Weekly Roundup - 07-28-11 - Final

8/6/2019 Weekly Roundup - 07-28-11 - Final

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CitiFX Technicals July 28, 2011

Market Commentary -for Institutional Client use only. Referto information, disclosures and qualifications at the end of thispublication. Weekly Roundup 1

Weekly Roundup

Tom [email protected]

Shyam [email protected]

Alex [email protected]

Chart of the Week

What are the interest rate markets telling us?

As we head to the end of the month we cannot help but be a littleconcerned about the way fixed income markets and curves aretrading.

The set ups here seems to us to be a classic anti-risk/ anti carrytrade environment. From an anti risk dynamic that would supportour concerns about the Equity market. From an anti carry tradedynamic that would support our concerns about what we think hasbecome the Worlds largest carry trade The USD as a fundingcurrency.

Foreign Exchange

Our favourite charts still suggest that the USD-index is set for a bounce andEURUSD set for a fall in the weeks ahead.

Chart included: USD Index, EURUSD

Page 13

Equities

We remain concerned here and still believe that a correction lower remains asignificant danger.

Chart included: Dow Industrials, S&P 500, VIX Index, Dow Transports

Page 18

Commodities

Gold continues to perform strongly.

Chart included: Gold

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Emerging Markets

We have early warning signs that the rally in the ADXY is running out of steamand may be approaching an end

Equity Indices in India, Brazil, Chile and Poland all look bearish

Chart included: ADXY, Sensex, Bovespa, USDBRL, IPSA, WIG

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Market Commentary -for Institutional Client use only. Referto information, disclosures and qualifications at the end of thispublication. Weekly Roundup 28 July 2011 2

Chart of the Week: What are the interest rate markets telling us?

As we head to the end of the month we cannot help but be a little concerned about the way

fixed income markets and curves are trading.U.S. 2s versus 5s curve

Source: Aspen Graphics / Bloomberg 27 July 2011.

While the World holds it breath and waits for a resolution to the U.S. debt crisis the 2s versus 5s

has resumed its bull flattening dynamic. Amazingly it sits today (27th July) at 108 basis points which isexactly the same level as we were at on 28

thJuly 2010 having flattened from a level of 161 basis

points in January 2010. This time around we have flattened from 156 basis points in February 2011. Further flattening then continued in August, 2010 as the Equity market swooned and the S&P fell

from 1,129 on 04 August to 1,040 (Down 8%) just 3 weeks later. Of course we know that this slide was arrested by the increasing guidance that QE2 was on the way.

That is just not going to happen this time in our view. We are still 16% above that August high and afull 26% above the low that was posted in August last year at 1,040.

By the time we reached that low in the S&P this curve had flattened to 85 basis points. That iscertainly more than we would have expected to see this time, but not by any means impossible.

However, if support around 104-107 basis points was to give way we would be concerned about anacceleration to the downside (Albeit we do not expect a move as far as we saw in 2010 to 70 b.p.s)

One might almost be inclined to believe that this curve was now showing more concerns abouteconomic slowdown/recession than debt concerns. (As in Europe, debt concerns would more likelysee the curve bear flatten). However when this flattening began in Feb this year, 5 year yields were at2.42% and are now at 1.53% and just 18 basis points of the years low.

So what we actually have is a dynamic where: Q.E. has ended and that increased stimulus is no longer feeding through to the economy

and asset markets. The chance of a U.S. Govt. debt downgrade has risen sharply. While in the near term this

may well be a non-issue (The U.S. debt remains firmly investment grade) it is a shot acrossthe bow with regard to fiscal responsibility. It is a warning that we have no choice but to cutback on the policies of recent years and start taking the fiscal imbalance seriously.

Crude Oil remains firmly wedged at the moment close to $100 Growth has been slower than expected in H1 and the unemployment picture has shown some

danger of deteriorating again. In effect the patient (U.S.A) has been continually on life support for the past 2 + years and we

have run out of money to pay the electricity bills.


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It is very hard to look at this dynamic and see how it can be positive for either the economy orthe Equity market.

