TOP 5 HOT IDEAS

DATE: Monday Nov 4, 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 – Chinese Non-Manufacturing PMI

FUNDAMENTALS
Non-Manufacturing PMI @ (9:45 PM ET / 1:45 GMT)
Our View – Neutral
Reason – Neutral
If PMI index exceeds 58 = Buy NZD/USD
If the PMI index drops to 52 or lower = Sell NZD/USD

Chinese economic reports are notoriously difficult to handicap and their non-manufacturing index is no exception. Based on other Chinese releases, the economy is improving and a stronger number could lift the NZD/USD. Yet the data is best traded reactively. If the PMI index exceeds 58, 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

8250 Remains equilibrium
8300 caps
8200 supports

The kiwi remains in a consolidation mode at 8250 as the 8300-8200 range continues to contain the price action.

2. AUD/USD – Australian Retail Sales

FUNDAMENTALS
Retail Sales expected @ 0.4% (7:30 PM ET / 23:30 GMT)
Our View – Neutral
Reason – Neutral
If Retail Sales rise by 0.6% or more = Buy AUD/USD
If Retail Sales rises by 0.1% or less = Sell AUD/USD

Consumer spending reports are always important because they form the backbone of an economy and Australia’s release is no exception. However this month’s report is difficult to handicap because service sector PMI, our preferred measure will be released after the consumption report. As such, the data is best traded reactively. If retail sales rise by 0.6% or more, the AUD/USD can be bought for a reversal higher. If retail sales rise by 0.1% or less, the AUD/USD can be sold for an extension lower. PROACTIVE or REACTIVE TRADE

TECHNICALS

9450 broken
9400 key support
9500 now resistance

The Aussie continued to decline after a flameout reversal on Thursday and having broken the 9450 level the pair now targets 9400 as the key support point.

3. EUR/USD – EZ PMI Manufacturing Final

FUNDAMENTALS
EZ PMI Manufacturing expected @ 51.3 (4 AM ET / 8 GMT)
Our View – Neutral
Reason – Neutral
If PMI is revised up to 52 or higher = Buy EUR/USD
If PMI is revised down to 51 or lower = Sell EUR/USD

Revisions to Eurozone PMI numbers are not expected to have any impact on the euro unless there is a change. Therefore the only opportunity is to trade the data is reactively in our opinion. If the PMI index is revised up to 52 or higher, the EUR/USD can be bought for a move higher. If PMI is revised down to 51 or lower, the EUR/USD can be sold. REACTIVE TRADE

TECHNICALS

3500 broken
3450 long term support
3600 now caps

The EUR/USD continued to liquidate breaking the key 1.3500 level and is now approaching key long term support at 1.3450. A break there opens run to 1.3300 while 1.3600 now caps the upside.

4. GBP/USD – PMI Construction

FUNDAMENTALS
PMI Construction expected @ 58.7 (4:30 AM ET / 8:30 GMT)
Our View – Higher House Prices
Reason – Bullish GBP
If PMI Construction rises to 60 or higher = Buy GBP/USD
If PMI Construction falls to 57 or lower = Sell GBP/USD

The U.K.’s PMI construction report is not a huge market mover for the GBP/USD unless there is a significant surprise and the release is therefore best traded reactively. If the PMI index exceeds 60 which means that construction sector activity is back to flat from contractionary conditions, the GBP/USD can be bought for an extension higher. If the index drops to 57 or lower however, the GBP/USD can be sold. REACTIVE TRADE

TECHNICALS

1.6000 gives way
1.5900 key support
1.6100 now stiff resistance

Cable tumbled all the way towards the key support at the 1.5900 level and is now near long term support just below that figure. A bounce back faces resistance at 1.6000 and then 1.6100.

5. USD/JPY – US Factory Orders

FUNDAMENTALS
Factory Orders expected @ 1.8% (10 AM ET / 14 GMT)
Our View – Neutral
Reason – Neutral
If Factory Orders rise by 3% or more = Buy USD/JPY
If Factory Orders stagnate or declines = Sell USD/JPY

U.S. factory orders are not extremely market moving for USD/JPY unless there is a big surprise. Therefore the data should only be traded reactively. If factory orders rise by 3% or more, we expect USD/JPY to rally. If factory orders stagnate or decline, we expect USD/JPY to fall. REACTIVE TRADE

TECHNICALS

Upside bias remains in place
98.00 continues to hold
99.00 next key upside level

USD/JPY remains in a bullish mode as it holds the 98.50 support with 99.00 now the next level in view.