japanese Machine Orders

FUNDAMENTALS
Machine Orders expected @ 0.7% (6:50 PM ET / 23:50 GMT)
Our View – Neutral
Reason – Neutral
If Machine Orders drop by -4% or more = Buy USD/JPY
If Machine Orders rise by 3% or more = Sell USD/JPY

Japan’s report on machine orders is not a big mover for the Japanese Yen unless there is a meaningful surprise. As a result, the data should only be traded reactively. If Machine Orders drop by -4% or more, USD/JPY can be bought for a quick move higher. If Machine Orders rise by 3% or more, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS

Again fails at 103.30
103.50 key to upside break
102.50 supports

For the third time USD/JPY has stalled at the 103.30 level suggesting that this may be an near term top. 102.50 is support for now.

3. EUR/USD – German Consumer Prices

FUNDAMENTALS
Final German Consumer Prices expected @ 0.2% (2 AM ET / 7 GMT)
Our View – Neutral
Reason – Neutral
If CPI is revised up to 0.5% or higher = Buy EUR/USD
If CPI is revised down to -0.2% or more = Sell EUR/USD

Germany’s final consumer prices report is not expected to have a significant impact on the euro unless there are revisions and if there is the impact could be significant since low inflation was the motivation behind the central bank’s decision to ease. We feel that the data is best traded reactively. If German CPI is revised up to 0.5% or higher, the EUR/USD can be bought for a stronger recovery. If CPI is revised down to -0.2% or lower, the EUR/USD can be sold. REACTIVE TRADE

TECHNICALS

3800 approached
3700 now support
Break of 3830 opens run to 3900

The euro probed the 3800 figure but failed just in front as the double top resistance continues to cap the move for now. 3700 is support while 3830 break opens run to fresh yearly highs.

4. USD/ZAR – South Africa Retail Sales

FUNDAMENTALS
Q1 Non-Farm Payrolls expected @ (6 AM ET / 11 GMT)
Our View – Neutral
Reason – Neutral
If Retail Sales drop by -0.5% or more = Buy USD/ZAR
If Retail Sales rise by 0.5% or more = Sell USD/ZAR

Retail sales are important for every country and South Africa is no exception. However the data is difficult to handicap and therefore best traded reactively. If retail sales drop for the second month in a row by 0.5% or more, USD/ZAR can be bought for a move higher. If retail sales rise by 0.5%, USD/ZAR can be sold. REACTIVE TRADE

TECHNICALS

10.3000 holds again
10.5000 caps
Break below 10.2000 opens run to 10.0000

USD/ZAR continues to hold at the 10.2000 level with 10.5000 providing resistance as the pair remains in a tight range.

5. NZD/USD – RBNZ Rate Decision

FUNDAMENTALS
RBNZ Rate Decision expected @ 2.5% (3 PM ET / 20 GMT)
Our View – Neutral
Reason – Neutral
If RBNZ maintains level of optimism = Buy NZD/USD
If RBNZ expresses more concern about NZD level = Sell NZD/USD

The Reserve Bank is not expected to alter interest rates but the view on the currency can have a significant impact on NZD/USD. When we last heard from the central bank, the RBNZ, they talked about raising interest rates in 2014 and expressed only mild concerns about the high level of the NZD. Since then, the New Zealand dollar hit a 5 year high against the Australian dollar and while the domestic economy improved, growth in Australia and China (its 2 largest trading partners) slowed. Rate decisions should only be traded reactively. If the RBNZ hardens its concern about the NZD, the currency can be sold for a move lower as this would mean later tightening. If they sound more optimistic and their view on the currency is unchanged, the NZD/USD can be bought for a renewed rally. REACTIVE TRADE

TECHNICALS

8400 key resistance
8300 near term support
Lower highs abound

8400 remains a key double top resistance for the kiwi and the pair will have a difficult time clearing through that level. Meanwhile 8300 is near term support and the pair is making a series of lower highs suggesting downside pressure.

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