On top of this the Global economy (Excluding the 2 huge developed zones of Europe and the U.S.)has to be getting a little worried. The game plan was that the developing World was in better shape toweather the storm while it waited for the inevitable return to health of these 2 major economic zones.Well guys, we hope you have a plan B because it looks like you might be waiting a lot longer than youthought. With these zones now having little choice but to show a greater level of fiscal and monetaryresponsibility that growth dynamic might be a lot more sluggish and the recovery a lot further downthe line than previously thought. Once we stop fooling ourselves that these dynamics aretechnicalities caused by snow and the tragedy in Japan the lights are likely to go on that theeconomic dynamic remains stressed. When that happens the next realisation is likely to be that in aGlobal economy where the developed nations of the U.S.A., Japan as well as the Euro zone have afever, then the rest of the World is likely to catch a cold

At some stage we may even have to entertain the possibility that with the taps of monetary andfiscal stimulus being turned off at the same time as the fiscal drag/cost push effect of Oil and othercommodities are kicking in, the bar to a new recession is getting lower from month to month.

2s minus Fed funds rate over Fed funds rate


This spread is back close to where it was in Oct-Nov last year just ahead of QE2 and has so far heldthat 8 basis point support area. This may well be the support area for a bounce with a double bottomforming (and we hope it is, because if 8 basis points were to give way there is no way that you couldpaint a positive dynamic on the back of that development).


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U.S. 5 year yield


This chart continues to hold the 76.4% pullback support area at 1.35% following the low posted in lateJune. While that holds, the pattern looks to be a double bottom with a neckline at 1.80% which wastested earlier this month. As yet we have not managed a close above this area to complete thispattern and have moved back much closer to the supports again.

Our view in June was that a low in yields was being posted and that we would see them move tohigher levels in the 2

ndhalf of the year. A close below 1.35% would put that view very much under

question and suggest a danger that the November 2010 lows of 1.02% could be tested again. If so, then a re-test of the 2 year yield low at 31 basis points and a further bull flattening of the 2s

versus 5s curve would be a likely consequence of such a break below 1.35% on 5 year yields.

U.S. 10 year yield


The pattern here continues to look like a double bottom with a neckline at 3.22%. A close above therewould confirm this and suggest an extended move towards the Feb 2011 highs again around 3.76%

A close below the 2.81-2.84% area would question this potential and suggest renewed losses (inyield) towards 2.67% (76.4% pullback level)


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U.S. 30 year minus 2 year chart is concerning.


On one side we have the 2 year yield which is very tied to Fed funds rate expectations. On the otherside we have the 30 year which is the least interfered with market (most QE taking place in the 5 to

10 year area) This spread was moving steadily higher since May but looks to have hit a brick wall around 394

basis points which happens to be the 76.4% pullback of the Feb-April fall. Now there is a danger of a double top forming off this level with the neckline at 381 basis points. In

addition the 55 and 200 day moving averages are converged at 382-383 basis points. A break through this area of support would suggest a renewed fall to test the 368 basis point

low seen in April-May. Below here and (like we saw with the 2s versus 5s spread in May) we would break the neckline of

the 76.4% pullback and suggest an acceleration to the downside. This break, if it occurs, could come from 2 year yields rising at a pace faster than 30 year yields. That

is not impossible and as long as it was not due to Sovereign concerns would be a positivedevelopment.

If, however, it took place and yields were dropping (30 year yields dropping faster than 2 year yields)it would suggest economic concerns/financial market concerns or both.

However (as a sweeping generalisation) over the last 2 years a flatter curve has tended to beassociated with falling yields as can be seen below

?


6/32


U.S. 30 year minus 2 year chart overlaid on 30 year yields.


In June we articulated a view that yields had put in a base and would likely head higher over thecourse of the 2nd half of the year into 2012 with yield curves steepening.

As yet, no developments have yet taken place to shake that view. However if some of the levelsarticulated above were to give way (levels outlined below) then it would start to pull away thebuilding blocks for that view and suggest at a minimum that the view is too early if not totallywrong.

Levels we are watching that would start to question our June view of a base in yields and/or a curvesteepening dynamic.

U.S. 2s versus 5s: Breaking below 104-107 basis points with yields falling.

U.S. 2s versus Fed funds: Breaking below 8 basis points.

U.S. 5 year yields: Breaking below 1.35%

U.S. 10 year yields: Breaking below 2.82-2.84%

U.S. 2 s versus 30s : Breaking below 381-383 basis points with yields falling and in addition a further breakbelow 368 basis points in a similar dynamic would be very concerning.

A number of these levels giving way would suggest renewed financial market (Equities) and or economic concernis returning at a time when incremental monetary and fiscal stimulus (can kicking) would be extremely difficult(much higher bar than 2010).

It would almost certainly need growth and employment disappointments combined with a bear market in equities(20%+ off the years high) to get us close to that bar.

So let us look at Europe (or more specifically Germany)


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German 2s versus 5s curve- Sitting on the edge of a cliff?


