- 17/08/2013 - 2013-08-17 15:42:26
- Weekly Analysis
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TFF TRADING RECOMMENDATIONS:
EUR/USD: the Euro retested 1.3200 Key support which was strongly rejected. Even though Friday's candle is an indecisive spinning top, bias and momentum remain up so Key resistance 1.3400-1.3415 is likely to be re-tested next week.
Recommendation: +/+ Stay Long but watch for signs of a reversal at Key resistance.
Recommendation: -/- Stay Short.
Technically price is still reacting off last week's bullish Morning Star formation from confluent support. Having broken Key resistance at 1338, price paused at 1368 only for a short while on Thursday. Price is likely to next test 1414 Key resistance, though 1338 may be re-tested as support.
The S&P had a quieter session on Friday and drifted lower after slightly weaker Housing data. Fundamentally we would like to see a further pullback to just over 1600 where we would look to go long for one final push up before looking for long term shorting opportunities. The S&P closed down 4.6 at 1655.9, down 35.4 on the week. The weekly range was 1651.9-1697.0. Fundamentally we remain neutral.
Regular readers will know that we were bearish on the U.S bond at the 150 level and often mentioned a target of 125. Because of the speed of the descent we recently recommended going flat for a short term bounce. This bounce clearly did not happen and we are therefore looking at the next possible scenario. There is still a chance that we get the bounce before the next FOMC but at the moment that is not looking likely. However at these prices you have to believe the market is pricing in some pretty aggressive tapering by the FED which we do not think will be the case. We think the FED will start with something between $5bn-$10bn and some of that will come off the short end. If that is the case then there will actually be a huge rally after the FED announcement which will then give us another shorting opportunity. The bond closed down 57 cents at 131.09, down 341 cents on the week. The weekly range was 130.50 – 135.03. Fundamentally we are now neutral.
FUNDAMENTAL VIEW & TOMORROW'S TFF LEADING INDICATORS REVIEW:
► PRECIOUS METALS: Both gold and silver witnessed an increase in commercial short position and an increase in large speculator longs.
► COMMODITY CURRENCIES: The AUD continues to be the most unloved currency in the world. Remember that under 'normal' circumstances commercials are always long the US$ and short the rest. This is because the US$ is the world's reserve currency in which international trade is priced and commercials conduct their business' internationally. They are therefore always long the US$. As this is not the case currently needs to be taken very seriously indeed irrespective of the fact that the extreme long positions in the commodity currencies has been reduced slightly.
► TREASURIES: Commercials continue to maintain their extreme long position which justifies our Neutral stance. The Treasury market has 'priced in' the September tapering and is due for a big corrective bounce.
The increase in the Commercial short and large speculator long positions for both gold and silver can be interpreted as bearish. However as both are coming of an extreme low position it in fact marks the start of a growth cycle. This is because commercials are never heavily short at a major market low and currently they are not.
We spotted an interesting article regarding physical gold demand which we replicate here:
Globally, jewellery demand was up 37% in Q2 2013 to 576 tonnes (t) from 421t in the same quarter last year, reaching its highest level since Q3 2008.
In China, demand was up 54% compared to a year ago; while in India demand increased by 51%.
There were also significant increases in demand for gold jewellery in other parts of the world: the Middle East region was up by 33%, and in Turkey demand grew by 38%.
Bar and coin investment grew by 78% globally compared to the same quarter last year, topping 500 tonnes in a quarter for the first time.
In China, demand for gold bars and coins surged 157% compared with the same quarter last year, while in India it jumped 116% to a record 122t.
Taking jewellery demand and bar and coin investment together, global consumer demand totaled 1,083t in the quarter, 53% higher than a year ago.
--Mark O'Byrne, "Physical Gold Demand Surges 53% in Q2, Total Supply Down 6%--Price Falls 35%", www.ResourceInvestor.com - August 15, 2013.
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