Today's Highlights - 07-11-11

8/6/2019 Today's Highlights - 07-11-11

1/14

Market Commentary - for Institutional Client use only.

Refer to information, disclosures and qualifications at the end of this publication.

11 July 2011 Tom Fitzpatrick (1-212-723-1344)Shyam Devani (44-207-986-3453)

Alex Good (1-212- 723-3469)CitiFX Technicals Portfolio [email protected]

Todays Highlights

Europe: European financial markets look to deteriorate further with pressure building in the short end of thecurves in the periphery while German yields move lower and the European Banks Index takes out the 2010 lows.

Italy:Italian German 10 year yield spread has taken out important resistance at 2.54% and is likely now to test3.25%. Italian 2s-10s curve continues to bear flatten and 2 year yields have seen a major break through3.22%-3.35% opening the way for an eventual test of the 4.50% area.Spain:Watch resistance on Spanish 10 year yields at 5.94%. Spanish 2s -10s still looks very similar (almostidentical) to what was seen at the end of 2010. Expect further bear flattening here.

Germany:10 year yields testing good support at 2.78%-2.80%. A close below opens the way for lower yields.German 2s-5s makes new trend lows. Bull flattening here reflecting a move to safety / concern with periphery.

European Banks:New trend lows. A breach of the channel base at 145 would open the way for 130.Equities: Short term weakness coming through on a number of indices

FTSE 100:Bearish key day reversal at the top of the range. Expect a test of 5,860 if not the 5,600 area.

DAX:Bearish key day reversal. Losses expectedNikkei 225:Held the 76.4% retrace of the move down from the Feb high which converged with the long termtrend resistance. The gap down today further suggests losses ahead

Sensex:Failing at the trend resistance. Weaker still below 18,670

Chart of the Day: Italy Germany 10 year yield spread

Source: Aspen Graphics / Bloomberg 11 July 2011

New trend highs and now through the resistance levels at 2.54% which was the low from April 1994(just prior to what became a blow out move in 1995 when the Italian German 10 year yield spreadwent to a high of 6.50% and DEMITL rallied from 953 to 1250+ by March 1995)

Resistance levels are now at 2.76% and 3.25%

TechnicalsTechnical Developments in the Foreign Exchange andAsset Markets
mailto:[email protected]:[email protected]:[email protected]


2/14

CitiFX Technicals 11 July 2011



2

Italy 10 year minus 2 year yield spread


Has been bear flattening over the past week and making new trend lows today

A breach of the channel base at 1.46% would suggest a move towards 1.00%

Italian 2 year yields


Last weeks close above the converged horizontal and trend resistance levels at 3.22%-3.35%marks a break higher on Italian 2 year yields.Resistance levels now come in above 4.50% (with the channel top at 4.79%)


3/14




3

Spanish 10 year yields


Making new trend highs and the key level to watch now is 5.94% which was the high from 2000

Spanish 10 year minus 2 year yield spread


The bear flattening has taken the Spanish 2-10s curve through important supports at 1.80%

A close below here would open the way for the Nov 2010 low at 1.62%

The setup and price action is still very similar to that seen in the second half of 2010.

Rising yields in Spain, a widening spread to German yields and a flatter curve only reflects aworsening situation in Spanish markets.


4/14




4

German 10 year yields

Source: Aspen Graphics / Reuters 11 July 2011

Closed below the 200 week moving average and is now testing important supports at 2.78%-2.80%where horizontal supports converge with the 50% retracement of the move from 2.08% in August2010 to 3.51% in April this yearA close below this area opens the way for 2.62%.

German 5 year minus 2 year yield spread


Taken out 59 basis points support and is making new trend lows

This bull flattening we are seeing reflects more a flight to safety rather than any recovery (whereone would expect to see the curve flattening with rising yields).