This chart posted a perfect 76.4% pullback in January of this year and is now sitting on the supportarea from which that bounce materialised at 57 basis points.

A close below here would suggest an acceleration to the downside.

German 2 year yield minus the ECB rate- Weve seen this movie before.


As the ECB moved to tightening mode and ultimately tightened rates we have seen 2 year German

yields invert rapidly to ECB rates just as they did after the first misguided rate hike dynamic seen in2008. (Who says history does not repeat itself?)


8/32


German 5 year yield-Failed to overcome resistance


The recent bounce in 5 year yields failed to overcome trend line and moving average resistance in the2.15-2.20% area. In addition the 5 year yield has fallen sharply by 32 basis points in the last 4 tradingdays.

There looks to be a real danger that it could revisit the July low at 1.63% and possibly the 76.4%pullback level at 1.57%

A break below that latter level would suggest a danger of a move all the way back to the 2010 low at1.18%

German 10 year yield-Similar chart


Similar support level dynamics at 2.50%; 2.42% and then 2.09%


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German 2s versus 5s curve and 5 year yields


At the start of 2011(From mid January to Mid April) this curve was bear flattening. That is what youexpect to see in an improving economic dynamic where the market anticipates rate rises.

However from Mid April onwards the curve has been bull flattening i.e. From the moment that theECB raised rates in April it has looked like a mistake (Not to them it appears)

The bull flattening has continued and we now stand at an important pivot on this curve. A break belowthe 57 basis point area with falling yields at the same time as bear flattening has continued in theperipheral countries would look to be the final nail in the coffin in yet another misguided move by theECB. This would likely draw a line under this tightening cycle and put the ECB very firmly back onhold (Despite their continued and insistent hawkish rhetoric)

So we seem to have a danger in both zones of a move lower in yields and a further flattening of thecurves. How does this stack up from a relative basis?

Bear flattening was a good sign

Bull flattening is not


10/32


Germany equally weighted 2s; 5's and 10s minus U.S. equally weighted 2s; 5s and 10s

Source: Aspen Graphics /Reuters 27 July 2011.

o This spread peaked in May-June and has been falling since. It is now at the low of the move downfrom that peak with little obvious support until at least 10 basis points (channel base) and after thatthe January low at minus 22 basis points.

Germany equally weighted 2s; 5's and 10s minus U.S. equally weighted 2s; 5s and 10s and EURUSD


o There is an obvious disconnect now between where the spread is and where EURUSD is. The spreadsuggests EURUSD should be closer to the July low at 1.3837 while EURUSD suggests the spreadshould be more like 50 basis points. Which is correct? Our bias is to go with the spread in line withour recently expressed bullish USD/bearish EUR views (And the picture suggested on the interestrate charts above) and suggest that EURUSD could move significantly lower in the days ahead.

o When we saw a disconnect similar to this in Dec/Jan EURUSD was trading in a similar pattern and fell

sharply from 1.3435 to 1.2860 over 5 trading days.


11/32


EURUSD reversed lower in January as spread moved in other direction


EURUSD price action leading into sharp 5 day fall in January and today.


This suggests that from an FX perspective the interest rate charts above could be supportive for theUSD vis a vis the Euro. That fits with our FX charts in the FX section below.

?


12/32


To sum up:

The charts above suggest concerns in both the Euro zone area and in the U.S. which are in danger ofcausing lower yields and flatter curves in both areas.

At the margin the dynamic seems to be more supportive the USD than the Euro as the interest ratebenefit moves back towards the U.S.

The picture seems to be one of economic and sovereign concerns with a line being drawn, at least forthe moment, under monetary and fiscal easing.

This set up seems to us to be a classic anti-risk/ anti carry trade environment. From an antirisk dynamic that would support our concerns about the Equity market. From an anti carrytrade dynamic that would support our concerns about what we think has become the Worldslargest carry trade The USD as a funding currency.


13/32


Foreign Exchange

Our favourite charts still suggest that the USD-index is set for a bounce and EURUSD setfor a fall in the weeks ahead.

USD-Index Daily chart

Source: Aspen Graphics / Reuters 27 July 2011.

The price action seen here in the last few months is very similar to that seen at the lows in March-July2008 before the USD-Index moved substantially higher (choppy price action with multiple 76.4%pullbacks)

If we were to follow suit with that period it suggested another move lower towards 73.50 or just belowagain before setting up a platform for renewed gains.

