Weekly Analysis - 26th May 2013


N.B: All our Reports reflect our Unique way of analyzing the markets: the TFF Way™, which combines our in-house Fundamental Indicators for prevailing market direction with Price Action analysis for timing, to provide our Subscribers and Investors with above average Returns.
The table below shows the weightings that TFF places on the different asset classes we trade and report on.
They represent the relative importance TFF gives to Technical and Fundamental Analysis to achieve a Trading Decision or Recommendation.
Based on these weightings we assign a combination of +/-/N Rating to each Trade and Recommendation in both categories.
When they align (+/+ or -/-) it is the highest rating and therefore the strongest trade signal. This will result in the ARCP entering a position in that Asset Class.
When Ratings do not align, we will look at the weightings that apply to determine if a position is to be taken.
Each Trade and Recommendation implements the TFF Rating System, is summarized in the TFF TRADES AND RECOMMENDATIONS section and is explained in detail under MARKET ANALYSIS in all our Daily and Weekly Reports.
 

TFF TRADES AND RECOMMENDATIONS:

EUR/USD: -/+ Stay Short.
GBP/USD: N/+ Look for Shorting opportunities on pull backs to resistance.
AUD/USD: +/+ We are Long at 0.9680.
USD/JPY: N/- Looking to Buy on pull back to 100.
$ Index: +/- Stuck in range. Waiting for clear direction.
Precious Metals: N/+ Long Gold at an average price of 1375.11.
Crude: +/+ Long crude at an average of 94.43.
Equities: N/N Remain side-lined.
Debt: -/- Increase short positions around 143.50 or better.
Special Situations: None.

MARKET ANALYSIS

CURRENCIES: The U.S. dollar index has been showing increasing signs of forming lower highs, which may indicate that its recent attempt to break above its 24/7/12 peak of 84.100 was a false breakout. We still do not know for sure whether or not this is the case, but we will likely receive additional clues during the next several weeks. Fundamentally we remain bearish. Last week should serve as a reminder that trading currencies during FOMC week is highly volatile and potentially dangerous for traders using Stops.
 
EUR/USD: technically the Euro had a see-saw week ending strongly, failing to make a lower low and ending as a weekly inside bar. However the weekly chart also shows price failing to close above the short term average for the 3rd week in a row. Price has some key support areas below all the way down to 1.2660, starting from the blue 'potential head & shoulders neckline' we have previously discussed. We feel the market will likely test these supports. Our view is supported by the fact that the daily chart shows dual rejection of confluent resistance around the 1.3000 key level. Our recommendation last week was to go short on a pull back so our readers should be short.
Recommendation: -/+ Stay Short with Stop above 1.3000.
                                                               EURUSD - Weekly
                                                                 EURUSD - Daily
 
GBP/USD: technicals for Cable are clearer than for the Euro as the 8/20 smas are clearly displaying downtrend characteristics. Our preferred scenario is to short on a pull back to dynamic/static resistance in the 1.5160-1.5250 area if we get the appropriate price action confirmation.
Recommendation: N/+ Look for Shorting opportunity on pull back to resistance.
                                                                GBPUSD - Daily
 
AUD/USD: the Aussie last week entered a key support area clearly seen in the weekly chart below. First significant support was touched on Thursday around 0.9580, so we started going Long after seeing a pin bar at this key support in the daily chart (see below). Rejection of support was not as strong as we anticipated, and the weekly candle is ultimately still a bear candle which made a lower high and a lower low. So further downside is possible but if so we still expect to see more opportunities to go Long lower down for a strong bounce in this key support area (0.9580-0.9537-0.9386).The daily chart also shows how an upper trendline has become significant. A strong bounce will be confirmed when this trendline is broken to the upside, so worth keeping a close eye on it in the daily and 4hr time frames.
Recommendation: +/+ We are Long at 0.9680.
                                                              AUDUSD - Weekly
                                                                AUDUSD - Daily

USD/JPY: the yen strengthened this week, as we looked to sell it (go Long USD/JPY) on a 'meaningful pull back'. On Thursday we saw a pin bar at static support so we went Long at 101.80, but as the market failed to gather momentum we came out with a tiny profit and avoided getting stopped out. Now we still believe this pair should be bought, but we will look for a more obvious price action buy signal at confluent support. This may happen if the market tests key support at 100.
Recommendation: N/- Looking to Buy on pull back to 100.
                                                                USDJPY - Daily
 
USD INDEX: a bearish end to the week but the Index remains inside the 83.45-84.46 range. ie there's a fight going on between bulls & bears around the 84.00 level. We anticipate a breakout of this range in the not too distant future, but it is impossible to say which way right now. Fundamentals say to the downside. Technicals are Neutral (with a leaning towards the upside, given our technical views in the 3 main component currencies EURUSD, USDJPY and GBPUSD).
Recommendation: N/- Waiting for market to commit.
                                                         USDINDX_M13 - Daily
 
PRECIOUS METALS: A quiet day ahead of the long weekend in the US and UK. A short term assault on the 1500 level is still very much on the cards and from a fundamental point of view we recommend adding to existing long positions on weakness.
Recommendation: N/+ Long Gold at an average of 1375.11 and looking to accumulate.
 
