Technicals

Technical Developments in the Foreign Exchange and Asset Markets 27 June 2011 Tom Fitzpatrick (1-212-723-1344) Shyam Devani (44-207-986-3453) Alex Good (1-212- 723-3469) CitiFX.Technicals@citi.com

CitiFX Technicals Portfolio

Todays Highlights
The pattern of EURUSD is very similar to what we saw in May. The overlay suggests that EURUSD will move below 1.4073 lows in coming days. 1.3970 is the more important long term support The S&P 500 will look very vulnerable if it moves beneath 1250 on a daily close basis European Bank Stocks stopped at resistances and are now nearing important supports at 149 The September 10 Year US Treasury Future Contract is in danger of posting momentum divergence at pivotal levels GBPUSD broke its head and shoulders neckline at 1.61 and looks to be on its way lower An inverted head and shoulders and a 76.4% Fibonacci at 80.00 are combining to make a technically bullish USDJPY set up arguing a push to 82.20 EURNOK and EURCHF are at good support levels that suggest caution to bearish views USDCAD is testing its 200 day moving average at .9908 with resistance at parity Crude broke its head and shoulders neckline and has a bearish set up while Brent broke its 76.4% Fibonacci neckline suggesting a sharp move lower Gold made a bearish outside week off a near 76.4% at trend highs, warranting caution on the precious metal in the near term. Chart of the Day: EURUSD 76.4% Fibonacci Retracement

Similar price action with near identical failures at the 55 DMA

Source: Aspen Graphics / Bloomberg 27 June 2011

We highlighted in our dailies last week that EURUSDs price action since pausing at the 76.4% Fibonacci was very similar in shape to the move from the early may highs to the late May lows Once again, EURUSD failed at its 55 DMA and has since headed lower. If the pattern were to continue holding, EURUSD would break beneath 1.4073 lows this week. A more significant break would be a close beneath the 1.3970 area which is the neckline of the 76.4% Fibonacci retracement

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S&P 500

27 June 2011

Source: Aspen Graphics / Bloomberg 27 June 2011

The S&P 500 Index will look very vulnerable if it breaks through 1250 supports that correspond with the March lows and the upward sloping trend channel On April 18th, 2011 the S&P 500 made an impulsive correction that had a low of 1294. One both June 21rst and 22nd we tested this level but did not move far above. 1294 now serves as resistance. European Banking Stocks

Hold of declining tops

Closing beneath 149 would open the way to 84.60

Source: Aspen Graphics / Bloomberg 27 June 2011

Early last week the European Banks Index looked like it was reversing momentum off an important support, and tested the linear declining tops that have defined the indexs price action since February It failed almost exactly at these declining tops and closed the week close to the 149 supports, that if breached on a close basis would open the way back to the 2009 lows

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10 Year Note

27 June 2011

Source: Aspen Graphics / Bloomberg 27 June 2011

The September 10 Year Futures contract is at risk of posting momentum divergence if it sells off here at trend line resistance at 125 A move through 123 +16 would make for a clearly defined break of supports GBPUSD

Source: Aspen Graphics / Bloomberg 27 June 2011

GBPUSD looks set to continue losses, trading beneath both the 55 and 200 day moving averages at 1.6333 and 1.5945 respectively and having completed a long term head and shoulders with a neckline at 1.61 resistances We see a move to the January lows at 1.5351 over coming weeks

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USDJPY

27 June 2011

Source: Aspen Graphics / Bloomberg 27 June 2011

USDJPY will look to push higher if it can sustain a close above 80.50, the neckline of an inverted head and shoulders with its 2nd shoulder at a 76.4% Retracement at 80.01 A move through the 76.4% neckline at 81.06 would argue an acceleration up towards resistances that correspond with the 200 day and May highs at 82.20 EURNOK

Double 76.4% retracement

Long term base intact

Source: Aspen Graphics / Bloomberg 27 June 2011

EURNOK comes into focus given our view that oil will drop double digit percentages while the S&P declines in coming weeks Watch support around 7.75 on the downside, the exact area of the 76.4% Fibonacci retracement. The neckline of the 76.4 is 7.94. A move through this area would also form an inverted head and shoulders formation that would target even higher levels for EURNOK

