Top 5 12.19.13

TOP 5 HOT IDEAS

DATE: Thursday Dec 19, 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. EUR/CHF – Swiss Trade Balance



FUNDAMENTALS
Swiss Trade Balance expected @ 2.8B (2 AM ET / 7 GMT)
Our View – Neutral
Reason – Neutral
If Trade Surplus is less than 2B = Buy EUR/CHF
If Trade Surplus exceeds 3B = Sell EUR/CHF

Switzerland’s trade balance is difficult to handicap and not incredibly market moving unless there is a big surprise. The data should only be traded reactively. If the trade surplus shrinks to 2B or less, EUR/CHF can be bought for a move higher. If it exceeds 3B or more, EUR/CHF can be sold. REACTIVE TRADE

TECHNICALS

2200 holds
Bottom formed
Rebound targets 2300

EUR/CHF has now formed a clear bottom at the 2200 level and the pair now targets 2300 as the next upside level.

2. EUR/USD – EZ Current Account

FUNDAMENTALS
EZ Current Account Balance expected @ (4 AM ET / 8 GMT)
Our View – Neutral
Reason – Smaller German Current Account Surplus AND French CA Deficit
If EZ Current Account Balance exceeds 15B = Buy EUR/USD
If EZ Current Account Balance is less than 10B = Sell EUR/USD

This month’s EZ current account balance is difficult to handicap. Whenever we look to handicap EZ data we always turn to the reports of its 2 largest economies – Germany and France. In Oct Germany reported a smaller current account surplus but France reported a smaller current account deficit. As such we feel that the data should only be traded reactively. For those who choose to wait, if the EZ current account balance exceeds 15B, the EUR/USD can be bought for a move higher. If the current account balance is less than 10B, the EUR/USD can be sold. REACTIVE TRADE

TECHNICALS

3800 rejected and reversed
3700 support broken
3650 next target of shorts

The euro rejected the 1.3800 level today and reversed sharply to break 3700 which suggests further downside action for the pair with 3650 now in view.

Cable has tested the 6250 level as the bearish bias remains in place after failing to take out the 6500 level and the pair could correct to 6200 in near term.

3. GBP/USD – UK Retail Sales

FUNDAMENTALS
Retail Sales expected @ 0.3% (4:30 AM ET / 8:30 GMT)
Our View – Bearish GBP
Reason – Decline in BRC Retail Sales, Smaller drop in jobless claims and weaker confidence
If Retail Sales grow by 0.5% or more = Buy GBP/USD
If Retail Sales is 0% or lower = Sell GBP/USD

We have good reasons to believe that U.K. retail sales will miss expectations because spending fell according to a similar report conducted by the British Retail Consortium, consumer confidence weakened and the drop in jobless claims was less than the previous month. As such, we feel that the data can be traded proactively or reactively. For those who choose to wait, if retail sales grow by 0.5% or more, the GBP/USD can be bought for a move higher. However if retail sales growth stagnates or declines, the GBP/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

Fails ahead of 6500
6250 Still key support
Bearish bias remains in place

Cable couldn’t quite make it to 6500 today and has now reversed below 6400 but remains well supported at 6250.

4. USD/MXN – Mexico Retail Sales

FUNDAMENTALS
Retail Sales expected @ 1.7% (9AM ET / 14 GMT)
Our View – Neutral
Reason -- Neutral
If Spending drops by -3% or more = Buy USD/MXN
If Spending rises by 1% or more = Sell USD/MXN

Mexico’s retail sales report is an important one for USD/MXN but the data is difficult to handicap and therefore best traded reactively. If retail sales drops by -3% or more USD/MXN can be bought for a move higher. If spending rises by 1% or more, USD/MXN can be sold. REACTIVE TRADE

TECHNICALS

Wide range
13.1000 caps
12.8000 supports

The peso saw a lot of volatility today and the pair now faces a wide range of 13.1000 to topside and 12.8000 to downside.

5. USD/JPY – Philadelphia Fed Index

FUNDAMENTALS
Philly Fed Survey expected @ 10 (10 AM ET / 15 GMT)
Our View – Bullish USD
Reason – Stronger Empire State Survey
If the Philly Fed index rises to 12 or higher = Buy USD/JPY
If the Philly Fed index falls to 4 or lower = Sell USD/JPY

We have good reasons to believe that the Philly Fed survey will be stronger because of a similar increase in the Empire state survey, a measure of manufacturing conditions in the NY region. As such, we feel that the Philly Fed survey can be traded proactively or reactively. For those who choose to wait, if the Philly Fed index rises to 12 or higher, USD/JPY can be bought for an extension higher. If the Philly Fed index falls to 4 or lower, USD/JPY can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

104.00 taken out
104.50 next
103.00 now support

Fresh yearly highs for USD/JPY now target 104.50 as next level with 103.00 now support.

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