TOP 5 HOT IDEAS

DATE: Moday Sept 30, 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 – Chinese Manufacturing PMI

FUNDAMENTALS
Chinese PMI Manufacturing expected @ 51.2 (9 PM ET / 1:30 GMT)
Our View – Neutral
Reason – Neutral
If PMI Manufacturing exceeds 51.5 = Buy AUD/USD
If PMI Manufacturing index is 50.5 or lower = Sell AUD/USD

According to HSBC’s flash manufacturing PMI index, manufacturing activity in China accelerated in the month of September. The data is not expected to be revised but if it is, the AUD/USD could react. If the flash PMI is revised to 51.5 or higher, the AUD/USD can be bought for a move higher. If the PMI index drops to 50.5 or lower, the AUD/USD can be sold. REACTIVE TRADE

TECHNICALS

9300 tested
gap fill at 9250 next
9400 caps upside

Aussie has been one of the weaker performers today as it drifted back to 9300 and now looks to fill the gap at 9250. Meanwhile 9400 caps the upside.

2. EUR/USD – German Retail Sales

FUNDAMENTALS
German Retail Sales expected @ 0.8% (2 AM ET / 7 GMT)
Our View – Bearish EUR
Reason – Slowest Pace of Retail Sales Growth Since May
If retail sales exceeds 1% = Buy EUR/USD
If retail sales growth is less than 0.5% = Sell EUR/USD

We have good reasons to believe that German consumer spending growth slowed in the month of August. According to the retail PMI report, retail sales expanded at its slowest pace since May. Therefore we feel the data can be traded proactively or reactively. If German retail sales exceed 1%, the EUR/USD can be bought for a move higher. If retail sales grow by less than 0.5%, the EUR/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

3565 holds
Upward bias in place
Break of 3565 opens run to 3700

The euro continues to stall at swing highs near the 1.3565 level but the pair remains in a strong upward bias and a break above opens the move towards 1.3700.

3. GBP/USD – Mortgage Approvals

FUNDAMENTALS
Mortgage Approvals expected @ 61.5K (4:30 AM ET / 9:30 GMT)
Our View – Neutral
Reason – Neutral
If Mortgage Approvals exceed 63K = Buy GBP/USD
If Mortgage Approvals are less than 58K = Sell GBP/USD

A number of U.K. housing market reports are due for release tomorrow and we believe the most important report will be mortgage approvals. U.K. housing market activity has been strong thanks to the low level of interest rates and the government’s Funding for Lending Scheme. Mortgage approvals are not a huge market mover for the GBP/USD, unless there is a big surprise. Therefore, we feel that the data is probably best traded reactively. If mortgage approvals exceed 63K, we expect the GBP/USD to rise. If approvals fall to 58K or lower, we expect the GBP/USD to fall REACTIVE TRADE

TECHNICALS

1.6165 key to upside
1.6000 now support
Break opens run to 1.6300

Cable continues it strong upside bias but the 1.6165 level is now key to further upside as break there could open a run to 1.6300. Meanwhile 1.6000 supports the downside.

4. USD/CAD – Canadian GDP

FUNDAMENTALS
July GDP expected @ 0.5% (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Stronger Retail Sales, Weaker Trade
If GDP growth is less than 0.3% = Buy USD/CAD
If GDP growth exceeds 0.8% = Sell USD/CAD

The 2 main components of GDP are retail sales and trade and unfortunately spending increased but trade activity in Canada deteriorated in the month of July. As such, we feel that the data can only be traded reactively. If GDP growth is less than 0.3%, USD/CAD can be bought for a move higher. If GDP growth exceeds 0.8%, USD/CAD can be sold. REACTIVE TRADE

TECHNICALS

1.0350 capped upside
1.0200 still deep support
Break above opens run to 1.0400

As we noted yesterday the 1.0350 level continues to cap the upside in USD/CAD while 1.0200 represents deep support. A break above however opens a run towards 1.0450.

5. USD/JPY – Chicago PMI

FUNDAMENTALS
Chicago PMI expected @ 54 (9:45 AM ET / 13:45 GMT)
Our View – Bearish USD
Reason – Weaker Empire, Stronger Philly
If Chicago PMI exceeds 56 = Buy USD/JPY
If Chicago PMI is less than 52 = Sell USD/JPY

The Chicago PMI report is scheduled for release on Monday and unfortunately this month’s release is a tough call because the Empire State survey declined but the Philly Fed survey increased. As such we feel that this data should be traded reactively. If the Chicago PMI index exceeds 54, USD/JPY can be bought for a move higher. If the index drops to 52 or lower, USD/JPY can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

98.00 tested
99.00 now caps
Break opens test of 97.00

USD/JPY continues to drift lower testing 98.00 in Friday’s trade. A break lower opens the prospect of a run towards 97.00 as the downward run accelerates.