Top 5 01.09.14

*Top 5 Archive Members Only Top 5


DATE: Thursday Jan 9, 2014

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 Retail Sales

Retail Sales expected @ 0.4% (7:30 PM ET / 23:30 GMT)
Our View – Bearish AUD
Reason – Drop in Sales Component of PMI Services
If Retail Sales rise by 0.7% or more = Buy AUD/USD
If Retail Sales rises by 0.2% or less = Sell AUD/USD

Consumer spending reports are always important because they form the backbone of an economy and Australia’s release is no exception. Australian data has been very weak and in November the sales component of PMI services declined, pointing to a drop in spending. We feel that the Retail Sales report can be traded proactively or reactively. For those who choose to wait, if retail sales rise by 0.7% or more, the AUD/USD can be bought for a reversal higher. If retail sales rise by 0.2% or less, the AUD/USD can be sold for an extension lower. PROACTIVE or REACTIVE TRADE


8900 tested again
8950 caps upside
Break of 8900 opens run to 8850

Aussie continues to probe the 8900 support but continues to hold for now. A break of 8900 opens a possible test of multiple support at 8850.

2. GBP/USD – UK Trade Balance


UK Trade Balance expected @ -9.4B (4:30 AM ET / 9:30 GMT)
Our View – Neutral
Reason – Drop in PMI Mfg but Rise in New Orders
If Trade Deficit is -8.9B or better = Buy GBP/USD
If Trade Deficit is -10B or higher = Sell GBP/USD

This month’s UK trade balance report is a tough call because the drop in the PMI manufacturing index was offset by the rise in new orders. This lack of consistency suggests that the data should be traded reactively. For those who choose to wait, if the Trade Deficit is -8.9B or better, the GBP/USD can be bought for a move higher. If the trade deficit is -10B or larger, the GBP/USD can be sold. REACTIVE TRADE


Takes out 6450
6500 next target of longs
6400 support

Cable has seen relative strength today as the pair took out the 6450 level and longs now eye the 6500 level as the next target. 6400 is near term support.

3. EUR/USD – ECB Rate Decision

ECB President Draghi’s Press Conference scheduled for 8:30 AM ET / 13:30 GMT
Our View – Neutral
Reason – Neutral
If Draghi sounds more optimistic about economy = Buy EUR/USD
If Draghi stresses the possibility of negative rates = Sell EUR/USD

When it comes to the ECB rate announcement, Draghi’s press conference is generally the most important part of the meeting. Economic data since the last meeting has been mixed so we do not anticipate any major changes in the central bank’s stance. However if Draghi sounds more optimistic, the EUR/USD could move higher. If he overlooks the improvements and focuses on the possibility of easier monetary policy, the EUR/USD could weaken. REACTIVE TRADE


3550 tested
3650 caps upside
Downtrend resumes

The EUR/USD downtrend has resumed with 3550 tested but held for now, but a break there opens a run to 3500. Meanwhile 3650 caps the upside.

4. USD/JPY – US Jobless Claims

Jobless Claims @ 335K (8:30 AM ET / 13:30 GMT)
Our View – Neutral
Reason – Neutral
If jobless claims drop to 325K or less = Buy USD/JPY
If jobless claims rise to 350k or more = Sell USD/JPY

The weekly Jobless claims report is the most important piece of U.S. data on the calendar Thursday. The claims data is difficult to predict and therefore best traded reactively. If jobless claims rise by 325K or less, USD/JPY can be bought for a move higher. If jobless claims rise to 350K or more, USD/JPY can be sold. REACTIVE TRADE


105.00 rally stalls
104.50 near term support
105.50 key to upside

USD/JPY recovery has stalled at the 105.00 level with 105.50 break key to further upside. Meanwhile 104.50 is near term support.

5. USD/CAD – Canadian Housing Starts

Canadian Housing Starts expected @ 190K (8:15 AM ET / 13:15 GMT)
Our View – Neutral
Reason – Neutral
If Housing Starts are less than 180K = Buy USD/CAD
If Housing Starts rise by 200K or more = Sell USD/CAD

Canada’s housing starts report is not a huge market mover for the Canadian dollar unless there is a big surprise so the data is best traded reactively. If housing starts are less than 180K, USD/CAD can be bought for a quick move higher. If housing starts rise by 220K or more, USD/CAD can be sold. REACTIVE TRADE


Break above 1.0800 holds
1.0700 now near term support
Push through 108.50 puts it on track to 1.1000

USD/CAD continues is uptrend move with the break above 1.0800 holding. A takeout at 1.0850 puts it on track to 1.1000