5/14




5

European Banks Index


New trend lows today after taking out 149 which was the low from June 2010. This level should nowprovide resistance if tested

This mornings low was on the channel base at 146

A breach of 146 would be another bearish development opening the way for at least 130

Overall the charts above continue to point towards a worsening environment in European financialmarkets with pressure increasingly moving to the shorter end of the curves in the periphery of

Europe. They continue to suggest a weaker EUR across the board and we would not be surprised tosee a test of 1.3968 on EURUSD which is the key pivot in focus

EURUSD


1.3968 was the low from May 23rd

from where we bounced up to the 76.4% Fibonacci retracementagainst the highs.

A close below would be a significant bearish development.

76.4% Fibonacci

1.3968


6/14




6

Equities

FTSE 100


Turning lower from the top of the range again after Fridays bearish key day reversal.

A repeat of the price action seen in Feb and May this year would see a test of 5,860, aconsolidation/bounce and another leg lower down towards the base of the range at 5,600.

Dax Index


Bearish key day down on Friday

Daily momentum crossing back down from stretched levels againShort term trend support comes in at 7,161 which is likely to be tested

??


7/14




7

Nikkei 225


Held the 76.4% Fibonacci retracement of the move down from the highs in Feb this year. This comesin at 10,193 on the log chart.

Longer term trend resistance from the 2007 highs converges here

Daily momentum is stretched and crossing back down

The daily candles below show an evening star / shooting star pattern (gap up and then gap down).This was also seen in early May this year before a move down that took the index lower until midJune

Nikkei 225


76.4% retracementagainst the highs and

long term trendresistance


8/14




8

Sensex


Failing at trend resistance which is at 19,060

Daily momentum crossing back down from the same levels as Jan and April 2011 when the marketturned lower

A close below short term support at 18,672-736 opens the way for 17,800 and possibly the trend

lows at 17,300.


9/14




9

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

Short term conviction views 1

Instrument ViewDate view was

establishedTarget Level today

Crude

Bearish daily reversal at thehighs and breach of near termsupports suggest short termweakness

13 April

** $93 Target Met.

Possibleextendedmove to $83.40 (200

week movingaverage)**

In addition a move to$75 (Head and

shoulders target)cannot be ruled out.

$95.01

EURUSD Bearish weekly reversal at the

trend highs09 May

1.4156**Target Met. Extended

to 1.3871 (200 day)1.4126

GBPUSD Revisited but could not sustain

rising trendline, head andshoulders targeting 1.5345

21 June 1.5345 1.5966

USDJPY

76.4% against the lows, doublebottom type formation andinverted head and shouldersbreak suggest higher levels

28 June 82.10 80.73

Source: CitFXTechnicals Views 11 July 2011

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


10/14




10

Long term conviction views1

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 willupdate our level of conviction on an ongoing basis.)

Instrument View for 2011 on 03 Jan 2011Conviction on 03

Jan 2011Conviction today-

11 July 2011Level today

S&P 500

Bearish year with double digit

percentage 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 1,343

U.S. long endyields

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

4.26%

Crude A move above $100 and

possibly towards $120Strong $100 target met. $95.01

Gold $1,700 this year and as high as

$2,000 eventuallyStrong Strong $1,543

Palladium A move above $1,000 this year Strong Strong $768

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.

1.4126

Data as at 11 July 2011


11/14




11

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

Strategic PortfolioData as at 11 July 2010

Instrument PositionDate

establishedComment Entry

Stop(If breached

unlessspecified

otherwise)

TargetPresent

level

Tactical PortfolioData as at 11 July 2010

Instrument PositionDate

established Comment Entry

Stop(If breached

unlessspecified

otherwise)

TargetPresent

level

GBPUSD Short 23 June 2011

Long term headand shoulders,

interest rate andequity

Spot Ref:1.6133

1.63051.5345-1.5370

1.5966

10 YearFuture(TYU1)

Short 24 June 2011

Held base of whatlooks like

corrective flag,potential double

bottom

124 14/32 125 1/2 3.10%(yield) 124.05/32

USDJPY Long 27 June 2011

76.4% Fibonacci

Hold + doublebottom + invertedhead and

shoulders + US 2year set up

80.79 80.0082.10,

possibly84.00

80.75

CitiFXTechnicals ProductsToday's Highlights - Sent Monday, Tuesday and Wednesday. Technical Strategy focused publication detailingimportant 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 andCommodity markets, especially where we believe the moves are significant for FX. The publication also includes adaily 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 relatedasset markets, with charts of each market. The document is hyperlinked to ease use and navigation. It should bethought 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. Oftenbased on interrelationships between markets.