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USDCAD

27 June 2011

Source: Aspen Graphics / Bloomberg 27 June 2011

USDCAD looks poised to move higher if it can close above the 200 day moving average at .9908 Parity would be the next major resistance Our bearish view of oil is a backdrop that supports a higher USDCAD EURCHF

Source: Aspen Graphics / Bloomberg 27 June 2011

EURCHF has become severely oversold in past weeks and is touching a long term channel base. We have taken profit on our short position and would look to re-enter on a bounce back to the 1.21 area, the top of EURCHFs most recent price channel

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Crude Oil

27 June 2011

Source: Aspen Graphics / Bloomberg 27 June 2011

Crude broke the neckline of its head and shoulders formation. We expect it to test $83.85 supports, a breach of which would open the way to the $75 area Short term supports can be found at the bottom of Crudes channel at $90

Crude Oil (2010 Chart)

Brief consolidation around 200 DMA in May 2010 before big push lower

Source: Aspen Graphics / Bloomberg 27 June 2011

In 2010 Crude made a head and shoulders at the high, dropped, and then consolidated near the 200 day moving average before making its next leg lower. Crude is currently consolidating near the 200 day moving average

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Brent Crude

27 June 2011

Impulsive 76.4% Fibonacci at trend highs. Breach of neckline = very bearish

Source: Aspen Graphics / Bloomberg 27 June 2011

Though our focus is on West Texas, it is worth pointing out that Brent Crude has broken its 76.4% retracement neckline at $105.15 arguing for a move much lower The first support to look out for is $89 Gold

Source: Aspen Graphics / Bloomberg 27 June 2011

Gold made a bearish outside week last week near the 76.4% retracement at its highs. A weekly close through 1462 suggests a danger of a further corrective move lower.

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27 June 2011

PLEASE NOTE THAT: The tables and information specified below under Short Term Conviction views, Long Term Conviction views, CitiFX Technicals Portfolio, Strategic Portfolio, and Tactical Portfolio ARE NOT INTENDED AS, AND DO NOT CONSTITUTE, AN OFFER, RECOMMENDATION, ADVICE OR A SOLICITATION TO BUY, SELL OR TO ENGAGE IN ANY STRATEGY, WHATSOEVER, IN ANY FOREIGN CURRENCY CONRACT OR ANY INSTRUMENT OR INVESTMENT. EACH DECISION BY YOU TO ENTER INTO ANY FOREIGN CURRENCY CONRACT OR TO INVEST IN ANY INSTRUMENT OR ENGAGE IN ANY STRATEGY MUST BE BASED ON DILIGENCE AND ANALYSIS INDEPENDENTLY UNDERTAKEN BY YOU AND YOUR ADVISORS. PLEASE CAREFULLY REVIEW THE DISCLAIMERS AT THE LAST PAGE OF THIS DOCUMENT.

Short term conviction views

Instrument

View

Date view was established

Target

Level today

Crude

Bearish daily reversal at the highs and breach of near term supports suggest short term weakness

13 April

* $93 Target Met and extended to $83.40 (200 week moving average)** In addition a move to $75 (Head and shoulders target) cannot be ruled out.

$90.00

EURUSD

Bearish weekly reversal at the trend highs

09 May

1.4156 **Target Met. Extended to 1.3864 (200 day)

1.4210

CRB Index

Weekly reversal at the highs, momentum diveirgence and large 55-200 day moving average gap

09 May

317 (200 day)

327

NDX

Breached the 55 day and trend support arguing for a move to the 200 day

24 May

2,200

2,220

EURCHF

Breached 5 month consolidatiojnj with a double top in place

23 May

1.16

1.1854

GBPUSD

Revisited but could not sustain rising trendline, head and shoulders targeting 1.5345

21 June

1.5345

1.5942

USDJPY

76.4 against the highs and close below 80.70 suggests lower levels ahead

06 June

79.57 and possibly 78.44

80.92

Convictions represent the views of the CitiFX Technical staff and not actual trades.

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CitiFX Technicals

27 June 2011
Source: CitFXTechnicals Views 27 June 2011

Long term conviction views

Summary of our strong conviction 2011 views as we open the year.

