Top 5 – 08.28.2013

*Top 5 Archive Members Only Top 5


DATE: Wednesday August 28, 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. EUR/CHF – Swiss UBS Consumption Indicator

UBS Consumption Indicator @ (2AM ET / 7GMT)
Our View – Neutral
Reason – Neutral
If UBS Consumption Indicator is less than 1.20 = Buy USD/CHF
If UBS Consumption Indicator exceeds 1.60 = Sell USD/CHF

Switzerland’s economic calendar is generally very light but there are a handful of economic releases worth watching month to month and this includes the UBS Consumption indicator which is a measure of demand. Unfortunately the data is difficult to handicap and best traded reactively only if there is a meaningful surprise. If the index drops to 1.20 or lower, EUR/CHF can be bought for an extension higher. If it is rises to 1.60, EUR/CHF can be sold. REACTIVE TRADE


2300 tested again
2200 deeper support
2400 caps upside

EUR/CHF continues to test the 2300 level with a break there opening a run towards the key support at 1.2200 while 1.2400 caps the upside.

2. EUR/USD – German GfK Consumer Confidence

GfK Consumer Confidence expected @ 7.1 (2AM ET / 7GMT)
Our View – Bullish EUR
Reason – Stronger ZEW and IFO
If GfK exceeds 8 = Buy EUR/USD
If GfK is less than 6 = Sell EUR/USD

We have good reasons to believe that German consumer confidence increased in the month of August because German businesses and investors grew more optimistic this month. The latest data shows that Germany continues to chug along and that should bode well for consumer confidence. Hence we believe that the GfK survey can be traded proactively or reactively. For those who choose to wait, if the GfK index exceeds 8, we expect the EUR/USD to rise. If the index falls to 6 or lower, we expect the EUR/USD to fall. PROACTVE or REACTIVE TRADE


Hammer on daily
3400 still caps
3300 still solid support

The EUR/USD printed a hammer on the dailies suggesting that the bullish bias remains in place. 1.3400 still caps the upside while 1.3300 offers strong support.

3. GBP/USD – CBI Reported Sales

CBI Reported Sales expected @ (7 AM ET / 11 GMT)
Our View – Neutral
Reason – General Improvement in Data and labor market conditions
If CBI exceeds 20 = Buy GBP/USD
If CBI is less than 15 = Sell GBP/USD

We have good reasons to believe that the CBI reported sales index improved in the month of August because there has been a general trend of positive data in UK data that even prompted the BoE to upgrade its GDP forecasts. Unfortunately the data does not have a big impact on the GBP unless there is a big surprise, which is why we believe the data is best traded reactively. Traders also need to keep an eye on BoE Governor Carney’s speech later that morning. If the CBI index exceeds 20, the GBP/USD can be bought for a move higher. If the CBI index drops to 15 or lower, the GBP/USD can be sold. REACTIVE TRADE


5500 holds for now
5700 still weighs as resistance
Break below 5500 opens run to 5400 support

Cable remained soft but found near term support at 5500 level. The pair is still capped by 1.5700 to the upside and any real break of 1.5500 opens a run to 1.5400.

4. USD/CAD – Average Weekly Earnings

Average Weekly Earnings expected @ (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Neutral
If Average Weekly Earnings grows by less than 1.5% = Buy USD/CAD
If Average Weekly Earnings grows by 3.5% or more = Sell USD/CAD

Canada’s average weekly earnings report is not a huge market mover for the Canadian dollar unless there is a large surprise. So we feel that the only opportunity is to trade the data reactively. If earnings grow by less than 1.5%, USD/CAD can be bought for a move higher. If earnings growth exceeds 3.5%, USD/CAD can be sold. REACTIVE TRADE


1.0500 near term top
1.0400 next target of shorts
1.0350 support

USD/CAD looks to have topped out near the 1.0500 level and is now slowly sliding back towards the 1.0400 support. Meanwhile 1.0350 provides deeper support for the pair.

5. USD/JPY – Pending Home Sales

Pending Home Sales expected @ 0.2% (10 AM ET / 14 GMT)
Our View – Neutral
Reason – Existing Home Sales Up, New Home Sales Down
If Pending Home Sales grow by 1% or more = Buy USD/JPY
If Pending Home sales drop by 0% or more = Sell USD/JPY

Pending home sales is scheduled for release tomorrow and unfortunately U.S. housing market data has been mixed. According to last week’s reports, existing home sales increased but new home sales declined. Therefore we feel that the pending home sales report is best traded reactively. If Pending home sales grow by 1% or more, USD/JPY can be bought for a move higher. If Pending home sales drop by 0% or more, USD/JPY can be sold. REACTIVE TRADE


97.00 tested
Key support must hold
98.00 now resistance

USD/JPY put in a very negative day testing the key support at 97.00. A break there opens a run towards 96.50 while 98.00 now becomes fresh resistance.