Portfolio Updates - We run a portfolio on the back of our ideas/views and as such send e-mails detailingchanges to positions (targets/stops etc.) in relation to this.


12/14




12

CitiFX Value Added Services & Products

FX TechnicalsTom Fitzpatrick New York 1-212-723-1344 [email protected]

Shyam Devani London 44-20-7986-3453 [email protected]

Alex Good New York 1-212- 723-3469 [email protected]

CitiFX Value Added Services & Products Group Heads

Global Head of Value Added Services & ProductsStephane Knauf London 44-20-7986-9486 [email protected]

Corporate Solutions GroupStephane Knauf London 44-20-7986-9486 [email protected]

FX & Local Markets StrategySteven Englander New York 1-212-723-3211 [email protected]

FX TechnicalsTom Fitzpatrick New York 1-212-723-1344 [email protected]

Quantitative Investor SolutionsJessica James London 44-20-7986-1592 [email protected]

Structuring GroupStephane Knauf London 44-20-7986-9486 [email protected]

Value Added ProductsPhilip Brass London 44-20-7986-1614 [email protected] Thomet Zurich 41-58-750-7646 [email protected]
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


13/14




13

Disclaimer for Charts / Graphs that show Market Data:

Past performance is not indicative of future results, which may vary.

Statistical information comes from sources that we believe to be reliable source(s); however, no information orrelated data has been independently verified by us. We assume no duty or obligation to update any information

or data. The information contained in this report is based on generally available information, its accuracy andcompleteness cannot be assured, and such information may be incomplete or condensed.

Some indices are unmanaged and investors cannot directly invest in them. The composite index results are forillustrative purposes only and do not represent the performance of a specific investment.

Supporting documentation will be furnished upon request for all claims, comparisons, recommendations,statistics or other technical data.

Other Citi personnel may have made investment decisions or take positions that are inconsistent with therecommendations or views in this publication.

Affiliates of Citi may serve as investment advisors to clients, including limited partnerships and other pooledinvestment vehicles. The affiliates may give advice and take action with respect to their clients that differs fromthe information and opinions included in this publication.

This document and the information herein are made available to you at your request and for informationpurposes only. This document and any other information provided to you is not intended and does notconstitute an offer to buy or sell, or the solicitation of an offer to buy or sell, any foreign currency contracts, nor

is it intended to be advice or a recommendation of any kind whatsoever. Each decision by you to enter into aforeign currency contract and each decision whether a foreign currency contract is appropriate or proper for youis an independent decision by you.

Fees, transaction costs, and other expenses reduce returns.

The total impact of the spreads and fees may be significant and may make it moredifficult for you to realize a profit from trading if replicating Short Term Convictionviews, Long Term Conviction views, CitiFX Technicals Portfolio, StrategicPortfolio, and Tactical Portfolio trades.

Over the Counter (OTC) trades in the CitiFXTechnicals Portfolio are established at market prices fromindependent trading desks in the sales and trading department of Citigroup Global Markets Inc. or one of its affiliates

(collectively, Citi). Contract market positions in the CitiFXTechnicals Portfolio are established on thelisting exchange.

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 listingexchange at the time of publication.

When OTC market prices are not readily available, positions are priced to fair market value, using techniquessuch as model or matrix pricing at time of publication. Examples of products that are priced to fair market valueinclude certain 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 frominvesting (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 proportionatelylarge impact of the funds deposited. This loss can be equal to, or in some instances greater than the full amount ofthe initial investment.

