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MARKET DRIVERS – CURRENCIES

FX Research • 05.08.2010 • Jyske Markets

Today’s Comment to say that the European debt crisis is over. In Today’s Chart - EUR/USD
Quiet night in the Far East. The better-than- our view, there will still be a risk of renewed
anticipated economic indicators which were political turmoil after the summer holidays, so
released from the US yesterday (ADP & ISM) gave we maintain a negative bias for the EUR/USD
rise to additional focus on Friday’s job report rate at one month’s term. Still, we no longer see
quite the same potential for EUR on the 1,50
from the US (Non Farm Payrolls).
downside, and therefore we revise up our 1-
USD was up on the above. The peak of EUR/USD month estimate of EUR/USD from 123 to 126. 1,45
was 132.40 subsequently falling to the present
level at 131.55. It seems that we are in for a No fewer than two monetary-policy meetings 1,40
positive note for the US dollar until the release of will be held this Thursday – at the BoE and the
Non Farm Payrolls on Friday. 131.00 will be in ECB. We anticipate that the BoE will keep its 1,35
focus for the EUR/USD rate. A level which will be interest rate at 0.5% since the upswing in the UK
difficult to breach initially. On the upside, it is has been fairly moderate due to fiscal tightening.
1,30
still 132.50 which is a point of strong resistance. Inflation is still surprisingly high which may be
If this level is breached, it may send the included in the considerations. We also expect
1,25
EUR/USD rate further up towards a test of the that the monetary-policy meeting in the ECB will
200-day moving average at 135.60. result in an unchanged interest rate at 1%. The
1,20
focus of attention will therefore be on liquidity
This summer’s weakening of the US dollar has circumstances and the purchases of government
been boosted by weaker-than-anticipated bonds from the Southern European countries. 1,15
economic indicators from the US, decreasing 26 nov 07 jan 18 feb 01 apr 13 maj 24 jun 05 aug
focus on the debt problems in Southern Europe
Today’s Key Events
as well as positioning. If we take a look at the so- Moving Average (55D ) Moving Average (100D )
called IMM positions, there are many indications 09:30 Unemployment (SEK)
that speculative investors have already settled a 10:00 Unemployment (NOK)
considerable part of the short EUR positions 13:00 BoE’s interest-rate announcement (GBP)
which were accumulated in the course of the 13:45 ECB’s interest-rate announcement (EUR) Source: Bloomberg/Jyske Bank
spring. In our view, this indicates that the 14:30 Jobless claims (USD)
potential of a further appreciation of EUR against 14:30 ECB press conference (EUR)
USD from the current levels should, after all, be Friday morning:
limited. In addition, we believe that it is too early 07:45 Unemployment (CHF)

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MARKET DRIVERS – CURRENCIES
FX Research • 05.08.2010 • Jyske Markets

