TOP 5 HOT IDEAS

DATE: Friday Jan 10, 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 Chinese Trade Balance

FUNDAMENTALS
Chinese Trade Balance expected @ $32.15B Exports expected at 5% (9 PM ET / 2 GMT)
Our View – Neutral
Reason – Neutral
If exports grow by 8% or more = Buy AUD/USD
If exports grows by 3% or less = Sell AUD/USD

Chinese trade numbers are scheduled for release this evening and because Chinese data is difficult handicap, it is best traded reactively. The report could have a significant impact on AUD/USD especially given the narrow range that the pair has been trading in. When it comes to the trade numbers, exports are the most important part of the release. Therefore if exports grow by 8% or more, the AUD/USD can be bought for a move higher. If exports grow by 3% or less, the AUD/USD can be sold. REACTIVE TRADE

TECHNICALS

8900 broken
8850 holds for now
Key multi month support

Aussie has been pushed to key multi month support at the 8850 level as it holds just above the 8850 level. A break here could open a run to 8750.

2. EUR/CHF – Swiss Unemployment

FUNDAMENTALS

Swiss Unemployment expected @ 3.4% (1:45 AM ET / 6:45 GMT)
Our View – Neutral
Reason – Neutral
If Switzerland’s unemployment rate is 3.4% or higher = Buy EUR/CHF
If Switzerland’s unemployment rate is 3.1% or less = Sell EUR/CHF

Switzerland’s unemployment rate is difficult to handicap but best traded reactively. If the unemployment rate rises to 3.4% or higher EUR/CHF can be bought for a move higher. If the unemployment rate drops to 3.1% or lower, EUR/CHF can be sold. REACTIVE TRADE

TECHNICALS

2400 caps the up move
2350 near term support
Break of 2400 opens run to 2500

The uptrend in EUR/CHF has run out of steam at the 2400 level and the pair can now correct to 2300, but the longer bullish bias remains in place.

3. GBP/USD – UK Industrial Production

FUNDAMENTALS
Industrial Production @ 0.4% (4:30 AM ET / 9:30 GMT)
Our View – No Trade
Reason – Drop in PMI Manufacturing, but rise in new export orders
If Industrial Production rises by 0.6% or more = Buy GBP/USD
If Industrial Production rises by 0.2% or less = Sell GBP/USD

UK industrial production is scheduled for release tomorrow. While we have small upside bias for the data, the report is best traded reactively because the drop in manufacturing activity in December was offset by a rise in new orders. If industrial production rises by 0.6% or more, the GBP/USD should resume its rally. However if industrial production rises by 0.2% or less, the currency pair can be sold for a move lower. REACTIVE TRADE

TECHNICALS

Takes out 6450
6500 caps
6400 support

Cable has seen relative strength again today as the pair took out the 6450 level and longs tried to push through 6500 level but the pair capped. 6400 is near term support.

4. USD/JPY – US Non-Farm Payrolls

FUNDAMENTALS
Non-Farm Payrolls expected @ 197K (8:30 AM ET / 13:30 GMT)
Our View – Neutral
Reason – Neutral
If NFPs exceed 210K = Buy USD/JPY
If NFPs is 180K or less = Sell USD/JPY

The U.S. non-farm payrolls report is a notoriously volatile piece of data to trade and should only be traded reactively. While the employment component of non-manufacturing ISM increased, pointing to the potential for an upside surprise, the possibility of revisions or divergent changes in the unemployment rate means it is better to wait for the report to come out before taking a trade. If payrolls exceed 210K, USD/JPY can be bought for a squeeze higher. If it is less than 180K, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS

105.00 rally stalls
104.50 near term support
105.50 key to upside

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

5. USD/CAD – Canadian Employment Report

FUNDAMENTALS
Canadian Employment expected @ 14K (8:30 AM ET / 13:30 GMT)
Our View – Bearish CAD
Reason – Sharp Decline in employment component of IVEY PMI
If Employment is less than 5K = Buy USD/CAD
If Employment exceeds 20K = Sell USD/CAD

We have good reasons to believe that Canadian employment numbers could surprise to the downside because the employment component of IVEY PMI declined. We feel the data can be traded proactively or reactively. For those who choose to wait, if Canadian employment rises by 5K or less, USD/CAD can be bought for a resumption of the uptrend. However if Canadian employment exceeds 20K, USD/CAD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

Break above 1.0850 holds
1.0800 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 1.0850 holding. With a takeout at 1.0850 it is now on track to 1.1000