Jan 22nd Jan 28th 2012

Volume 2, Issue 2

Elite Global Trading

Forex Weekly Commentary

Fundamental Outlook
any indications of acceptance or lack there of. Next week is full of additional EU debt auctions mostly short-term debt from Italy, Spain, France with 30 year auctions by Germany, and Netherlands. We are expecting similar risk positive results we saw last week. We will be watching closely the Germany 30 year auction on Wednesday as a barometer of the long-term debt demand. As the EU summit approaches we favor further risk appetite and continued recovery of the EUR. Over the last year the EUR has behaved positively and risk appetite increased off of hopium leading up to the EU summits. I must note that these kick the can meetings usually end in market disappointment and further declines in the EUR. Unless the Greek negations break down I favor long EUR trades leading into the summit and am looking for more favorable levels to establish short entries in the EURUSD between 1.3100-1.3250 targeting 1.2000. Since the EUR can break down on any headline I will likely avoid long EURUSD trades for the time being in favor of shorts in direction of the primary long term trend. Looking further into the week we cannot over look the two day FOMC meeting and the end-of week Gross Domestic Product growth data. The FOMC will release their interest rate policy and in a unique policy change will begin forecasting their rate policy though 2016. With interest rates at near 0% Fed

In this issue: Fundamental Outlook GBPUSD 1 2

AUDUSD EURUSD Event Risk

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Markets will have a busy week ahead with economic events in the US and Europe. There's no escaping the Greek debt saga this week as markets are expecting a deal between the IIF and Greece by Monday on the voluntary haircuts. The negotiations continued though the weekend with rumors of disagreements on the new interest rates. Bloomberg reports agreements were close with rates between 4%-4.5%, however Germany & IMF are insisting on an agreement closer to 3%. The ultimate goal is to reduce Greeces Debt to GDP ration down to 120% from 160%. A deal is still uncertain as there are plenty of moving parts and in typical Euro fashion it only takes one no to spoil the party. Considering that the holders of Greek debt also hold Greek CDS it will be interesting to see how a deal is consummated. The most recent developments came on Sunday when CNBC reported a spokesman for the IIF stated the deal conveyed to the Greek authorities is the maximum consistent with a voluntary deal. Keep a close eye on the developments out of the EU finance ministers meeting Monday for

Jan 22nd Jan 28th 2012

Volume 2, Issue 2

Elite Global Trading

Chairman Ben Bernanke has been forced to identify creative ways for the fed to meet its dual mandate. I do no expect any major policy changes to be announced at this meeting. While the markets are craving a hit from the QE pipe, I would be very surprised if we saw any indications of further accommodation given the recent marginally decent Data from the US. Be very careful here as there is a lot of market anticipation around this meeting and if I am correct about no indications of accommodation markets will surly be disappointed taking a hit in risk appetite. I feel strongly about this projection especially since Bernanke will be unavailing the FOMC projections of the federal funds rate targets. He will likely focus on this while holding his normal position that the Fed Stands ready to assist market stability as needed. The things to be watching for are; the projections of target federal funds rates, the press conference (where Bernanke will discuss new FOMC growth forecasts), any possible statement changes. Key reactions to watch out for:

Accommodation look for strong risk rally and weak USD Any Big US GDP misses sell risk as the markets sells off. In the event of Greek debt negations fail and imminent default sell EUR at current level and hold on tight. If the German or Netherlands debt auctions fail look to sell risk.

Expectations

EU Authorities will say anything to calm markets expect hopium rallies. FOMC will focus exclusively on projections of Fed Funds rate targets and markets will be disappointed about no mention of accommodation. Rally in risk appetite to start the week (Successful EU Member bond Auctions, Support for Greek negotiations, propaganda leading into the EU summit, and the Fed has got to do further accommodation....right?)

In the unlikely event of further Fed

UK Pound Sterling / United States Dollar

GBPUSD: More gains for the Pound into the 1.5650 range. A top will be set in place soon, don't be faked out by this rally up. If there is a recession or region-wide financial crisis for the Euro Zone, it is highly likely that the United Kingdom is not far behind (if it is not already suffering the same fate). The relationship between euro and sterling price action against third party currencies is exceptional due to its fundamental connections, but there are still external factors that can offer a degree of separation. With 4Q GDP seen contracting, we could see another shot to lower lows in the months ahead. Outlook: Neutral, looking for move up to top out around 1.5650 in the weeks to come before the next larger move down. We could see congestion at the top prior to the next major move. Look for support on this move up to sit at, 1.5513, 1.5495, 1.5445, and 1.5364. Looking at topside resistance to hold at 1.5648 area on this move up, 1.5775 would be the cap and if a break of that will give a more reason for bullish activity.