GOLD: technicals on Gold show a bullish week but with clear rejection of dynamic resistance at the short term average. The daily chart below shows how the market will need to overcome very tough resistance at multiple levels for a rally to take shape. Our fundamental view is very bullish, so if that is correct, expect to see price negotiate its way past the first hurdle which is confluent dynamic and static resistance around 1400, 2 trendlines and 8/20 emas (see daily chart below). Failure to do so will mean a likely test of recent lows in the 1320-1338 area.
                                                           XAUUSD - Weekly
                                                             XAUUSD - Daily
 
SILVER: Silver paints a similar picture to Gold, with the main difference being that, unlike Gold, it has attempted a downside breakout to the post collapse lows and failed with a very strong rejection of prices below 22$, clearly shown by the weekly chart. However, the weekly short term average still acted as resistance so this will need to be broken next week for a rally to ensue, which as the daily chart shows, would mean price breaking key resistance above the 20ema and 23.26.
                                                           XAGUSD - Weekly
                                                             XAGUSD - Daily
 
CRUDE: A quiet day. We are looking to add to our small long position on weakness in anticipation of the break above $100. Technically, although all the averages are pointing downwards and price is still trading below the 8/20 emas, we have recently had 2 pin bars showing violent rejection of prices below 94$, making a 93.25-93.35 a very strong support. Friday also ended in a pin bar so this makes further upside likely. Whether it will be strong enough to break Key resistance above 97.30 remains to be seen.
Recommendation: +/+ Long at a cost of 94.43.
                                                         CRUDE_N13 - Daily

EQUITIES: After a rather volatile Asian session Friday European markets appeared calm on the open but drifted lower during the morning.
The S&P also drifted lower along with European markets thus starting the New York session lower. Durable goods came in twice as good as expected and the market sold off again proving a negative sentiment is developing amid more concern that the FED will start to taper QE. The market went quiet shortly after the open ahead of the Bank holiday weekend in the UK and U.S but had recovered nearly all its losses by the end to close down 1.2 at 1650, down 17.4 on the week. The weekly range was 1634.7- 1688.2.
Technically, the last 2 trading days' lows defined a key trendline which price will need to break on the downside for the market to stage a meaningful pull back. It also shows clear rejection of 50sma dynamic support. Static resistance above at 1660. We remain neutral for now.
Recommendation: N/N Remain side-lined.
                                                            S&P500 - Daily
 
DEBT: Major European bond markets were mostly unchanged on Friday in a quiet session. But peripherals saw significant further selling on the belief that the demand for the peripheral high yielding markets will lose popularity as the U.S FED begin to decrease QE.
The U.S 30 year future stayed pretty flat during Asian time despite volatility in the region’s stock markets and traded sideways throughout the London time zone. It reacted as you would expect on the U.S data but then traded higher as stocks were sold. However what the market will realize is that the reason stocks were selling was because of fear that the Fed will taper QE and if that happens then of course it is also negative for bonds and the two will fall in tandem just as they have risen together over the last 4 years.
The 30 year future closed up 15 cents at 143.28, down 63 cents on the week. The weekly range was 142.28- 145.06. There was some short covering in the cash bond market which is usual ahead of a long weekend and explains why the cash bond is virtually unchanged on the week and the future is down.  This would have affected the price of the future to a degree so it also ended the week higher than it would have done. For this reason we intend to add to our short during the limited opening period on Monday at or around the Friday closing level.
Technically, the weekly chart shows that although the open/close range has tightened in the last couple of weeks, price has still been making lower highs and lower lows, so we have no reason to expect this to change going forward. This market seems headed towards 140.44 next.
Recommendation : -/- Stay short. Increase short positions around 143.50 or better.
                                                     USTBOND_M13 - Weekly
                                                       USTBOND_M13 - Daily
 
Please see below the weekly change in prices and yields for the major cash bond markets:
 

FUNDAMENTAL VIEW & TOMORROW'S TFF LEADING INDICATORS REVIEW:

COT DATA:
 
£: Massive increase in commercial longs and big rise in large and small speculator shorts.
CAN$: Increase in commercial longs and big rise in small speculator shorts.
EURO: Increase in commercial longs and big increase in both large and small speculator shorts.
GOLD: Commercials remain short at the smallest level in over a year. Continued reduction in large speculator longs.
COPPER: Commercials net long circa 22,000 contracts. A net short position of 35,000 contracts will signal the end of the bull run.

German consumer confidence survey's headline index unexpectedly rose to 6.5 from 6.2 in May, the highest level in 5 1/2 years.

Equity fund flows had another big week, with funds taking in $7.5 billion in assets under management. Bond funds saw big inflows as well, expanding by $4.5 billion. Commodity funds saw outflows of $2.1 billion, and money-market funds expanded by $16 billion.

CHECK OUR INTERACTIVE ECONOMIC CALENDAR FOR UPCOMING WORLDWIDE DATA RELEASES

CHARTING LEGEND:

NB: Our MT4 charts are based on One Financial Markets data. OFM being a UK based broker run their charts off GMT (Greenwich Mean Time), so their daily candles close at 00:00 GMT. For our Daily Reports we take snapshots between 21:30-22:00 GMT to coincide with the US closes.

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