TOP 5 HOT IDEAS

DATE: Wednesday Sept 18, 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 – Q2 Current Account Balance

FUNDAMENTALS
Current Account Balance expected @ -1.90B (6:45 PM ET / 22:45 GMT)
Our View – Neutral
Reason – Weaker Trade
If Current Account Deficit is -0.5B or smaller = Buy NZD/USD
If Current Account Deficit is -2.5B or larger = Sell NZD/USD

New Zealand current account numbers are due for release this evening and while the trade balance deteriorated in Q2, the overall appetite for NZD could make it difficult for this secondary report to take steam out of the currency’s rally. Therefore we feel that the data should be traded reactively and only if there is a large surprise. If the current account deficit narrows to -0.5B or smaller, we believe the NZD/USD can be bought for an extension higher. If the deficit is -2.5B or larger, the NZD/USD can be sold. REACTIVE TRADE

TECHNICALS

Holds above 8200
8300 next in view
8100 supports

Kiwi continues to be well bid as evidenced by its closed above 8200. The upside bias now points to 8300 as the next target of shorts with 8100 the near term support.

2. AUD/USD – Westpac Leading Index

FUNDAMENTALS
Leading Index expected @ (8:30 PM ET / 0:30 GMT)
Our View – Neutral
Reason – Neutral
If Leading Indicators exceed 0.5% = Buy AUD/USD
If Leading Indicators fall by -0.3% or more = Sell AUD/USD

Australian leading indicators are scheduled for release tonight and the data is not expected to have a significant impact on the AUD unless there is a big surprise. The data is also difficult to handicap and therefore best traded reactively. If leading indicators exceed 0.5%, the AUD/USD can be bought for a move higher. If leading indicators fall by -0.3% or more, the AUD/USD can be sold. REACTIVE TRADE

TECHNICALS

Good recovery off 9300
9400 key resistance
Break opens tests of 9500

Aussie also remains well bid with the pair recovering well of the 9300 support as it closed above that level. 9400 is the key upside target and a break there opens run towards the 9500 level.

3. GBP/USD – BoE Minutes

FUNDAMENTALS
BoE Minutes expected @ (4:30 AM ET / 8:30 GMT)
Our View – Bullish GBP
Reason – Minutes Likely to be less dovish
If the minutes are more optimistic = Buy GBP/USD
If the minutes remain dovish = Sell GBP/USD

The focus of the market may be on the Fed meeting, but sterling traders should not overlook tomorrow’s release of the Bank of England minutes. We are eager to see if policymakers have grown less dovish after the recent improvements in economic data. We have good reasons to believe that the minutes will be slightly more optimistic because last week Bank of England Governor Carney, MPC members Miles, Fisher and McCafferty all acknowledged the recent improvements in the economy in their speeches, with some even going so far as to say that the recovery has gained momentum. However central bank minutes are always a tough call and best traded reactively. If the minutes are more optimistic, the GBP/USD can be bought for an extension higher. If the minutes remain dovish, the GBP/USD can be sold. REACTIVE TRADE

TECHNICALS

1.6000 continues to cap
1.5900 near term support
1.5800 deeper support level

Cable continues to flame out ahead of the key 1.6000 level which has been capping rallies for two days. 1.5900 holds support for now with 1.5800 much deeper support for the pair.

4. EUR/USD – Housing Starts + Building Permits

FUNDAMENTALS
Housing Starts expected @ 2.7% & Building Permits expected @ -0.4% (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Neutral
If Housing Starts AND Building Permits fall by 1% or more = Buy EUR/USD
If Housing Starts AND Building Permits grow by 3% or more = Sell EUR/SD

U.S. Housing Starts and Building Permits are not huge market movers for the U.S. dollar especially before a Fed rate decision but given a large enough surprise, it could still impact the EUR/USD. We believe the data should be traded reactively and only if there is a big surprise. If Housing Starts AND Building Permits fall by 1% or more, we expect the EUR/USD to strengthen. If Housing Starts AND Building Permits grow by 3% or more, we expect the EUR/USD to weaken. REACTIVE TRADE

TECHNICALS

3400 caps for now
3450 key upside break
3250 key downside move

EUR/USD range is marked by 3450 topside and 3250 downside targets with a break wither way signalling possible longer directional move.

5. USD/JPY – FOMC Rate Decision

FUNDAMENTALS
FOMC Rate Decision expected @ (2 PM ET / 18 GMT)
Our View – Neutral
Reason – Neutral
If Fed tapers by $15-20B and talks of doing more = Buy USD/JPY
If Fed tapers by $10B or less and sounds dovish = Sell USD/JPY

FOMC rate decisions are always important but more so this month because the central bank is gearing to change monetary policy in a major way. The decision to taper will be a very difficult one for the central bank and best traded reactively in our opinion. If the Fed tapers by $15-20B and talks about reducing asset purchases further, USD/JPY can be bought for a move higher. If the Fed tapers by $10B or less and sounds dovish, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS

99.00 support holds
98.00-100.00 range persists
Break either way could signal big move

USD/JPY continues to hold in the 98.00-100.00 range and is likely to remain there with a break either way leading to more significant directional move.