Top 5 12.24.13 – 12.27.13

TOP 5 HOT IDEAS

DATE: Tuesday Dec 24, 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

**Holiday Alert: Due to lack of data, we are publishing an abridged version of the Top 5

DATE: Tuesday Dec 24, 2013

1. USD/JPY – Durable Goods



FUNDAMENTALS
Durable Goods expected 1.8% (8:30 AM ET / 13:30 GMT)
Our View – Neutral
Reason – Neutral
If Durable Goods orders rises by 2.5% or more = Buy USD/JPY
If Durable Goods orders drop by 1% or more = Sell USD/JPY

The durable goods orders report is notoriously volatile and difficult to trade. So the only opportunity we see is to trade the data reactively. If durable goods orders rise by 2.5% or more, USD/JPY can be bought for a move higher. If orders rise by 1% or less, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS


USD/SGD has been in a very strong uptrend but prices are failing right at the 61.8% Fibonacci retracement of the August to October sell-off. If the currency pair does not manage to close above 1.27, it is vulnerable for drop to the 50% Fib and former breakout point at 1.26. If it extends higher, there could be some resistance at 1.2750.

2. EUR/USD – U.S. New Home Sales

FUNDAMENTALS
New Home Sales expected @ -0.9% (10 AM ET / 15 GMT)
Our View – Bearish USD, Bullish EUR
Reason – Drop in Existing Home Sales
If New Home Sales drop by -4% or more = Buy EUR/USD
If New Home Sales rise by 10% or more = Sell EUR/USD

We have good reasons to believe that new home sales declined in the month of November because existing home sales surprised to the downside. Also, new home sales soared the previous month so a retracement is natural. This data can be traded proactively or reactively. If existing home sales drop by -4% or more, the EUR/USD should rally. If Existing Home Sales rise by 10% or more, the EUR/USD should fall. PROACTIVE or REACTIVE TRADE

TECHNICALS


EUR/USD has been turn mode since failing at 1.38. Support is now at 1.36, the 50-day SMA and below there, 1.35, where the second standard deviation Bollinger Band sits. If EUR/USD starts to recover, the October high of 1.3830 which also happens to be the 61.8% Fibonacci retracement of the 2011 to 2012 sell-off will be the key resistance.

DATE: Thursday Dec 26, 2013

1. USD/CHF – U.S. Weekly Jobless Claims

FUNDAMENTALS
Jobless Claims @ 347K (8:30 AM ET / 13:30 GMT)
Our View – Neutral
Reason – Neutral
If jobless claims drop to 325K or less = Buy USD/CHF
If jobless claims rise to 380k or more = Sell USD/CHF

Jobless claims are scheduled for release on Thursday and given the sharp deterioration the week prior, a rebound is expected. The claims data in general is difficult to predict and therefore best traded reactively. If jobless claims rise by 325K or less, USD/CHF can be bought for a move higher. If jobless claims rise to 380K or more, USD/CHF can be sold. REACTIVE TRADE

TECHNICALS


The rally in EUR/CHF looks like a dead cat bounce. There is major resistance above current levels at 1.2310, where the 100-day and 200-day SMA converge. 1.22 is near term support but the swing low of 1.2167 is the key level to watch.

DATE: Friday Dec 27, 2013

1. USD/JPY – Japanese Industrial Production

FUNDAMENTALS
Industrial Production expected @ 0.4% (6:50 PM ET / 23:50 GMT)
Our View – Neutral
Reason – Neutral
If Industrial Production falls by 0.1% or more = Buy USD/JPY
If Industrial Production rises by 1% or more = Sell USD/JPY

A number of Japanese economic reports are scheduled for release on Thursday evening / Friday morning in Japan. Of these releases, we feel that industrial production is the most important. Unfortunately the data is difficult to handicap and therefore best traded reactively. If industrial production drops by 0.1% or more, USD/JPY can be bought for a move higher. If industrial production rises by 1% or more, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS


Friday’s ugly reversal candle in USD/CAD points to further losses for the pair. The current move should extend to the first standard deviation Bollinger Band at 1.0575 and a break below the December low of 1.0560 would open the door for a stronger sell-off to 1.05. However if USD/CAD manages to regain its upside momentum, its 3 year high of 1.0737 is key resistance and above there the 2010 high of 1.0854.

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