22nd March 2012

UPDATE

Short Sterling is under pressure

Technical Fundamental

in association with

Disclaimer

Authorised and regulated by the FSA

Short Sterling is under pressure

Short Sterling LIFF E Jun 13 99.65 99.60 99.55 99.50 99.45 99.40 99.35 99.30 99.25 99.20 99.15 99.10 99.05 99.00 98.95 98.90 98.85 98.80 98.75 98.70 98.65 98.60 98.55 98.50 98.45 98.40 98.35 98.30 98.25 30000 25000 20000 15000 10000
x10

WEEKLY CHART
The market has failed to make progress through the 99.00 level on successive occasions since that level was first achieved last summer. The band of 99.10-15 is now major resistance. Look closer.

in association with
High 99.10 High 99.15

UPDATE Technical Fundamental

May

June

July

August

September

N ov ember

2012

February March

April

May

June

DAILY CHART
Short Sterling LIF FE Jun 13 99.20 99.15 99.10 99.05 99.00 98.95 98.90 98.85 98.80 98.75 98.70 98.65 98.60 98.55 98.50 98.45

A H&S top has completed. The minimum move on the downside? About 98.60.

10000

5000
x10

Disclaimer

31 7 14 N ov ember

21

28

5 12 D ecember

19

27

2 9 2012

16

23

30

6 13 February

20

27

5 March

12

19

26

2 April

Short Sterling is under pressure

in association with

FUNDAMENTALS: The UK economy has been showing steady signs of improvement this year, as recent PMI surveys, especially the Service sector variety, have been stronger than expected. Other data too has surprised with earlier retail sales reports and recent house price surveys picking up. But todays release of retail sales was weaker than expected and once again the doom-sayers are talking the economy down, but what does the market say? For such a key data release to come in so weak relative to market consensus, the market has shrugged it off. The front contracts have barely moved and further down the yield curve, December 2013 tried to rally but failed. This tells us that the market is focused on something else, what is it? It isnt equity markets because they have been weaker over recent days and today the FTSE and S&P are under pressure. We judge traders see todays number in a broader context and when set against the recent strong PMI Service sector surveys both here and in the US a recovery, not recession is clearly the expectation. As with any turning point in the economic cycle, data releases are uneven. Whether going into recession or starting a recovery, data occasionally throws out a contradictory signal and we judge that is how todays UK retail sales report is seen.

UPDATE Technical Fundamental

Short Sterling is under pressure

FUNDAMENTALS: CONTINUED
in association with

In the US the recovery is clearly picking up speed. Much like in the UK, the ISM nonmanufacturing surveys are strengthening and a recent retail sales report was stronger than forecast. But unlike in the UK , the US Labour market has turned too. The non-farm payroll report has been picking up for several months and the weekly initial jobless claims report today dropped below 350k for the first time in four years. Why you might ask is he going on about the US when writing about Short Sterling? The answer is simple: the US economy still dwarfs any of its nearest rivals including China and what happens there has an impact globally. For example; last months Japanese trade report showed a deficit of some 1,475.0B Yen which this month had turned into a 32.9B Yen surplus on increased US demand. So my point is traders see a visible US recovery taking hold and expect that to percolate through into the UK economy, which is already in the early stages of its own recovery. Yesterdays budget attempted to do what it could for business and wealth creators within the constraints of the austerity drive. So while we continue to see little opportunity for either the Bears or Bulls in the front contracts of Short Sterling, further down the yield curve we anticipate more movement with the Bears increasingly taking control. For sure, it is way to soon to expect any upward movement in monetary policy, but markets dont follow Central Bankers they try to anticipate their next move. That will at some point be a tightening. The place to anticipate that is further down the yield curve so watch for the shape of the Short Sterling futures strip begin to change over the coming months as the economy enjoys the boost from the Queens Diamond jubilee and the Olympic games, both due this year.

UPDATE Technical Fundamental

in association with

UPDATE Technical Fundamental

SEVEN DAYS AHEAD Authorised and Regulated by the FSA 124 REGENTS PARK ROAD LONDON NW18XL TEL +44 (0) 7849 922573 E-MAIL msturdy@sevendaysahead.com, pallwright@sevendaysahead.com WEB SITE SEVENDAYSAHEAD.COM The material and information set out in this research is not intended to be a quote of an offer to buy or sell any financial products. Any expression of opinion is based on sources believed to be reasonably reliable but is not guaranteed as to accuracy or completeness. The material and information herein is general and for informational purposes only. Although Seven Days Ahead endeavours to provide useful information they make no guarantee as to the accuracy or reliability of the research. The derivative market comprises volatility and considerable risks. To the maximum extent permitted by law no responsibility or liability can be accepted by Seven Days Ahead, any company or employee within its group for any action taken as a result of the information contained in this presentation. You are requested not to rely on any representation in this research and to seek specific advice from your accountant, legal adviser or financial services adviser when dealing with specific circumstances.

Seven Days Ahead is regulated by the UK Financial Services Authority.