This week the USD-Index hit 73.42 before bouncing strongly possibly setting us up for a dynamic similarto that which began on 15 July 2008 and saw the USD-Index 13% higher by September.


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USD-Index daily chart today compared to 2008.

Source: Aspen Graphics / Reuters 27July 2011. In 2008 we saw 2, 76.4% retracements, broke to a new high and then did a 76.4% pullback on the whole

pattern when it broke the rising support line. A similar development today is suggesting that the USD-Index could very well be set for a renewed

bounce from here The renewed rally began in mid July 2008 leading to a sharp rally into September.

Double 76.4%pullbacks at thelows

?


15/32


In addition, the monthly chart set up is very similar to that seen in the turn of the USD-Index in 1995


As per our extensive write up of 17th

June , 2011, we believe that the USD-Index could be turning here ina fashion similar to that seen in 1995

Then we had a sharp 2 year rally, then a correction in 1998 (Asian, Russia and LTCM crises) and aresumption of the trend into the 2001 peak.

The main component of the USD-Index is the EURO which we continue to believe will also be its Achilles

heel. As long as Europe keeps treating a solvency problem like it is a liquidity problem this issue will go into

remission but not disappear. As a consequence we continue to believe that the EURO, without fiscal,economic and political convergence (together with a common Bond market) remains a Fixed exchangerate masquerading as a single currency

1995 was the year that the Euro zone had to go back to the drawing board after the collapse of theERM (Exchange rate mechanism). It took the best part of 3-5 years before they instituted newstructure (the Euro). Its flaws are different, but it is flawed nonetheless. Now is the time for theEuro zone to decide if it is a real Union or a Patchwork quilt of individual states Nothing in theBand aid approach seen so far convinces us that it is acting as the former. Without thatcommitment, it is unlikely that we have yet written the final chapter in this Horror story.

Turn in the USD-Index in April 1995 (10 yearsand 2 months after the bear market began inFeb 1985

Is history repeating itself in May2011? (9 years and 10 monthsafter the July 2001 peak)

?


16/32


EURUSD- Is it starting to turn again?


This is the 11th session since the low at 1.3837 on EURUSD. The bounce from 1.3968 low in May lasted 11 sessions. The pair then bounced 728 pips. So far in this move up since 1.3837 we have rallied 700 pips. If the follow through is going to be similar to end of early June we may well be turning down again now. Note: the bounce up from 1.4073 on June 16th to the 1.4580 high on July 4th lasted 12 sessions

In other related markets the average of the German curve (2's+5's+10's) minus the U.S. curve (2's+5's+10's)suggests a lower EURUSD and markets in the European periphery are worsening still with higher yields in Spainand Italy, wider spreads against Germany and a flatter curve in Italy (2's-10's)

728 pips in 11sessions andbarely missesposting a key day

reversal down atthe high

700 pips sofar in 11

sessions andbarelymissesposting a keyday reversaldown at thehigh

?


17/32


Germany equally weighted 2s; 5's and 10s minus U.S. equally weighted 2s; 5s and 10s and EURUSD


There is an obvious disconnect now between where the spread is and where EURUSD is. The spreadsuggest EURUSD should be closer to the July low at 1.3837 while EURUSD suggests the spread shouldbe more like 50 basis points. Which is correct? Our bias is to go with the spread in line with our recentlyexpressed bullish USD/bearish EUR views (and the picture suggested on the interest rate charts above)and suggest that EURUSD could move significantly lower in the days ahead.

When we saw a disconnect similar to this in Dec/Jan EURUSD was trading in a similar pattern and fellsharply from 1.3435 to 1.2860 over 5 trading days.


18/32


Equities

We remain concerned here and still believe that a correction lower remains a significantdanger.

DJIA may be on the cusp of a double top and subsequent head and shoulders top.


Possible double top forming here with a neckline at 12,296 A close below would suggest losses to at least the June lows around 11,860 That, if it took place, would breach the neckline of a large head and shoulders top at 11,983 and

suggest extended losses towards 10,800


19/32


Similar picture on S&P 500


Slightly different short-term price action that fell short of the early July highs Overall it has a similar head and shoulders potential with a neckline at 1,262 below which a target of

around 1,140 would come into play.


