Top 5 12.17.13

TOP 5 HOT IDEAS

DATE: Tuesday Dec 17, 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 – RBA Minutes



FUNDAMENTALS
RBA Minutes expected @ (7:30 PM ET / 0:30 GMT)
Our View – Neutral
Reason -- Neutral
If RBA Minutes are neutral = Buy AUD/USD
If RBA minutes are dovish = Sell AUD/USD

The minutes from the last RBA meeting will be released this evening and based on the comments from RBA Governor Glenn Stevens last week, we expect more concerns about the high level of the currency but it will be interesting to see whether the RBA minutes will be dovish enough to drive AUD/USD to its 3 year low of 0.8850. Central bank minutes are always best traded reactively. If the RBA minutes sound neutral and give investors the sense that the central bank is in no rush to cut rates, the AUD/USD could be bought for a squeeze higher. However if the minutes dovish and suggests that they are getting more willing to ease, the AUD/USD can be sold for an extension lower. REACTIVE TRADE

TECHNICALS

8900 key hold
9000 immediate resistance
Break opens a test of yearly lows at 8850

The Aussie managed to hold the 8900 support for another day and could push to 9000 on short covering with 9050 a stiffer level of resistance. Meanwhile a break to the downside opens a run to yearly lows at 8850.

2. GBP/USD – UK Consumer Prices

FUNDAMENTALS
Consumer Prices expected @ 0.2% (4:30 AM ET / 9:30 GMT)
Our View – Bullish GBP
Reason – Smaller Decline in BRC Shop Prices
If CPI rises by 0.4% or more = Buy GBP/USD
If CPI is flat or declines = Sell GBP/USD

U.K. consumer prices are scheduled for release tomorrow and we believe that inflationary pressures could surprise to upside given the smaller decline in shop prices according to the British Retail Consortium. Therefore we feel that the data can be traded proactively or reactively. For those who choose to wait, if CPI rises by 0.4% or more, the GBP/USD can be bought for a move higher. If CPI is flat or declines, the GBP/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

6300 holds somewhat
6350 caps upside
Bearish bias in place

Cable has held the 6300 level today but failure at 6350 suggests that a bearish bias is in place after failing to take out the 6500 level and the pair could correct to 6200 in near term.

3. EUR/USD – German ZEW

FUNDAMENTALS
ZEW Survey expected @ 55 (5 AM ET / 10 GMT)
Our View – Neutral
Reason – Neutral
If the ZEW survey exceeds 57 = Buy EUR/USD
If the ZEW survey is less than 53 = Sell EUR/USD

The German ZEW survey is a fairly important release for the EUR but one that is difficult to handicap. While German economic data has seen recent improves, there has been dispersion in growth within the region. As a result, we believe that it is probably best to trade the ZEW report reactively. If the ZEW survey exceeds 57, the EUR/USD can be bought for a quick move higher. If the ZEW survey drops to 53 or lower, the EUR/USD can be sold.

TECHNICALS

3800 rejected yet again
3700 support holds
Break of 3830 opens run to 3900

The euro continues to hold above the 3700 level but four days days of stalling ahead of yearly highs at 3830 and today’s failure to breach 3800 suggests that further correction may be due.

4. USD/JPY – U.S. Consumer Prices

FUNDAMENTALS
Consumer Prices expected @ 0.1% (8:30 AM ET / 13:30 GMT)
Our View – Neutral
Reason – PPI declined, but Gas Prices Rise
If CPI exceeds 0.3% = Buy USD/JPY
If CPI drops by -0.3% or more = Sell USD/JPY

Tomorrow’s CPI report is best traded reactively because last month, producer price growth declined, which points to lower CPI but economists are looking for an increase because gas prices rose. If CPI growth exceeds 0.3%, USD/JPY can be bought for an extension higher. If CPI drops by -0.3% or more however, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS

Consolidation around 103.00
102.50 holds
102.00 key support

USD/JPY consolidated today at 103.00 as the pair corrects the latest attempt higher but it must hold the 102.00 level in order to preserve its bullish bias.

5. NZD/USD – Q3 New Zealand Current Account

FUNDAMENTALS
GDP expected @ 4.1% (4:45 PM ET / 21:45 GMT)
Our View – Bearish NZD
Reason – Weaker Trade
If Current Account Ratio falls by less than -3% = Buy NZD/USD
If Current Account Ratio drops by -5% or more = Sell NZD/USD

New Zealand current account numbers are due for release this evening and we have good reasons to believe that the data will surprise to the downside given the drop in trade activity. As such we feel that the data can be traded proactively or reactively. If the current account ratio falls by -3% or less, the NZD/USD can be bought for an extension higher. If the current account ratio drops by 5% or less, the NZD/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

8200 holds
8400 still caps
Higher lows remains

Kiwi maintains its uptrend as higher lows stay in place with 8200 support and 8400 resistance as key range points.

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