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CURRENCY CURRENTS

Professional

23 May 2011 Weekly

Index

Existing Commitments – Commitment of Traders Report, P2

Yielding – Comparison of 3-month and 10-year Interest Rates, P3

FX Scripts and Charts – Technical Analysis and Commentary, P4-10

Intermarket View — Key correlations P11

Positioning – Open Position Summary, P12

Bottom Line Trades and setups

Dollar Index – Testing upper trend channel resistance. Working higher on key themes

playing out as expected: eurozone debt concerns and slowdown in Chinese growth. P4

USDJPY – Poised to rock’n roll or not. Recession and downgrades…hmmm!! P5

EURUSD – Breaking…finally…on news. P6

USDCHF – Still think it is game over for Swiss, but benefiting relatively on eurozone

turmoil… P7

GBPUSD – Working lower…inflation still a big concern i.e. keeping Bank of England in the

game, but the economy still looks quite ugly. P8

USDCAD – Same comments…Rallying right on E-Wave cue! Now testing the downtrend

line going back to August 2010. Move playing along with commodities correction. P9

AUDUSD Love coming out of commodities means premium fades here…question is how far

does this go? I think a lot farther. P10

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Existing Commitments Weekly Commitment of Traders Summary

Decent conversion flow from away from maximum dollar bearish may be underway—net

swing for the week of 71,761 contracts to dollar bullish positioning.

Euro and pound biggest swings, from bullish 73% and 64%, to 65% and 49%,

respectively.

Commitment of Traders Report Commitment of Traders Report

Currency Futures Currency Futures

17-May-11 10-May-11

Long % Short % Total Long % Short % Total

yen 38,016 63% 22,643 37% 60,659 yen 36,100 61% 23,046 39% 59,146

euro 89,941 65% 48,296 35% 138,237 euro 98,054 73% 36,607 27% 134,661

Swiss 24,409 74% 8,748 26% 33,157 Swiss 27,905 71% 11,569 29% 39,474

pound 30,327 49% 31,255 51% 61,582 pound 41,368 64% 23,250 36% 64,618

C$ 36,008 79% 9,717 21% 45,725 C$ 42,698 89% 5,495 11% 48,193

A$ 61,179 86% 10,260 14% 71,439 A$ 72,871 85% 12,550 15% 85,421

NZ$ 22,518 69% 9,894 31% 32,412 NZ$ 22,828 71% 9,114 29% 31,942

M. peso 112,311 94% 7,399 6% 119,710 M. peso 123,092 96% 5,027 4% 128,119

Total 414,709 74% 148,212 26% 562,921 Total 464,916 79% 126,658 21% 591,574

Commitment of Traders Report

Currency Futures

Change 10-May-11 to 17-May-11

Swing

Long Short Net L/(S) % Ttl

yen 1,916 (403) 2,319 3.9%

euro (8,113) 11,689 (19,802) -14.7%

Swiss (3,496) (2,821) (675) -1.7%

pound (11,041) 8,005 (19,046) -29.5%

C$ (6,690) 4,222 (10,912) -22.6%

A$ (11,692) (2,290) (9,402) -11.0%

NZ$ (310) 780 (1,090) -3.4%

M. peso (10,781) 2,372 (13,153) -10.3%

Total (50,207) 21,554 (71,761) -12.1%

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Yielding A look at major currency yield differentials

Yield across the industrialized world still aren’t reflecting much inflation concern. 10-yr

yields in all countries fell last week.

*Source of inflation data: The Economist

5/23/2011

Yield Weekly Diff. Yield Weekly Diff. Inflation Real Yield

3-month Change +/- $ Yld 10-year Change +/- $ Yld Rate 3-Month 10-year

JPY 0.112 0.000 0.067 1.131 -0.010 -2.001 0.0 0.102 1.12

EUR 0.922 0.000 0.877 3.024 -0.071 -0.108 2.8 -1.878 0.22

CHF 0.230 0.215 0.185 1.859 -0.066 -1.273 0.3 -0.070 1.56

GBP 0.599 -0.002 0.554 3.328 -0.079 0.196 4.5 -3.901 -1.17

CAD 0.967 -0.010 0.922 3.172 -0.042 0.040 3.3 -2.333 -0.13

AUD 4.828 -0.029 4.783 5.339 -0.099 2.207 3.3 1.528 2.04

USD 0.045 0.020 0.000 3.132 -0.071 0.000 3.2 -3.155 -0.07 …but eurozone periphery is still be hammered on risk. Greek restructing a foregone conclusion?

Greece 10-yr now at 17.3%! Spain at 5.6% and rising!

Ireland at 10.9% and testing old high!

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FX Scritps & Charts A look at our individual currency stories

US $ Index 7626 (last week 7553)…testing the upper channel.

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USDJPY Daily: No change to view…same expectations

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EURUSD Daily: Breaking on news! 50% retrace from B low at 1.3900.

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USDCHF Daily: Correction complete for wave 3 higher?

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GBPUSD Daily: Through channel resistance; next chart support at 1.6049

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USDCAD Daily: Above downtrend channel resistance

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AUDUSD Daily: Big test today; below 1.0500 sets the stage for a quick fall to 1.0360 (50%

retracement area).

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Intermarket Chart View Key intermarket relationships

Revisiting that USDJPY versus 10-year yield correlation; recession suggests rates go lower, but

risk says otherwise….a tug-a-war?

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Positioning Open Positions Summary

23 May 2011 8:00 a.m. ET

Open Positions

Entry Long Entry Stop Last Profit Profit Percent

Date Symbol (Short) Price Loss Price PIPs Target Returns

MAJORS

5/13/2011 EURUSD Short 1.4230 1.4350 1.4034 196 1.3720 1.4%

5/17/2011 USDJPY Long 81.62 80.1000 81.87 25 87.25 0.3%

Jack Crooks

Black Swan Capital