Top 5 – 04.02.13

*Top 5 Archive Members Only Top 5 Uncategorized


DATE: Tuesday April 2, 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 Rate Decision

RBA Rate Decision @ 3% (11:30 PM ET / 3 GMT)
Our View – Bullish AUD but no Trade
Reason – More Improvements than Weakness since Last Meeting
If RBA Gov Stevens Maintains Glass Half View Outlook = Buy AUD/USD
If RBA Gov Stevens Expresses Concerns about AUD level or Mining Investment = Sell AUD/USD

Tonight’s RBA monetary policy announcement should have a meaningful impact on the AUD. Based on the improvements in Chinese data, huge job growth in February in Australia and the 5 year high in Australian stocks, the RBA doesn’t have too much to worry about. Nonetheless, rate decisions and how central bankers feel about the outlook for their economy can always surprise investors and therefore we believe that the RBA rate decision is best traded reactively. Since the RBA is widely expected to leave rates unchanged, if RBA Governor Glenn Stevens maintains a glass half full view on the economy and sounds optimistic, the gains seen today could turn into a stronger recovery that takes the AUD/USD to its next key resistance level of 1.05. However if he sounds overly concerned about the strength of the currency and outlook for mining investment, today’s gains could evaporate quickly as the AUD/USD tumbles to its 50-day SMA and next support level of 1.0350. REACTIVE TRADE


1.0400 continues to hold
1.0450 caps all upside
1.0350 deep support

AUD/USD remains supported at 1.0400 with deeper support at 1.0350 but 1.0450 caps the rallies for now and a break below 1.0400 opens up another test of 1.0350

2. EUR/CHF – Swiss PMI Manufacturing

Swiss Manufacturing PMI expected @ 50.4 (3:30 AM ET / 7:30 GMT)
Our View – Neutral
Reason – Neutral
If PMI drops below 50 = Buy EUR/CHF
If PMI exceeds 52 = Sell EUR/CHF

Swiss PMI manufacturing numbers are due for release on Tuesday and given a large enough surprise could have an impact on EUR/CHF. However the data is difficult to handicap and therefore best traded reactively. Recent reports show leading indicators deteriorating but consumption increased, confusing the outlook further. Economists are looking for weaker numbers and if the PMI index dips below 50, we expect EUR/CHF to rally. If the index exceeds 52, we expect EUR/CHF to slide. REACTIVE TRADE


1.2150 still supports
1.2200 caps for now
Consolidation persists

EUR/CHF remains in a very tight 1.2150-2200 range as it maintains its deep level support but upside seems capped for now.

3. EUR/USD – Eurozone Final Manufacturing PMI Figures

Eurozone PMI Manufacturing expected @ (4 AM ET / 8 GMT)
Our View – Neutral
Reason – Neutral
If PMI is revised to 48 or higher = Buy EUR/USD
If PMI is revised down to 45 or lower = Sell EUR/USD

Revisions to the Eurozone’s PMI manufacturing numbers are due for release on Tuesday and typically there are no major revisions. However if the data is revised, it tends to have an impact on the EUR/USD. The data is best traded reactively. If the PMI index is revised to 48 or higher, we expect EUR/USD to rally. If the index is revised down to 45 or lower, we expect EUR/USD to slide. REACTIVE TRADE


1.2850 taken out
2750 holds
1.2900 next target of longs

EUR/USD remained well bid above the key 1.2750 support level with 1.2850 taken out the bias turns slightly bullish and long will try to press the 1.2900 level. A break below 1.2800 creates yet another retest of the key 1.2750 support.

4. GBP/USD – U.K. Manufacturing PMI

PMI Manufacturing expected @ 48.7 (4:30 AM ET / 8:30 GMT)
Our View – Bearish GBP
Reason – Weaker CBI Index
If PMI is revised to 49 or higher = Buy GBP/USD
If PMI is revised down to 46 or lower = Sell GBP/USD

We have good reasons to believe that U.K. PMI numbers will surprise to the downside. Economists are looking for manufacturing activity to improve but a similar survey conducted by the Confederation of British Industry found weaker manufacturing activity in the month of March. As a result, we believe the data can be traded proactively or reactively. For those who choose to wait, if the PMI index is revised to 49 or higher, we expect GBP/USD to rally. If the index is revised down to 46 or lower, we expect the GBP/USD to weaken. PROACTIVE or REACTIVE TRADE


5200 recovered
But 5250 still caps
Break above opens run to 5300

Cable perked up today pushing towards the upper end of its recent range but remains capped at 1.5250. A Break through those levels opens up a run to 1.5300.

5. USD/JPY – U.S. Factory Orders

Factory Orders expected @ 2.9% (10 AM ET / 14 GMT)
Our View – Neutral
Reason – Neutral
If Factory Orders rise by 4% or more = Buy USD/JPY
If Factory Orders fall by -1.5% or more = Sell USD/JPY

U.S. factory orders is not an extremely market moving U.S. economic report unless there is a big surprise. The data is also difficult to handicap but if we had to guess, given the drop in ISM manufacturing, there’s potential for a downside surprise. Still, after the sharp decline the previous month, a rebound is natural. Therefore the data is best traded reactively. If factory orders rise by 4% or more, we expect USD/JPY to rally. If factory orders fall by -1.5% or more, we expect USD/JPY to weaken. REACTIVE TRADE


93.50 broken
94.00 caps for now
93.00 next target of shorts

USD/JPY broke the key 93.50 support level today and remains on path to test 93.00 support while the upside is capped by 94.00 for the time being.