TOP 5 HOT IDEAS

DATE: Monday June 3, 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 – PMI Manufacturing and Retail Sales

FUNDAMENTALS
PMI Manufacturing expected @ (7:30 PM ET / 23:30 GMT) & Retail Sales expected @ 0.3% (9:30 PM ET / 1:30 GMT)
Our View – Neutral
Reason – Neutral
If the PMI index exceeds 39 & Retail Sales grow by 0.4% or more= Buy AUD/USD
If the PMI index drops below 35 & Retail Sales grow by 0.1% or less = Sell AUD/USD

Sunday’s Australian economic reports are important but difficult to handicap since service sector PMI will be released after retail sales. Hence the data can be best traded reactively. If the PMI index exceeds 39 & Retail Sales grow by 0.4% or more, the AUD/USD can be bought for a recovery trade. However if the PMI index drops below 35 & Retail Sales grow by 0.1% or less, the AUD/USD could come under additional selling, creating opportunity for a short trade. REACTIVE TRADE

TECHNICALS

.9500 still holds
.9700 stiff resistance
Consolidation of lows

The Aussie continues to undergo a consolidation of lows, but the downside pressure on the pair remains with .9500 still key support but .9700 proving to be stiff resistance.

2. EUR/CHF – Swiss PMI Manufacturing

FUNDAMENTALS
PMI Manufacturing expected @ 50.8 (3:30 AM ET / 7:30 GMT)
Our View – Neutral
Reason – Neutral
If the PMI index drops below 50 = Buy EUR/CHF
If the PMI index exceeds 51 = Sell EUR/CHF

Swiss PMI Manufacturing numbers are scheduled for release Monday and given recent upside improvements, our bias is in favor of stronger manufacturing activity. However European demand for Swiss exports is weak so this piece of data is still best traded reactively. If the PMI index drops below 50, EUR/CHF can be bought for a move higher. If the PMI index exceeds 51, EUR/CHF can be sold. REACTIVE TRADE

TECHNICALS

2400 holds
2600 still overhead resistance
Break of 2400 opens run to 2300

The EUR/CHF continues to consolidate in a broad 1.2400-1.2600 range but the pair is probing the lower 2400 level and a break there opens up a run to 1.2300.

3. EUR/USD – Eurozone PMI Manufacturing Final

FUNDAMENTALS
EZ PMI expected @ 47.8 (4 AM ET / 8 GMT)
Our View – Neutral
Reason – Neutral
If EZ PMI index is revised to 48.5 or higher = Buy EUR/USD
If EZ PMI index is revised to 47 or lower = Sell EUR/USD

Final Eurozone manufacturing PMI numbers will not impact the euro unless the numbers are revised. Therefore the only opportunity is to trade the report reactively. If the EZ PMI index is revised to 48.5 or higher, the EUR/USD can be bought for a quick move higher. If EZ PMI index is revised to 47 or lower, the EUR/USD can be sold. REACTIVE TRADE

TECHNICALS

2950 holds
3100 still key resistance
Higher lows hold

Although EUR/USD dipped today, it managed to rebound back to 1.3000 level and maintains its slight upward bias. 1.3100 still key to upside breakoout

4. GBP/USD – UK PMI Manufacturing

FUNDAMENTALS
UK PMI Manufacturing expected @ 50.3 (4:30 AM ET / 8:30 GMT)
Our View – Bullish GBP
Reason – Small Improvement in CBI
If UK PMI exceeds 51 = Buy GBP/USD
If UK PMI drops below 49 = Sell GBP/USD

We have good reasons to believe that U.K. manufacturing activity improved in the month of May because a similar survey conducted by the Confederation of British Industry increased. As a result, this data can be traded proactively or reactively. For those who choose to wait, if the PMI index exceeds 51, the GBP/USD can be bought for a quick move higher. If the UK PMI index drops below 49, the GBP/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

5100 tested but rebounds
5300 possibly in view
Double bottom forms

GBP/USD has formed a double bottom and held the 5100 level suggesting that it could now make a run towards the key resistance at 1.5300. A break back towards 1.5050 however would turn the bias negative again.

5. USD/JPY – ISM Manufacturing Index

FUNDAMENTALS
ISM Manufacturing expected @ 50.7 (10 AM ET / 14 GMT)
Our View – Neutral
Reason – Stronger Chicago PMI but Weaker Empire and Philly
If ISM index exceeds 51 = Buy USD/JPY
If ISM index drops below 50 = Sell USD/JPY

The national ISM manufacturing index is an important release for the U.S. dollar. We typically like to trade this report proactively but this month, the lower Empire and Philly Fed survey was offset by the large increase in Chicago PMI, making the data difficult to call. Therefore ISM should be traded reactively. If the index exceeds 51, USD/JPY can be bought for a move higher. If it drops below 50, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS

100.50 tested several times again
100.00 support holds
Rebounds weak

Although USD/JPY has managed to survive another run at the 100.00 level, the rebounds in the pair have been weak and the pressure for a test of 100.00 continues to build