TOP 5 HOT IDEAS

DATE: Thursday Sept 12, 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. USD/JPY – Japanese Purchases of Foreign Bonds

FUNDAMENTALS
MoF Data on Japan Buying Foreign Bonds expected @ (7:50 PM ET / 23:50 GMT)
Our View – Neutral
Reason – Neutral
If Purchases exceed 100B = Buy USD/JPY
If Purchases are -100B or lower = Sell USD/JPY

An essential criteria for a resumption of the USD/JPY rally is Japanese purchases of foreign bonds. While this data has become important it is difficult to handicap and therefore the only opportunity to trade this data is reactively. If the recent rise in demand ends, USD/JPY can be sold for a quick move lower. If the nearly 3% U.S. yield finally draws demand from the Japanese, leading to an increase in purchases in excess of 100B, USD/JPY can be bought as investors start to see this as a continued trend. REACTIVE TRADE

TECHNICALS

100.00 fails again
99.50 now support
100.50 near term resistance

USD/JPY has once again failed to hold the 100.00 mark, but a long as the pair remains above 99.50 it bias is still slightly bullish, but 100.50 caps any rallies for now.

2. AUD/USD – Australian Employment

FUNDAMENTALS
AU Employment expected @ 10K (9:30 PM ET / 1:30 GMT)
Our View – Neutral
Reason – Drop in employment component of services and construction, rise in manufacturing
If Employment Change rises by 20K or more = Buy AUD/USD
If Employment Change drops by -5K or more = Sell AUD/USD

Australian employment numbers are scheduled for release this evening and unfortunately this month’s release will be difficult to handicap. While confidence has improved and manufacturing activity rebounded, the PMI reports show a deeper contraction in the service and construction sectors. As a result, we believe the data can is best traded reactively. For those who choose to wait, if employment increases by 20K or more, the AUD/USD can be bought for an extension higher. If employment falls by 5k or more, the AUD/USD can be sold.

TECHNICALS

9300 held
9350 now in view
9350 break opens run to 9500

The AUD/USD recovery remains on track and the hold above the 9300 level suggests that a possible stronger breakout is in play. A move above 9350 opens a test of teh key 9500 level.

3. EUR/USD – Eurozone Industrial Production

FUNDAMENTALS
EZ Industrial Production expected @ -0.3% (5 AM ET / 9 GMT)
Our View – Bearish EUR
Reason – Sharp Drop in GE and FR IP
If IP rises by 0.3% or more = Buy EUR/USD
If IP drops by -0.5% or more = Sell EUR/USD

We have strong reasons to believe that Eurozone Industrial Production will surprise to the downside. Whenever we look to handicap EZ data, we always turn to the releases of its 2 largest economies – Germany and France. Both countries reported a decrease in industrial production in the month of July. As a result, the data can be traded proactively or reactively. If industrial production rises by 0.3% or more, the EUR/USD can be bought for a move higher. If industrial production drops by 0.5% or more, the EUR/USD can be sold. PROACTIVE or REACTIVE TRADE

TECHNICALS

3300 taken out
3350 next target of longs
3400 remains key resistance

The EUR/USD took out the 3300 level with 3350 now in view, but the 3400 could prove to be tough resistance as the pair has failed at that level several times.

4. USD/CAD – House Price Index

FUNDAMENTALS
House Price Index expected @ 0.1% (9 AM ET / 13 GMT)
Our View – Neutral
Reason – Neutral
If House Price index drops -0.3% = Buy USD/CAD
If House Price Index exceeds 0.5% = Sell USD/CAD

Canada’s house price index is not a huge market mover unless there is a big surprise. Therefore the data can only be traded reactively. If house prices drop by 0.3% or more, USD/CAD can be bought. If the House Price Index exceeds 0.5%, USD/CAD can be sold. REACTIVE TRADE

TECHNICALS

1.0300 key support
1.0400 near term resistance
Break of 1.0300 opens test of 1.0250

USD/CAD has continued to push lower as it now tests the key 1.0300 support with a break there opening up the test of the 1.0250 level. 1.0400 caps the upside for now.

5. USD/JPY – Weekly Jobless Claims

FUNDAMENTALS
Jobless Claims @ 330K (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Neutral
If jobless claims rise by 320K or less = Buy USD/JPY
If jobless claims rise by 350K or more = Sell USD/JPY

Since one the most important U.S. release this week is jobless claims, it could have an unusually large impact on the dollar. However the data is difficult to predict and therefore best traded reactively. If jobless claims rise by 320K or less, USD/JPY can be bought for a move higher. If jobless claims rise by 350K or more, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS

100.00 fails again
99.50 now support
100.50 near term resistance

USD/JPY has once again failed to hold the 100.00 mark, but a long as the pair remains above 99.50 it bias is still slightly bullish, but 100.50 caps any rallies for now.