TOP 5 HOT IDEAS
DATE: Friday Oct 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. AUD/USD – Chinese Q3 GDP
FUNDAMENTALS
Chinese YoY GDP expected @ 7.8% (10 PM ET / 2 GMT)
Our View – Neutral
Reason – Neutral
If YoY GDP growth is 7.8% or higher = Buy AUD/USD
If YoY GDP growth is 7.5% or lower = Sell AUD/USD
The most important economic report scheduled for release over the next 24 hours is Chinese Q3 GDP numbers. The data is expected to have a significant impact on the AUD/USD and risk appetite in general. If the Chinese economy gained momentum last quarter, there’s hope for Australia and the global economy. However the data is difficult to handicap and best traded reactively. If annualized GDP growth is 7.8% or stronger, the AUD/USD can be bought for an extension higher. If annualized GDP growth slows to 7.5% or less, we believe AUD/USD can be sold for a move lower. REACTIVE TRADE
TECHNICALS
9600 taken out
9675 next target of longs
9400 now deep support
The Aussie rally continues with 9600 taken out longs will target the 9675 level as the next point of resistance as the short squeeze continues. Meanwhile 9400 provides strong support.
2. USD/CAD – Canadian CPI
FUNDAMENTALS
CPI expected @ 0.1% (8:30 AM ET / 12:30 GMT)
Our View – Bullish CAD
Reason – Higher IVEY but lower raw material prices
If CPI is -0.2% or lower = Buy USD/CAD
If CPI exceeds 0.5% = Sell USD/CAD
Canadian CPI is scheduled for release on Friday and this month we believe the data will be stronger than expected with prices rising according to the IVEY PMI index. As a result, the data is best traded proactively or reactively. If CPI drops by 0.2% or more, USD/CAD can be bought for a move higher. If CPI growth exceeds 0.5%, USD/CAD can be sold. PROACTIVE or REACTIVE TRADE
TECHNICALS
1.0300 broken
1.0250 next target of shorts
Break opens run to 1.0200 lows
Break of 9550 opens run to 9700
The loonie rally has now broken the 1.0300 barrier with shorts targeting the 1.0250 level while 1.0350 caps the upside. A break below opens up a test of 1.0200 support
3. USD/MXN – Unemployment Rate
FUNDAMENTALS
Unemployment Rate expected @ 5.1% (9 AM ET / 14 GMT)
Our View – Neutral
Reason – Neutral
If Unemployment rate exceeds 6% = Buy USD/MXN
If Unemployment rate is less than 4% = Sell USD/MXN
Labor market numbers are important for every country and Mexico is no exception. While the data is difficult to handicap, if there is a good enough surprise, we expect a meaningful reaction in USD/MXN. The opportunity here is to trade the data reactively. If the unemployment rate exceeds 6%, we expect USD/MXN to rise. If the unemployment rate is less than 4%, we expect USD/MXN to fall. REACTIVE TRADE
TECHNICALS
Headed for retest of 12.5000?
13.5000 caps upside
12.4000 key hold
USD/MXN continues to drift lower as the pair now approaches a retest of double bottom at 12.5000 as break below 12.4000 opens a run to 12.0000.
