Technicals

Technical Developments in the Foreign Exchange and Asset Markets 22 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 failure to break above the 55 day moving average after a symmetrical move could suggest EURUSD weakness in coming days. The S&P 500s 200 day moving average has held at 1258 European Bank Stocks held important supports in the 150-152 area The Shanghai Composite went through 2661 supports suggesting lower levels in Chinese equities GBPUSD has a head and shoulders neckline at 1.6115 and could make a bearish key day reversal if it closes beneath 1.6167. UK vs US 2 Year Rate Differentials also look to push in favor of the US. AUDJPY is hovering above pivotal 84.55 supports Crude is in a pivotal support area around the 200 day moving average and head and shoulders neckline. Last year crude made a head and shoulders pattern, chopped around the 200 day moving average before falling aggressively. The Crude to Natural Gas Ratio looks to push lower if it can close through nearby 20.50 supports Chart of the Day: EURUSD

Similar price action

Source: Aspen Graphics / Bloomberg 22 June 2011

EURUSD has once again tested the 55 day moving average and failed to close above it. The last time it did this it fell 3 big figures in subsequent days This time supports are 3 big figures lower at 1.4073, the daily low on June 16th. 1.3970 is the major downside level to monitor

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S&P 500

22 June 2011

Source: Aspen Graphics / Bloomberg 22 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 We held the 200 day moving average on 16 June, at 1258. It appears that the price action is consolidating in front of supports similar to the Dow Jones Transportation Index European Banking Stocks

Breach of declining tops?

Hold of repeated supports and morning star candle

Source: Aspen Graphics / Bloomberg 22 June 2011

The European Banking Index has held repeated supports in the 150-152 area and has bounced with a morning star candle formation Outright bearish views would be easier to establish if the 150-152 supports give way

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Shanghai Composite (China)

22 June 2011

Source: Aspen Graphics / Bloomberg 22 June 2011

The Shanghai Composite went through 2661 supports suggesting lower levels in Chinese equities The first good support is the channel base at 2550. An acceleration through there opens the way to 2319 which is another 76.4% neckline which if broken could see the SHCOMP back to the 1716 lows last seen in 2008 GBPUSD

Source: Aspen Graphics / Bloomberg 22 June 2011

GBPUSD has a neckline of a head and shoulders pattern targeting 1.5341 coming up at 1.61. Will make a bearish key day reversal on a close beneath 1.6167

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Good supports can be found at 1.5937, a March pivot UK 2 Year Rates US 2 Year Rates

Failure to break above 38.2% retracement in February makes up move seem corrective, long term downtrend in tact

Source: Aspen Graphics / Bloomberg 22 June 2011

The UK US 2 Year rate differential broke through its trend-line support overnight arguing for a push lower towards 0% AUDJPY

84.55: Support

61.8% Fibonacci: Next support at 80.44

Source: Aspen Graphics / Bloomberg 22 June 2011

AUDJPY is testing the 84.40 support area that was pivotal in both February,May and June. A breach of this level should open the way to at least 83.41, the 200 day moving average A push below 83.41 would see AUDJPY without any obvious supports until the 61.8% retracement of its move at 80.44

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Crude Oil

22 June 2011

Source: Aspen Graphics / Bloomberg 22 June 2011

Crude held an important support near its head and shoulders neckline, the 200 day moving average and the base of a downward sloping trend channel with a top near $100 A push through $92.58 would argue for a big push lower- the head and shoulders targets $75 Last year when oil fell we traded in a choppy fashion around the 200 day moving average and then went lower again Crude Oil (2010 Chart)

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

Source: Aspen Graphics / Bloomberg 22 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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Crude to Nat Gas Ratio

22 June 2011

Source: Aspen Graphics / Bloomberg 22 June 2011

The Crude to Natural Gas Ratio is testing trend supports and will look vulnerable to move lower given a close beneath the 20.50 area 19 would be the first target given such a break and then 14.50

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22 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.

$93.89

EURUSD

Bearish weekly reversal at the trend highs

09 May

1.4156 **Target Met. Extended to 1.37 (200 day)

1.4391

CRB Index

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

09 May

317 (200 day)

338

NDX

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

24 May

2,200

2,251

EURCHF

Breached 5 month consolidatiojnj with a double top in place

23 May

1.16

1.2097

GBPUSD

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

22 June

1.5345

1.6113

USDJPY

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

06 June

79.57 and possibly 78.44

80.15

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

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22 June 2011

Source: CitFXTechnicals Views 22 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 today22 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

1295

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 2.95% and 30Y at 4.20%

Crude

A move above $100 and possibly towards $120

Strong

$100 target met.

$93.89

Gold

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

Strong

Strong

$1,545

Palladium

A move above $1,000 this year

Strong

Strong

$767

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 1.4391 1.4940 on 04 May has established a long term peak earlier than we thought. Data as at 22 June 2011

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22 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 22 June 2010

Instrument

Position

Date established

Comment

Entry

Stop (If breached unless specified otherwise)

Target

Present level

Tactical Portfolio
Data as at 22 June 2010

Instrument

Position

Date established

Comment

Entry

Stop (If breached unless specified otherwise)

Target

Present level

EURCHF

Short

23 May 2011

EURGBP

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

25 May 2011

5 month consolidation seems over and the double top argues for further losses 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

1.2375

1.2520

1.20 and possibly 1.1575

1.2097

Spot ref. 0.8666

Premium paid

0.8450

0.8873

EURUSD

27 May 2011

Spot ref 1.4235

Premium paid

Sub 1.40

1.4372

GBPUSD

Short

22 June 2011

Spot Ref: 1.6133

1.6305

1.53451.5370

1.6113

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22 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
Tom Fitzpatrick Shyam Devani Alex Good New York London New York 1-212-723-1344 44-20-7986-3453 1-212- 723-3469 thomas.fitzpatrick@citi.com shyam.devani@citi.com alexander.good@citi.com

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