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VIX sitting close to a pivotal resistance


This is the 4th

time we have had a bounce like this in just over a year.1. April 2010: Rallies from 15.23% to 23.20% before falling away for 2 days to 18.44%.Subsequent

rally breaks the 23.20% high and peaks at 48.20% on 21 May.2. Feb. 2011: Rallies from 15.22% to 23.22% before falling away for 4 days to 17.63%.Subsequent

rally breaks the 23.22% high and peaks at 31.28% % on 16 March3. May 2011: Rallies from 15.15% through 23.20-23.22%% to 24.65% but closes below at 22.73%

before falling away for 11 days back towards15%4. July 2011: Rallies from 15.30% to 23.20% and holds the resistance to close the day at 22.98%.

This looks similar to both April 2010 and Feb 2011 suggesting a possible pause for 2-3 daysbefore higher again (01 August?- Day before debt ceiling expires? Are they going to make a messof the negotiations?)

The falls in 2010( April-July) and 2011 (Feb-March) were 17% and 7% respectively (Average 12%). Extrapolating that to the recent high suggests the potential for at least 1,261 (Almost identical to the

head and shoulders neckline) if like Feb-march 2011. If like 2010, then the move could be expected toextend towards 1,125 (Close to the head and shoulders target of 1,140.) The average of the twowould suggest a move towards 1,193

All this suggests that in the coming days a closing break above the 23.20% VIX level could seefurther losses in the Equity market as the VIX powers higher but that we may see a 24-48 hourpause first.


21/32


As is often the case the Dow Jones transportation index may also be giving an early warning sign


It sits poised on rising trend line and 200 day moving average support at 5,154 to 5,190 and a

possible double top neckline at 5,043 A close below the latter level would suggest extended losses towards at least the 4,500 area.


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Commodities

Gold continues to perform strongly

Gold may post a bullish outside month as a continuation


A monthly close above $1,557.75 would confirm this development and suggest that our 2011 target of $1,700-1,750 remains achievable en route to our overall $2000+ target.


23/32


Emerging markets

We have early warning signs that the rally in the ADXY is running out of steam and may beapproaching an end

Equity Indices in India, Brazil, Chile and Poland all look bearish

ADXY Index


While the ADXY Index has made higher highs this week, we see early warning signs that the uptrend may

be running out of steam The weekly momentum is showing negative divergence with the possibility to complete triple divergence

(the third crossover has not yet occurred) In addition we see the two trend across the highs (long term and medium term) converge just above at

121

As yet there is not enough on this chart to suggest that the uptrend has absolutely come to an end but there isenough here to warrant caution, especially if we are right about our general USD view and the relationship in theoverlay below stays in tact


24/32


ADXY Index and DXY Inverted


Over the past year the ADXY and DXY inverted have effectively moved together.

Sensex


Held the trend resistance across the highs and is in line for a bearish outside week if we close below18,415 at the end of this week

The last time we saw a bearish weekly was in the first week of Jan 2011. The follow through saw a movedown of more than 10% in the 5 weeks that followed

The key support area to watch here is 17,300. A weekly close below would be a bearish break openingthe way for the 15,500 support area (horizontal support and what may be channel base)


25/32


Bovespa (Brazil)


Trading back below the 200 week moving average and is approaching the medium term double topneckline at 57,633

A weekly close below there would be a significant bearish break suggesting and eventual move down tothe double top target at 44,000

Interim support is at 48,200.USDBRL


Momentum divergence reflects weakness in the downtrend

Hammer pattern at the lows indicates a bounce (insert) Short term resistance is at 1.5850-1.5930 where the 55 day moving average, trend resistance and this

months high converge A break of that open the way for the 200 day and horizontal resistance at 1.64

?


26/32


IPSA (Chile)


Remains below the 55 week moving average The support to watch now here is 4,215 which was the low in Feb this year and again in March A weekly close below would suggest losses down to the 200 week currently at 3,544.

WIG Index (Poland)


Failed at the long term 76.4% retrace against the 2007 highs on the log chart

Now trading below the 55 week moving average (46,820) for the first time since July 2009 A weekly close below the 55 week would suggest losses down to the 200 week moving average at

41,300.


27/32

Market Commentary for InstitutionalClient Use Only. Refer to informationdisclosures and qualifications at the end of thispublication Weekly Roundup 27

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28/32


PLEASE NOTE THAT: The tables and information specified below under Short Term Conviction views, Long Term Convictionviews, CitiFX Technicals Portfolio, Strategic Portfolio, and Tactical Portfolio ARE NOT INTENDED AS, AND DO NOTCONSTITUTE, 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 TOENTER INTO ANY FOREIGN CURRENCY CONTRACT OR TO INVEST IN ANY INSTRUMENT OR ENGAGE IN ANY STRATEGY MUSTBE BASED ON DILIGENCE AND ANALYSIS INDEPENDENTLY UNDERTAKEN BY YOU AND YOUR ADVISORS. PLEASE CAREFULLYREVIEW THE DISCLAIMERS AT THE LAST PAGE OF THIS DOCUMENT.

