TOP 5 HOT IDEAS

DATE: Monday June 10, 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 – Chinese Industrial Production

FUNDAMENTALS
Chinese Industrial Production expected @ 9.4% (1:30 AM ET / 5:30 GMT)
Our View – Neutral
Reason – Neutral
If Industrial Production exceeds 9.7% = Buy AUD/USD
If Industrial Production growth is less than 9.1% = Sell AUD/USD

A handful of Chinese economic reports are scheduled for release on Sunday and we feel that industrial production will be the most important because it is a reflection of Chinese economic activity and foreign demand. Unfortunately Chinese data is notoriously difficult to handicap and therefore best traded reactively. The AUD/USD tends to be the most sensitive to Chinese reports. If Chinese industrial production exceeds 9.7%, the AUD/USD can be bought for a move higher. If industrial production growth is less than 9.1%, the AUD/USD can be sold. REACTIVE TRADE

TECHNICALS

9425 absolute key support
Bottom holds for 2 days
9700 still caps upside

The Aussie continues to probe further downside, but so far the 9425 double bottom has held and the longer that level does not get violated the better the prospect of bottom forming. Upside still capped by 9700.

2. NZD/USD – New Zealand Manufacturing Activity

FUNDAMENTALS
Q1 Manufacturing Activity expected @ (6:45 PM ET / 22:45 GMT)
Our View – Neutral
Reason – Neutral
If Manufacturing Activity grows by 2% or more = Buy NZD/USD
If Manufacturing Activity contracts by 2% or more = Sell NZD/USD

New Zealand’s first quarter manufacturing activity report is not expected to have a huge impact on the NZD/USD unless there is a big surprise. Therefore it is best traded reactively. If manufacturing activity grows by 2% or more, the NZD/USD can be bought for a move higher. If manufacturing activity contracts by 2% or more, the NZD/USD can be sold. REACTIVE TRADE

TECHNICALS

Fresh lows
Close near the bottom of range suggests test of 7850
8000 stiff resistance to the upside

Kiwi has made fresh lows and a close near the bottom of days range suggests that a further probe towards 7850 is likely. Meanwhile upside is capped by 8000.

3. USD/JPY – Japanese Current Account Balance

FUNDAMENTALS
Japanese Current Account Balance expected @ ¥351.8B (7:50 PM ET / 23:50 GMT)
Our View – Neutral
Reason – Trade Balance Deteriorated, Yen strengthened late April
If Current Account Surplus is less than ¥300B = Buy USD/JPY
If Current Account Surplus is greater than ¥1200B = Sell USD/JPY

Current account numbers are fairly important to Japan and over the past few weeks we have been looking for consistent improvements. However for April in particular, the Yen topped out and began to rise. The trade balance also deteriorated, pointing to the possibility of a downside surprise. We still feel this data is best traded reactively. If Japan’s current account surplus is less than ¥300B, USD/JPY can be bought for a move higher. If the country’s current account surplus is greater than ¥1200B, USDJPY can be sold. REACTIVE TRADE

TECHNICALS

95.00 bottom holds
98.00-99.00 now major overhang
Consolidation likely

USD/JPY appears to have made a near term bottom near the 95.00 figure and the pair is likely to consolidate over the next few days with 98.00-99.00 proving overhead resistance.

4. EUR/CHF for SZ Unemployment

FUNDAMENTALS
Swiss Unemployment expected @ 3.1% (1:45 AM ET / 5:45 GMT)
Our View – Neutral
Reason – Neutral
If Switzerland’s unemployment rate is 3.2% or higher = Buy EUR/CHF
If Switzerland’s unemployment rate is 3% or less = Sell EUR/CHF

No major changes are expected in Switzerland’s unemployment rate so the data is best traded reactively. If Switzerland’s unemployment rate is 3.2% or higher EUR/CHF can be bought for a move higher. If the unemployment rate drops to 3% or lower, EUR/CHF can be sold. REACTIVE TRADE

TECHNICALS

1.2300 holds
Consolidation in 1.2300-1.2400 range
Break lower opens run to 1.2200

EUR/CHF has retraced off the highs but continues to hold support at 1.2300 as it now consolidates in the 1.2300-1.2400 range.

5. USD/CAD – Canadian Housing Starts

FUNDAMENTALS
Canadian Housing Starts expected @ 178K (8:15 AM ET / 12:15 GMT)
Our View – Neutral
Reason – Neutral
If Housing Starts are less than 160K = Buy USD/CAD
If Housing Starts rise by 190K or more = Sell USD/CAD

Canadian housing starts are not a huge market mover for the Canadian dollar unless there is a big surprise. This data is therefore best traded reactively. If housing starts are less than 160K, USD/CAD can be bought for a quick move higher. If housing starts rise by 190K or more, USD/CAD can be sold. REACTIVE TRADE

TECHNICALS

1.2050 finally gives way
1.0200-1.0100 new range
Break of 1.0100 opens run to parity

The loonie finally showed some strength taking out the key 1.0250 support in USD/CAD. The pair may consolidate in 1.0250-1.0150 range for now but a break below 1.0100 would open a run to 1.0000