TOP 5 HOT IDEAS

DATE: Monday August 6, 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

FUNDAMENTALS
RBA Rate Decision expected @ 2.75% (12:30 AM ET / 4:30 GMT)
Our View – Neutral
Reason – Neutral
If RBA tone shifts to neutral from dovish = Buy AUD/USD
If RBA remains dovish = Sell AUD/USD

The RBA is not expected to alter interest rates tonight but the tone of the central bank could have a large impact on how the AUD/USD trades. Economic data from Australia has been quite terrible. If the RBA ignores the data and shifts its tone from dovish to neutral, the AUD/USD can be bought for a further squeeze higher. If the RBA increases its level of dovishness, the AUD/USD can be sold for a resumption of the downtrend. REACTIVE TRADE

TECHNICALS

8850 tested but held
8850 key support
9000 key upside resistance

Aussie slipped once again to 8850 but held at key support for now. A break there opens the run to 8700. A break of 9000 reverses the bearish bias for now.

2. GBP/USD – UK Industrial Production

FUNDAMENTALS
Industrial Production @ 0.5% (4:30 AM ET / 8:30 GMT)
Our View – Bullish GBP
Reason – PMI Manufacturing at 25 month high, new orders and export orders rise
If Industrial Production rises by 0.7% or more = Buy GBP/USD
If Industrial Production drops by 0.2% or more = Sell GBP/USD

UK industrial production is scheduled for release tomorrow. We have good reasons to believe that the data will surprise to the upside because manufacturing activity rose strongly according to the latest PMI numbers with significant strength in new orders and export orders. This data can therefore be traded proactively or reactively. For those who choose to wait, if industrial production rises by 0.7% or more, the GBP/USD should rally. However if industrial production rises by 0.2% or less, the currency pair can be sold for a move lower. PROACTIVE or REACTIVE TRADE

TECHNICALS

5350 taken
5400 still caps upside
Break above 5400 opens the run to 5700

Cable continues its recovery as 5350 level was taken out today, but 5400 still caps and is a key resistance. A break above would open the run to 5700.

3. EUR/USD – German Factory Orders

FUNDAMENTALS
Factory Orders expected @ 0.9% (6 AM ET / 10GMT)
Our View – Bullish EUR
Reason – Stronger PMI Manufacturing
If Factory Orders exceed 1.5% = Buy EUR/USD
If Factory orders is less than 0.4% = Sell EUR/USD

We have good reasons to believe that German factory orders increased in the month of June because manufacturing activity improved and more specifically there was an increase in new orders and new export orders. We believe that the data can be traded proactively or reactively. For those who choose to wait, if factory orders exceed 1.5%, we expect the EUR/USD to rise. If orders grow by 0.4% or less, we expect the EUR/USD to fall. PROACTIVE TRADE or REACTIVE TRADE

TECHNICALS

3300 STILL caps
3200 support
Stalemate continues

The euro remains in the same 100 point range it has been for most of last week with 3300-3200 corridor refusing to budge. A break on either side could set direction for the near term.

4. USD/CAD – Canadian Trade Numbers

FUNDAMENTALS
Trade Balance @ -0.52B (8:30 AM ET / 12:30 GMT)
Our View – Bearish CAD
Reason – Lower IVEY PMI in June
If trade deficit exceeds -1.0B = Buy USD/CAD
If trade balance is 0.0B or better = Sell USD/CAD

We have good reasons to believe that Canada’s trade balance deteriorated in the month of June because manufacturing conditions declined according to that month’s IVEY PMI index. Therefore we feel the data can be traded proactively or reactively. For those who choose to wait, if Canada’s trade deficit exceeds -1.0B, USD/CAD can be bought for a quick move higher. If the trade balance is 0.0B or better, USD/CAD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

1.0400 caps topside
1.0300 support
Consolidation continues

Loonie continues to consolidate its rebound with 1.0400 capping for now while 1.0300 remains support.

5. USD/JPY – US Trade Balance

FUNDAMENTALS
Trade Balance expected @ -$43.5B (8:30 AM ET / 12:30 GMT)
Our View – Bullish
Reason – Big Jump in ISM Manufacturing
If Trade deficit is smaller than -$40B = Buy USD/JPY
If Trade deficit exceeds -$47B = Sell USD/JPY

We have good reasons to believe that the U.S. trade balance narrowed in the month of June because manufacturing activity improved significantly according to the latest ISM manufacturing figures. Therefore the data can be traded proactively or reactively. For those who choose to wait, if the Trade deficit is smaller than -$40B, USD/JPY can be bought for a move higher. If Trade deficit exceeds -$47B, USD/JPY can be sold. PROACTIVE or REACTIVE TRADE

PROACTIVE or REACTIVE TRADE

TECHNICALS

98.50 is given
98.00 next test
Break of 98.00 opens run to 96.00

USD/JPY continues to drift lower towards 98.00 level after the 100.00 level was rejected on Friday and a break below 98.00 could now open the prospect of a run to 96.00