(As we continually note, when and if factors/dynamics change, we will adjust them into our thought process. These are our views we hold with conviction today. As we head through the year we will update our level of conviction on an ongoing basis.)

Instrument

View for 2011 on 03 Jan 2011

Conviction on 03 Jan 2011

Conviction today27 June 2011

Level today

S&P 500

Bearish year with double digit percentage down close of 15-16 % (1,055-1070) expected. Intra year bear market (High to low fall of 20%+ ) also a danger. Peak could well come in the opening days of the year.

Strong

Strong

1270

U.S. long end yields

10 year yields to head towards 4% and possibly 4.5% by end of year. 30 year yields to head towards 5%

Strong

Strong

10Y at 2.86% and 30Y at 4.21%

Crude

A move above $100 and possibly towards $120

Strong

$100 target met.

$90.00

Gold

$1,700 this year and as high as $2,000 eventually

Strong

Strong

$1,498

Palladium

A move above $1,000 this year

Strong

Strong

$723

EURUSD

A move to high 1.40s (1.4850) by end of year) with possible 1.50+ and even 1.60+ in early 2012

Strong

Weak. We have now changed our year end view and believe that the move seen to 1.4184 1.4940 on 04 May has established a long term peak earlier than we thought. Data as at 27 June 2011

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CitiFX Technicals

27 June 2011

CitiFX Technicals Portfolio

Strategic trades will likely be / intended to be of more medium term nature using the variety of building blocks that we articulate in that medium term view. Tactical trades by definition are likely to be more short-term and driven more by day to day price dynamics, risk management P&L etc. The strategic portfolio will be made up of 100 units of capital with the potential for modest leverage while the tactical portfolio will comprise 50 units of capital also with modest leverage potential. These portfolios represent actual trades in FX, EM, Fixed income, Commodities or Equity indices

Strategic Portfolio
Data as at 27 June 2010

Instrument

Position

Date established

Comment

Entry

Stop (If breached unless specified otherwise)

Target

Present level

Tactical Portfolio
Data as at 27 June 2010

Instrument

Position

Date established

Comment

Entry

Stop (If breached unless specified otherwise)

Took profit at 1.1859

Target

Present level

EURCHF

Squared up today

23 May 2011

TAKEN PROFIT AT 1.859 Price action is similar to that seen at the highs in October 2010 suggesting further losses Short term price action looks corrective and the setups still remind us of Nov 2010 Long term head and shoulders, interest rate and equity Held base of what looks like corrective flag, potential double bottom

1.2375

1.20 and possibly 1.1575

1.1854

EURGBP

Long 0.8450 Put Option (expiry 06 July) Long 1.40 Put option (Expiry 28 June)

25 May 2011

Spot ref. 0.8666

Premium paid

0.8450

0.8896

EURUSD

27 May 2011

Spot ref 1.4235

Premium paid

Sub 1.40

1.4210

GBPUSD

Short

27 June 2011

Spot Ref: 1.6133

1.6305

1.53451.5370

1.5942

10 Year Future

Short

24 June 2011

124 14/32

125 1/2

3.10%

2.86%

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27 June 2011

CitiFX Technicals Products

Today's Highlights - Sent Monday, Tuesday and Wednesday. Technical Strategy focused publication detailing important technical developments in the past 24 hours and looking at possible implications for other markets. Main focus is the FX market but the piece also covers important developments in Equity, Fixed Income and Commodity markets, especially where we believe the moves are significant for FX. The publication also includes a daily grid with short comments on each major currency pair and support/resistance levels Weekly Roundup - Sent late Thursday European time. Detailed coverage of all G10/EM FX Markets and related asset markets, with charts of each market. The document is hyperlinked to ease use and navigation. It should be thought of as an e-mailed website that can be kept for reference over the following week. Bulletins Ad hoc pieces sent where we believe particularly significant developments have taken place. Often based on interrelationships between markets. Portfolio Updates - We run a portfolio on the back of our ideas/views and as such send e-mails detailing changes to positions (targets/stops etc.) in relation to this.

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FX Technicals
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