Top 5 12.16.13


DATE: Monday Dec 16, 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 – New Zealand PMI Services

PMI Services expected @ (4:30 PM ET / 21:30 GMT)
Our View – Bullish NZD
Reason – Stronger Business PMI
If PMI index exceeds 60 = Buy NZD/USD
If PMI index is 56 or lower = Sell NZD/USD

We have strong reasons to believe that service sector activity in New Zealand accelerated in the month of November because of the strength of the the business PMI index. However since the data will be released right when the FX markets reopen on Sunday, the data can only be traded reactively. For those who choose to wait, if the PMI index exceeds 60, we believe the NZD/USD can be bought for a move higher. If the PMI index drops to 56 or lower, the NZD/USD can be sold for a move lower. REACTIVE TRADE


8200 holds
8400 still caps
Higher lows remains

Kiwi maintains its uptrend as higher lows stay in place with 8200 support and 8400 resistance as key range points.

2. USD/JPY – Q4 Tankan Survey

Tankan Large Manufacturers Index Outlook @ 17 (6:50 PM ET / 23:50 GMT)
Our View – Bullish JPY but no Trade
Reason – Continued Signs of Recovery
If Tankan Index is 8 or lower = Buy USD/JPY
If Tankan Index is 20 or better = Sell USD/JPY

Japan’s Quarterly Tankan survey is one of the country’s most important economic releases as it is a measure of business confidence. Given the general improvements in Japan’s economy, the market is looking for confidence to rise. However an improvement is widely expected and therefore we may only see a nominal reaction in the JPY unless there is a significant surprise, which is why we feel the data is best traded reactively. If the Tankan index drops to 8 or lower, we expect USD/JPY to rally. If the index rises to 20 or higher, we expect USD/JPY to fall. REACTIVE TRADE


104.00 fails
Yearly highs taken but not held
102.00 key support

USD/JPY run for the highs ran out of steam ahead of the the 104 level and the pair may correct to 102.50 now with 102.00 a key support level to hold if this uptrend is to stay in place.

3. AUD/USD – Chinese Flash PMI

HSBC Flash PMI expected @ 50.9 (8:45 PM ET / 1:45 GMT)
Our View – Neutral
Reason – Neutral
If the PMI index exceeds 51.2 = Buy AUD/USD
If the PMI index is less than 50.2 = Sell AUD/USD

China’s manufacturing PMI numbers should have a big impact on the AUD because China is Australia’s number one trade partner. Given the vulnerability of the Australian economy, the currency can be particularly sensitive to incoming data. Since Chinese economic reports are difficult to handicap, we feel they are best traded reactively. If the PMI index exceeds 51.2, meaning that Chinese manufacturing activity increased, the AUD/USD can be bought for a recovery trade. If the index drops below 50.2, the AUD/USD can be sold for a more aggressive move lower. REACTIVE TRADE


8900 key hold
9000 immediate resistance
Break opens a test of yearly lows at 8850

The Aussie managed to hold the 8900 support and could push to 9000 on short covering with 9050 a stiffer level of resistance. Meanwhile a break to the downside opens a run to yearly lows at 8850.

4. EUR/USD – Eurozone PMIs

Eurozone Composite PMI expected @ 52 (4 AM ET / 9 GMT)
Our View – Bearish EUR
Reason – Drop in Industrial Production and Factory Orders
If the PMI index exceeds 53 = Buy EUR/USD
If the PMI index is less than 51 = Sell EUR/USD

We have good reasons to believe that the Eurozone PMI index could surprise to the downside given the drop in industrial production and factory orders. Therefore we feel that the data can be traded proactively or reactively. For those who choose to wait, if the PMI index exceeds 53 the EUR/USD can be bought for a move higher. If the index drops below 51, the EUR/USD can be sold. PROACTIVE or REACTIVE TRADE


3800 rejected
3700 support holds
Break of 3830 opens run to 3900

The euro continues to hold above the 3700 level but three days of stalling ahead of yearly highs at 3830 suggest that further correction may be due.

5. USD/CHF – Empire State Manufacturing Survey

Empire State Manufacturing Survey expected @ 5 (8:30 AM ET / 13:30 GMT)
Our View – Neutral
Reason – Neutral
If Empire State index exceeds 8 = Buy USD/CHF
If Empire State index is less than -2 = Sell USD/CHF

As one of the first manufacturing reports out of the U.S., the Empire State survey is difficult to handicap and therefore best traded reactively. If the Empire State manufacturing index exceeds 8, USD/CHF can be bought for a move higher. If the index drops to -2 or lower, USD/CHF can be sold. REACTIVE TRADE


Lower double bottom at 8850
8900 immediate resistance
Break of 8850 opens run to 8800

The Swissie appears to have made a lower double bottom at 8850 with 9000 now the key resistance, but a move through the bottom opens run to 8800.

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