Top 5 – 09.06.2013

*Top 5 Archive Members Only Top 5


DATE: Friday Sept 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 – Australian PMI Construction

PMI Construction expected @ (7:30 PM ET / 23:30 GMT)
Our View – Neutral
Reason – Neutral
If the PMI index exceeds 46 = Buy AUD/USD
If the PMI index is less than 42 = Sell AUD/USD

Australia’s PMI Construction index is not a huge market mover for the AUD unless there is a big surprise so the only opportunity is to trade the report reactively. If the PMI index exceeds 46, the AUD/USD can be bought for a move higher. If the PMI index drops to 42 or lower, the AUD/USD can be sold. REACTIVE TRADE


9100 holds
9000 still new support
9200 caps recovery for now

For a strong day for the dollar, the Aussie managed to hold its own showing relative strength as it managed to hold 9100 level. 9000 is still from support for now now while 9200 caps the upside.

2. GBP/USD – UK Industrial Production

Industrial Production @ 0.2% (4:30 AM ET / 8:30 GMT)
Our View – Bullish GBP
Reason – PMI Manufacturing extends to new highs, new orders and export orders rise
If Industrial Production rises by 1% 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 and 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. The data can therefore be traded proactively or reactively. For those who choose to wait, if industrial production rises by 1% or more, the GBP/USD should rally. However if industrial production drops by -0.2% or more, the currency pair can be sold for a move lower. PROACTIVE or REACTIVE TRADE


5650 rejected
5550 next support
5500 deeper support

Cable was again failed in its attempt to break through 5650 and the pair now drifts back to 5550 support. 5500 support is more crucial and a break there opens run towards 5400.

3. EUR/USD – German Industrial Production

German IP expected @ -0.5% (6:00 AM ET / 10:30 GMT)
Our View – Bearish EUR
Reason – Factory orders declined
If German IP grows by 0.1% or more = Buy EUR/USD
If German IP falls by -0.7% or more = Sell EUR/USD

We have good reasons to believe that German industrial production declined in the month of July because factory orders dropped -2.7%, erasing a large part of yesterday’s gains. The data can therefore be traded proactively or reactively. For those who choose to wait, if industrial production grows by 0.1% or more, we expect the EUR/USD to rally. If industrial production falls by -0.7% or more we expect the EUR/USD to decline. PROACTIVE or REACTIVE TRADE


3150 broken
3100 next in view
3000 longer term target of the shorts

The euro was kneecapped today as it gave up key support below the 3150 level with 3100 now squarely in view of the shorts. A break there could open a run towards the key 1.3000 level.

4. USD/JPY – Non-Farm Payrolls

Non-Farm Payrolls expected @ 180K (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Neutral
If NFPs exceed 200K = Buy USD/JPY
If NFPs is 140K or less = Sell USD/JPY

The U.S. non-farm payrolls report is notorious for being a volatile piece of data to trade due in part to the potential conflict between the number of jobs created and the unemployment rate. For this reason, the data can only be traded reactively in our opinion and even more so this month because the market’s expectations are high and there is reason to believe that job growth could be stronger or weaker. The strongest argument for an increase in non-farm payrolls is the non-manufacturing ISM index. Service sector activity expanded at its fastest pace since January 2006 and more importantly, the employment component of the report rose to its highest level in 6 months. The ISM index increased from 56 to 58.6 in the month of August while jobless claims dropped to 323k from 332k. The jobless claims figures may have been distorted by Labor Day but claims still fell to its second lowest level in 5 years with the less volatile 4-week moving average dropping to its lowest level since October 2007. Continuing claims also declined by 43k to 2.95 million while non-farm productivity was revised up to 2.3% in Q2. Fewer firings have not always translated into stronger hiring, but the rise in the employment component of non-manufacturing ISM index indicates that U.S. companies are hiring. However in the manufacturing sector, job growth slowed slightly despite an uptick in activity. Private sector payrolls dropped to 176k from 196k according to ADP while layoffs jumped 56.5%, a 15 month high according to Challenger Grey & Christmas. Consumer confidence also deteriorated in August. So if payrolls exceed 200K, USD/JPY can be bought for a stronger move above 100. If it is less than 140K, USD/JPY can be sold for a move back towards 99. REACTIVE TRADE


100.00 finally taken and held
100.50 next target of shorts
99.50 new support

USD/JPY has finally taken the key 100.00 level and longs will now target the resistance at 100.50 while 99.50 becomes the new support for the pair.

5. USD/CAD – Canadian Employment

Canadian Employment expected @ 20K (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – IVEY released after Employment
If Employment rises by less than 10k = Buy USD/CAD
If Employment exceeds 40K= Sell USD/CAD

Canadian employment numbers are scheduled for release on Friday and economists are looking for job growth to rebound after falling more than 39k the previous month. Unfortunately this month’s report is difficult to handicap because the IVEY PMI index (our usual guide to CAD employment will not be released until afterwards. Therefore this data can only be traded reactively. If Canadian employment rises by less than 10K, USD/CAD can be bought for a resumption of the uptrend. However if Canadian employment exceeds 40K, USD/CAD can be sold. REACTIVE TRADE


1.0500 holds
1.0450 next target of shorts
1.0600 caps upside

USD/CAD drift lower was halted at the 1.0500 level. The pair may try to test the 1.0450 support once again while 1.0600 caps the upside.