Jan 22nd Jan 28th 2012

Volume 2, Issue 2

Elite Global Trading

Australian Dollar / United States Dollar

AUDUSD: Risk move to start the year off is slowly coming to an end with confluence topping across multiple risk assets. Looking at the Aussie we could see some headwinds start to bear down on the major currency pair. Currently, the market is fully pricing in 100 basis points of rate cuts over the coming 12 months and the outlook for rates generates greater short-term volatility than the currently level does. That said, we will see if Aussie dollar traders preoccupation with the ebb and flow of risk appetite trends can be temporarily disrupted by the release of fourth quarter CPI figures. Unlike the New Zealand numbers released last week, this report isnt expected to deliver a sharp easing in inflation pressure; but the dovish bearings of the policy group could leverage a smaller changes impact. We are looking for a topping formation in the week to come on this pair between 1.05001.0630. Outlook: Bullish Bias, a break higher of last weeks formed triangle was the indication of a move to higher highs before a final top will be put in place for the next move towards parity. Look for support at, 1.0455, 1.0438, 1.0422, 1.0400, and 1.0370. Targets on the upside are, psychological level 1.0500 and extension at 1.0566.

Euro / United States Dollar

EURUSD: The Euro zone enjoys a relief rally to end last week, but how long will this last? Heading into the trading week, there potential fundamental time bombs that cold stall this relief rally; but the weight of their influence has lessened considerably from just a few weeks ago. Given expected time frames, the terms of the private sector investors accommodation for Greeces debt burden will be the first concern. The current consensus is still for a 50 percent haircut (essentially debt forgiveness), in a roll to new 30-year bonds with a significantly reduced 3.0 to 4.75 percent coupon. Anything along these lines could buy us a little more time of disregard for real fundamental threats. We have come to expect the same quick-fix and well-fix-it-later policy decisions to follow the EU Finance Minister summit on Monday. A little more open to surprise are the growth-based economic indicators and the ECBs threemonth liquidity tender due in the first 48 hours. The data out have not had an influence that one would expect because of the major headwinds we have dealt with regarding the euro zone have mainly overshadowed from a med term perspective. Outlook: LT Bearish Bias, ST Neutral, looking at continued move up to resistance around 1.3100 area over the next few weeks. Volatility in the high 1.2000s can be expected before the next major downturn to the lower 1.2000s, support to watch for the move up sits at: 1.2877, 1.2848, 1.2805, and 1.2763, a break of this will open the door for the low of 1.2625. Look for resistance at 1.2900, 1.2945, 1.2986, and 1.3056. We are looking at buying on dips at support levels with stop below 1.2763, targeting 1.3100 area.

Jan 22nd Jan 28th 2012

Volume 2, Issue 2

Elite Global Trading

Weeks Event Risk

Sunday: AUDUSD: PPI 7:30pm Thursday: Monday: EUR: Consumer Confidence 10am AUD: CB Leading Index 6pm EUR: GfK German Consumer Climate USD: Core Durable Goods Orders 8:30am USD: Unemployment Claims 8:30am USD: New Home Sales 10am Tuesday: EUR: French/German/EUR Flash PMI 3-4am EUR: ECOFIN Meetings GBP: Public Sector Net Borrowing 4:30am EUR: Industrial Orders 5am EUR: Belgium NBB Business Climate 9am GBP: Gov. King Speaks 3pm AUD: CPI 7:30pm Friday: EUR: M3 Money Supply 4am CHF: KOF Economic Barometer 5:30am USD: Advance GDP 8:30am USD: Revised UoM Consumer Sentiment 9:55am JPY: Monetary Policy Min 7:50pm Statement 3pm

Wednesday: EUR: German IFO Business Climate 4am GBP: MPC Meeting Min 4:30am GBP: Prelim GDP 4:30am USD: Pending Home Sales 10am USD: FOMC Statement/Fed Fund Rate 2:15pm NZD: Official Cash Rate/RBNZ Rate

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News letter Authors: Anthony Rousseau

arousseau@eliteglobaltrader.com

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