Currency Spot Short-term market drivers Technical levels 1-month


target
Majors
EUR/USD 131.60 Future focus on internal imbalances in the euro zone, political disagreement and pressure on Southern European govt. bonds - Resistance 132.70 next 135.00
The US is somewhat ahead of Europe in the economic cycle - Support: 131.20 next 128.50 126
The Fed’s quantitative easing keeps the USD value low; higher government debt does not result in increases in the US market rate as it should +
USDDKK 566.08 Future focus on internal imbalances in the euro zone, political disagreement and pressure on Southern European govt. bonds + Resistance 567.84 next 579.77
The US is somewhat ahead of Europe in the economic cycle + Support: 561.42 next 551.86 592
The Fed’s quantitative easing keeps the USD value low; higher government debt does not result in increases in the US market rate as it should -
EURGBP 82.78 Focus on very negative public finances: Uncertainty about future fiscal tightening (and UK’s rating) may weaken pound sterling + Resistance 83.95 next 85.30
Pound sterling was under massive pressure when the financial crisis peaked, and (too) much misery has already been discounted - Support: 82.10 next 80.70 82.50
We expect that the quantitative easing came to an end in February and that the BoE will start normalising its monetary policy in H2 -
GBPDKK 899.77 Focus on very negative public finances: Uncertainty about future fiscal tightening (and UK’s rating) may weaken pound sterling - Resistance 907.44 next 923.18
Pound sterling was under massive pressure when the financial crisis peaked, and (too) much misery has already been discounted + Support: 887.44 next 873.40 903
We expect that the quantitative easing came to an end in February and that the BoE will start normalising its monetary policy in H2 +
EURJPY 113.43 Focus on debts in Southern Europe has caused pressure on the single European currency and shifted the balance of power between EUR and JPY - Resistance 114.40 next 115.50
Risk of renewed risk aversion supports JPY slightly - Support: 111.55 next 110.00 110
Decent growth in recent months; the economy is, however, still fragile; low growth ahead and deflation may once again be a theme +
JPYDKK 6.57 Focus on debts in Southern Europe has caused pressure on the single European currency and shifted the balance of power between EUR and JPY + Resistance 6.68 next 6.77
Risk of renewed risk aversion supports JPY slightly + Support: 6.51 next 6.45 6.77
Decent growth in recent months; the economy is, however, still fragile; low growth ahead and deflation may once again be a theme -

Please refer to the publication, CHF: stil moving upwards -

Please refer to the publication, CHF: stil moving upwards -


MARKET DRIVERS – CURRENCIES
FX Research • 05.08.2010 • Jyske Markets

Currency Spot Short-term market drivers Technical levels 1-month


target
Scandinavia
EURNOK 788.03 Continuing improvement of key indicators in Norway: labour market is strong and housing market is close to its record-high levels - Resistance 812 next 820
Norges Bank was one of the first ones to raise its interest rate. Even though we may be in for a slow start, we foresee 3% in the 1-year term - Support: 781 next 769 800
Correction in the equity market/rising risk aversion will still be able to put pressure on the NOK +
NOKDKK 94.49 Continuing improvement of key indicators in Norway: labour market is strong and housing market is close to its record-high levels + Resistance 95.39 next 96.94
Norges Bank was one of the first ones to raise its interest rate. Even though we may be in for a slow start, we foresee 3% in the 1-year term + Support: 91.75 next 90.85 93.10
Correction in the equity market/rising risk aversion will still be able to put pressure on the NOK -
EURSEK 939.69 Still risk that SEK will suffer a blow in the event of risk aversion - Resistance 965 next 980
Riksbanken expresses optimism about the economy and thinks Sweden has been through the worst part of the crisis + Support: 935 next 925 940
After GDP for Q2, Q3 and Q4 2009 has been revised up, we anticipate interest-rate hikes at the remaining monetary meetings in July +
SEKDKK 79.26 Still risk that SEK will suffer a blow in the event of risk aversion + Resistance 79.68 next 80.54
Riksbanken expresses optimism about the economy and thinks Sweden has been through the worst part of the crisis - Support: 77.20 next 76.02 79.00
After GDP for Q2, Q3 and Q4 2009 has been revised up, we anticipate interest-rate hikes at the remaining monetary meetings in July -
MARKET DRIVERS – CURRENCIES
FX Research • 05.08.2010 • Jyske Markets

Current Strategies
Currency Strategy Description of Strategy Date of Entry Target Stop READ
Entry Level Loss MORE

Due to deflation in Japan, BoJ will keep rates unchanged for quite som time into 2011
USD/JPY Option Widening of the interest-rate spread to the US and the euro zone, among others, will put the yen under pressure 16-12-2009 89.68 106 N/A CLICK HERE
In the long term, the dollar will strengthen due to a faster economic recovery and stronger rate hikes in the US

Please note: We point out that FX investment is currently associated with extraordinarily high uncertainty.
But for long-term risk tolerant investors, there may be good investment opportunities in these turbulent
times. This recommendation is only relevant for very risk-tolerant clients with the right risk profile and the
overall financial strength to cope with any loss that may be incurred.
MARKET DRIVERS – CURRENCIES
FX Research • 05.08.2010 • Jyske Markets

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