TOP 5 HOT IDEAS

DATE: Friday Sept 13, 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. NZD/USD – Business Manufacturing PMI

FUNDAMENTALS
Business NZ PMI expected @ (6:30 PM ET / 22:30 GMT)
Our View – Bullish NZD
Reason – Optimism of RBNZ
If NZ PMI exceeds 61 = Buy NZD/USD
If NZ PMI is 58 or less = Sell NZD/USD

New Zealand’s business PMI index is scheduled for release this evening and the data is difficult to handicap but based on the hawkishness of the RBNZ, we expect the index to rise and business activity to improve. As a result, we feel that the data can be traded proactively or reactively. For those who choose to wait, if the Business PMI index exceeds 61, NZD/USD can be bought for a reactive trade. If the index drops to 58 or lower, the NZD/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

8100 taken out
8160 caps
8000 now support

The kiwi staged a strong breakout but stalled ahead of the 8165 resistance. A break there opens a run towards 8250 while 8000 now becomes support.

2. EUR/CHF – Swiss Producer Prices

FUNDAMENTALS
Swiss PPI expected @ 0.2% (3:15 AM ET / 7:15 GMT)
Our View – Neutral
Reason – Neutral
If PPI growth falls by -0.1% or more = Buy EUR/CHF
If PPI growth rises by 0.5% or more = Sell EUR/CHF

Swiss producer prices are not a huge market mover for the Swiss Franc unless there is a meaningful surprise. As a result, we believe this data can only be traded reactively. If PPI growth falls by -0.1% or more, EUR/CHF can be bought for a quick trade higher. If PPI growth rises by 0.5% or more, EUR/CHF can be sold. REACTIVE TRADE

TECHNICALS

Consolidation continues
2400 caps
2300 supports

EUR/CHF continues to trade in a narrow range with 2400 capping the upside while 2300 supports the downside as consolidation continues.

3. GBP/USD – UK Construction Output

FUNDAMENTALS
Construction Output expected @ 2.1% (4:30 AM ET / 8:30 GMT)
Our View – Neutral
Reason – Neutral
If Construction Output exceeds 3% more = Buy GBP/USD
If Construction Output drops by 1% or more = Sell GBP/USD

UK Construction Output is not a huge market mover for the British pound unless there is a meaningful surprise. Therefore we feel this data can only be traded reactively. If UK construction Output rises by 3% or more, the GBP/USD could extend its gains. If construction output drops by 1% or more, the GBP/USD could weaken. REACTIVE TRADE

TECHNICALS

Consolidates above 5800
5700 now supports
5850 opens test of 5900

Cable saw a narrow consolidation day but held above the 5800 level indicating that it may make another run at 5850 and a break there could open a test of the 5900 figure.

4. EUR/USD – Q2 Employment

FUNDAMENTALS
Q2 Employment expected @ (5 AM ET / 9 GMT)
Our View – Neutral
Reason – Neutral
If Q2 Employment rises by 0.5% or more = Buy EUR/USD
If Q2 Employment drops by -0.7% or more = Sell EUR/USD

The Eurozone’s quarterly employment report is not a huge market mover unless for the EUR/USD unless there is a big surprise. The data therefore should only be traded reactively in our opinion. If Q2 Employment rises by 0.5% or more, the EUR/USD can be bought can be bought. If employment drops by -0.7% or more, the EUR/USD can be sold. REACTIVE TRADE

TECHNICALS

3250 holds
3325 still caps
A break above opens a retest of 3400

EUR/USD held above the 3250 support today but was once again stymied by the resistance and the 3325 level. A break above there could open a run towards the 3400 level.

5. USD/JPY – U.S. Retail Sales

FUNDAMENTALS
Retail Sales expected @ 0.5% (8:30 AM ET / 12:30 GMT)
Our View – Higher Redbook and steady ICSC
Reason – Bullish Dollar
If retail sales rise by 0.8% or more = Buy USD/JPY
If retail sales rises by 0.2% or less = Sell USD/JPY

The U.S. retail sales is the most important event risk for the dollar this week. It is the last piece of data that could sway the central bank’s decision. Consumer spending is the backbone of the U.S. economy and even if job growth has been modest, if spending is strong, the Fed can confidently taper asset purchases this month. A solid retail sales report could be just the push that policymakers need to vote for less stimulus. However spending is not expected to be strong – retail sales are expected to rise only 0.5%, up from 0.2% in July. We believe that the risk is to the upside for the data because according to the Johnson Redbook survey, spending improved last month and even though the International Council of Shopping Centers reported a slowdown, the change was nominal. As a result, we feel that the data can be traded proactively or reactively. For those who choose to wait, if retail sales rise by 0.8% or more, USD/JPY can be bought for a recovery. If retail sales rise by 0.2% or less, USD/JPY can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

99.00 tested again
100.00 now resistance
A break below would turn bias negative

USD/JPY tested the 99.00 level today as it continues to unwind its rally with 100.00 now resistance. A break below 99.00 would turn bias negative again.