Options. Investors should be fully aware of the standardized terms, special vocabulary (such as puts, calls, deltaand theta) 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 andaccounting and regulatory standards. These risks may be magnified in emerging markets. International investingmay not be for everyone.

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

Commodity Exchange Act.


14/14




DisclaimerThis communication is issued by a member of the sales and trading department of Citigroup Global Markets Inc. or oneof its affiliates (collectively, Citi). Sales and trading department personnel are not research analysts, and the informationin this communication (Communication) is not intended to constitute research as that term is defined by applicableregulations. Unless otherwise indicated, any reference to a research report or research recommendation is not intendedto represent the whole report and is not in itself considered a recommendation or research report. All views, opinions andestimates expressed in this Communication (i) may change without notice and (ii) may differ from those views, opinionsand estimates held or expressed by Citi or other Citi personnel.This Communication is provided for information and discussion purposes only. Unless otherwise indicated, it does notconstitute an offer or solicitation to purchase or sell any financial instruments or other products and is not intended as anofficial confirmation of any transaction. Unless otherwise expressly indicated, this Communication does not take intoaccount the investment objectives or financial situation of any particular person. Recipients of this Communication shouldobtain advice based on their own individual circumstances from their own tax, financial, legal and other advisors beforemaking an investment decision, and only make such decisions on the basis of the investor's own objectives, experienceand resources. The information contained in this Communication is based on generally available information and,although obtained from sources believed by Citi to be reliable, its accuracy and completeness cannot be assured, andsuch information may be incomplete or condensed.Citi often acts as an issuer of financial instruments and other products, acts as a market maker and trades as principal in

many different financial instruments and other products, and can be expected to perform or seek to perform investmentbanking and other services for the issuer of such financial instruments or other products.The author of this Communication may have discussed the information contained therein with others within or outside Citiand the author and/or such other Citi personnel may have already acted on the basis of this information (including bytrading for Citi's proprietary accounts or communicating the information contained herein to other customers of Citi). Citi,Citi's personnel (including those with whom the author may have consulted in the preparation of this communication),and other customers of Citi may be long or short the financial instruments or other products referred to in thisCommunication, may have acquired such positions at prices and market conditions that are no longer available, and mayhave interests different from or adverse to your interests.Investments in financial instruments or other products carry significant risk, including the possible loss of the principalamount invested. Financial instruments or other products denominated in a foreign currency are subject to exchange ratefluctuations, which may have an adverse effect on the price or value of an investment in such products. No liability isaccepted by Citi for any loss (whether direct, indirect or consequential) that may arise from any use of the informationcontained in or derived from this Communication.

Past performance is not a guarantee or indication of future results. Any prices provided in this Communication (otherthan those that are identified as being historical) are indicative only and do not represent firm quotes as to either price orsize. You should contact your local representative directly if you are interested in buying or selling any financialinstrument or other product or pursuing any trading strategy that may be mentioned in this Communication.Although Citibank, N.A. (together with its subsidiaries and branches worldwide, "Citibank") is an affiliate of Citi, youshould be aware that none of the financial instruments or other products mentioned in this Communication (unlessexpressly stated otherwise) are (i) insured by the Federal Deposit Insurance Corporation or any other governmentalauthority, or (ii) deposits or other obligations of, or guaranteed by, Citibank or any other insured depository institution.IRS Circular 230 Disclosure: Citi and its employees are not in the business of providing, and do not provide, tax or legaladvice to any taxpayer outside of Citi. Any statements in this Communication to tax matters were not intended or writtento be used, and cannot be used or relied upon, by any taxpayer for the purpose of avoiding tax penalties. Any suchtaxpayer should seek advice based on the taxpayers particular circumstances from an independent tax advisor.

2010 Citigroup Global Markets Inc. Member SIPC. All rights reserved. Citi and Citi and Arc Design are trademarks andservice marks of Citigroup Inc. or its affiliates and are used and registered throughout the world.

Today's Highlights - 07-11-11

Documents

Transcript of Today's Highlights - 07-11-11