Short term conviction views 1

Instrument ViewDate view was

establishedTarget Level today

EURUSD Bearish weekly reversal at the

trend highs09 May

1.4156**Target Met. Extended

to 1.3871 (200 day)1.4278

Gold Breaking to new trend highs 13 July $1,630 $1,616

Silver Closed above the double

bottom neckline suggest a turnback up

18 July $44 and then $49+ $40.24

USDCHF Channel base and positive

divergence suggest a rally18 July 0.84+ 0.8016

USD Index (DXY) Hold of support and effective

76.4% retrace against the lows26 July At least 76.71 74.31


1Convictions represent the views of the CitiFX Technical staff and not actual trades.


29/32


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 thoughtprocess. These are our views we hold with conviction today. As we head through the year we will updateour level of conviction on an ongoing basis.)

Instrument View for 2011 on 03 Jan 2011Conviction on 03

Jan 2011Conviction today-

28 July 2011Level today

S&P 500

Bearish year with double digitpercentage down close of 15-16% (1,055-1070) expected.

Intra year bear market (High tolow fall of 20%+ ) also a danger.

Peak could well come in theopening days of the year.

Strong Strong 1,304

U.S. long end

yields

10 year yields to head towards4% and possibly 4.5% by end ofyear.

30 year yields to head towards5%

Strong Strong10Y at 2.97%and 30Y at

4.27%

Crude A move above $100 and

possibly towards $120Strong $100 target met. $97.38

Gold $1,700 this year and as high as

$2,000 eventuallyStrong Strong $1,616

Palladium A move above $1,000 this year Strong Strong $829

EURUSD

A move to high 1.40s (1.4850)by end of year) with possible1.50+ and even 1.60+ in early2012

Strong

Weak. We have nowchanged our year endview and believe that

the move seen to1.4940 on 04 May has

established a longterm peak earlier than

we thought.

1.4278



30/32


CitiFXTechnicals PortfolioStrategic trades will likely be / intended to be of more medium term nature using the variety of building blocks that we articulate in that mediumterm 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 50units of capital also with modest leverage potential.These portfolios represent actual trades in FX, EM, Fixed income, Commodities or Equity indices

Strategic Portfolio

Instrument PositionDate

establishedComment Entry

Stop(If breached

unlessspecified

otherwise)

TargetPresent

level

Tactical PortfolioInstrument Position

Dateestablished

Comment Entry

Stop(If breached

unlessspecified

otherwise)

TargetPresent

level

USCHF

Long 0.84Call Optionexpiry 16

August 2011

14 July 2011

Long term channelbase along with

potential positivedivergence

suggests a rallyahead

Spot ref:0.8160

Premium paid(cost 0.4%)

0.84+ 0.8015



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OTC Positions are priced to market using bid/offer prices from independent Citi sources at time of publication.Contract market positions are priced at end of day settlement or current disseminated prices on the listing exchangeat the time of publication.

When OTC market prices are not readily available, positions are priced to fair market value, using techniques suchas model or matrix pricing at time of publication. Examples of products that are priced to fair market value includecertain contractual commitments (i.e. interest rate swaps, options, etc.).

Cash, Forward or Options positions in foreign currencies are volatile and involve inherent risks including the effect ofleverage. Foreign exchange transactions are not appropriate for every investor and investors should refrain from investing(or hedging) in foreign exchange unless they are knowledgeable, experienced and fully understand the terms and risks,including but not limited to:

Potential of loss. Because of the effect of leverage, relatively small market movement will have a proportionately largeimpact of the funds deposited. This loss can be equal to, or in some instances greater than the full amount of the initialinvestment.

Options. Investors should be fully aware of the standardized terms, special vocabulary (such as puts, calls, delta andtheta) and the potential high-risk characteristics of option transactions.

Diversification does not ensure against loss. There may be additional risk associated with international investing, including foreign economic, political, monetary

and/or legal factors, changing currency exchange rates, foreign taxes, and differences in financial and accounting andregulatory standards. These risks may be magnified in emerging markets. International investing may not be foreveryone.

Certain foreign exchange transactions are only available to Eligible Contract Participants as defined in the CommodityExchange Act.

Weekly Roundup - 07-28-11 - Final

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Transcript of Weekly Roundup - 07-28-11 - Final