TOP 5 HOT IDEAS

DATE: Thursday Oct 3, 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 – PMI Services

FUNDAMENTALS
PMI Services expected @ (7:30 PM ET / 23:30 GMT)
Our View – Bullish AUD
Reason – Stronger PMI Manufacturing and Retail Sales
If PMI Manufacturing exceeds 41 = Buy AUD/USD
If PMI Manufacturing index is 37 or lower = Sell AUD/USD

Australia’s PMI manufacturing index is scheduled for release this evening and based on the rise in the manufacturing PMI index and uptick in retail sales, we have strong reasons to believe that the PMI services report will surprise to the upside. Therefore we feel the data can be traded proactively or reactively. For those who choose to wait, if the PMI index exceeds 41, we expect the AUD/USD to rally. If the index drops to 37 or lower, we expect AUD/USD to weaken. PROACTIVE or REACTIVE TRADE

TECHNICALS

9300 continues to support
9450 caps for now
9500 more serious resistance

The Aussie continue to hold above the 9300 support which now a true base for the pair, but it faces upside resistance at 9450 and more importantly at the 9500 level.

2. NZD/USD – Chinese Non-Manufacturing PMI

FUNDAMENTALS
Chinese PMI Non-Manufacturing expected @ (9 PM ET / 1:30 GMT)
Our View – Neutral
Reason – Neutral
If PMI Manufacturing exceeds 55 = Buy NZD/USD
If PMI Manufacturing index is 52 or lower = Sell NZD/USD

China’s non-manufacturing PMI report is difficult to handicap but could be market moving for the commodity currencies. While the AUD/USD is generally the most receptive to Chinese data, the NZD/USD should also be affected. The data is best traded reactively. If the PMI index exceeds 55, the NZD/USD can be bought for a move higher. If the PMI index drops to 52 or lower, the NZD/USD can be sold. REACTIVE TRADE

TECHNICALS

Big bounce off 8200
Momentum regained
8400 still caps upside

The kiwi saw a big bounce off 8200 and has recovered strongly towards the 8350 level but 8400 still caps the upside for now.

3. GBP/USD – UK PMI Services

FUNDAMENTALS
PMI Services expected @ 60.5 (4:30 AM ET / 8:30 GMT)
Our View – Neutral
Reason – Stronger Consumer Confidence but Weaker PMI Manufacturing
If the PMI index exceeds 61 = Buy GBP/USD
If the PMI index drops to 59 or lower = Sell GBP/USD

The UK’s PMI Manufacturing index is scheduled for release tomorrow and this month’s report is difficult to handicap because consumer confidence improved but manufacturing activity slowed. The data should therefore only be traded reactively. If the PMI index exceeds 61, the GBP/USD can be bought. If the index drops to 59 or lower, the GBP/USD can be sold. REACTIVE TRADE

TECHNICALS

Retest of highs?
1.6000 deep support
Break above 1.6265 opens test of 1.6350 highs

Cable stabilized at 1.6200 which remains key support and may try for a retest of recent highs at 1.6265. A break above opens a run towards 1.6350.

4. EUR/USD – Eurozone Retail Sales

FUNDAMENTALS
Eurozone Retail Sales expected @ 0.2% (5 AM ET / 9 GMT)
Our View – Bearish EUR
Reason – Lower German and French Retail Sales
If Eurozone Retail Sales exceeds 0.4% = Buy EUR/USD
If Eurozone Retail Sales drops by -0.1% or more = Sell EUR/USD

Eurozone Retail Sales numbers are scheduled for release tomorrow and we believe that the data will surprise to the downside. Whenever we look to handicap EZ data, we always turn to reports of the 2 largest economies – Germany and France. Retail sales in both countries plunged in the month of August. The data can therefore be traded proactively or reactively. For those who choose to wait, if Eurozone retail sales rise by 0.4% or more, the EUR/USD can be bought for an extension higher. If retail sales drops by -0.1% or more, the EUR/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

3600 taken out
3500 now support
Bias now up

The euro finally took out the 1.3600 level and looks to pierce higher as bias turns modestly up. 1.3500 is now support and the next level of resistance is 1.3650.

5. USD/JPY – US ISM Non-Manufacturing

FUNDAMENTALS
US ISM Non-Manufacturing expected @ 57 (10 AM ET / 14 GMT)
Our View –Bullish USD
Reason – Stronger Manufacturing ISM
If ISM exceeds 59 = Buy USD/JPY
If ISM drops below 56 = Sell USD/JPY

The US’ ISM non-manufacturing report is expected to be a big market mover for the U.S. dollar because of the potential delay non-farm payrolls. Given the rise in the manufacturing ISM index, the data should be strong and can therefore proactively or reactively. If the ISM index exceeds 59, USD/JPY can be bought for a recovery. If it drops to 56 or lower, USD/JPY can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

97.00 holds
Bias remain down
Only break of 99.50 turns momentum

USD/JPY continues to drift lower as the pair remains in a downtrend making lower highs along the way. 97.00 is key support while only a move through 99.50 turns the tide the other way.