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BMO: 2012 forecast for Canadian dollar Wednesday, December 28, 2011 - 09:45 Analysts at BMO Capital Markets say that Canadian dollar has been influenced by 2 things: - investors' risk sentiment; - outlook for Bank of Canada’s policy. The specialists think that Canadian dollar will weaken versus its US counterpart. In their view, the pair USD/CAD will rise to 1.0600 in the first half of the next year as the market will be dominated by the risk aversion and significant possibility of BoC rate cuts. In the second part of 2012 risk sentiment will improve and prospects for BoC rate hikes mount, so that loonie will likely get chance to reverse and USD/CAD will slide to the parity level. BMO: 2012 forecast for Canadian dollar // FBS Markets Inc. Raiffeisen: 2012 prospects for EUR/USD Wednesday, December 28, 2011 - 10:15 Analysts at Raiffeisen think that the single currency will fall versus US dollar in the first quarter of the next year below $1.30, staying around this level by the middle of 2012. Then EUR/USD will rise and its average rate in the second half of the year will be at $1.35. The specialists say that the exchange rate will likely overshoot or undershoot the targets by up to 10 cents in between due to renewed escalation in the euro-zone debt crisis and/or further Fed’s monetary policy easing. In their view, these deviations from the path of the interest rate differential will be only temporary and offer good trading opportunities. Raiffeisen: 2012 prospects for EUR/USD // FBS Markets Inc. ANZ: euro under negative pressure Wednesday, December 28, 2011 - 10:30 Technical analysts at ANZ claim that as the European currency didn’t manage to rise to $1.33/1.35 during the past week, it’s now under severe technical pressure and risks sliding lower to $1.25 or even to $1.23. The specialists claim that euro’s rate versus the greenback has so far been relatively high in comparison with the single currency’s fair value. The bank underlines that years there were some aggressive selloffs over the past few years. In their view, the same may happen now. According to ANZ, EUR/USD may hit the minimums of late 2008 or even 2010 (at $1.1875). The strategists also expect euro to weaken versus Australian dollar heading down towards 1.20. ANZ: euro under negative pressure // FBS Markets Inc.

BBH: demand for yen will remain high next year Tuesday, December 27, 2011 - 15:30 Analysts at Brown Brothers Harriman believe that in the first quarter of 2012 the demand for Japanese yen will remain high. In their view, yen will remain among the top performers in the G10 in the first quarter of the next year due to such factors as: Demand for safe havens; Japan’s inability to recycle its current account surplus. According to BBH, the Bank of Japan could conduct new currency interventions. At the same time, the specialists don’t expect the BOJ to establish a definitive floor in the USD/JPY.

The FOMC will become dovish the next year 2011-12-23 15:33 The Federal Open Market Committee is expected to become more dovish due to the annual rotation. As a result, the Federal Reserve Chairman Ben Bernanke will get chance to pursue his active loose monetary policy if he thinks that American economy needs help. The FOMC consists of 12 members – 7 Fed board governors and the president of the New York Federal Reserve Bank have – permanent vote, while the 4 remaining seats are shared by the other 11 FRB presidents which change places on the annual basis. This year 3 out of the 4 rotating seats was occupied by the hawks – Richard Fisher, the president of the Dallas Federal Reserve Bank, Charles Plosser of Philadelphia, Narayana Kocherlakota of Minneapolis. That means that these policymakers don’t think that monetary policy can be used to stabilize economic conditions and would prefer setting long-term target for inflation. Doves, on the other hand, believe that the central bank has to keep interest rates low to support the national economy. Fisher, Plosser and Kocherlakota voted against the pledge to keep short-term rates close to 0 until the middle of 2013 and against the Operation Twist. The old distinction, with hawks concerned about inflation and doves worried about weak growth, has subsided over the past 20 years. Fed officials agree that keeping inflation low and stable is a necessary precondition of good economic performance. This year, a “tough group” of hawks occupied. These officials had little sympathy for the Fed’s innovative efforts to try to lower long-term interest rates, said Brian Bethune, a Fed expert at Amherst College in Massachusetts. In 2012, the Fed is losing 3 hawks and only getting one: Jeffrey Lacker, the president of the Richmond Fed. The other 3 new members: John Williams, the president of the San Francisco Fed, Dennis Lockhart, the president of the Atlanta Fed, Sandra Pianalto of Cleveland are viewed as more consensus-minded and likely to vote with Bernanke. The FOMC will become dovish the next year

Citigroup: warning for USD bulls 2011-12-22 16:00 Currency strategists at Citigroup say that US economic data has so far been surprising the markets in a positive way referring to the recent labor, housing and trade figures. As a result, the Economic Surprise Index designed by the bank has risen from the record minimum in June almost reaching the record maximum at present. According to Citigroup’s experience, the upside moves of the index correspond to US dollar’s selling periods. It happens as the market becomes more optimistic and risk sentiment improves making the demand for US currency decline. The analysts don’t think that dollar will weaken this year as many traders have already closed their books for the year and others may be reluctant to take on big new positions right before the end of a quarter. At the beginning of 2012, however, if the economic data remains favorable, investors may decide that they have overestimated the negative effects of the euro zone’s crisis on the global economy. “The surge in data flow itself may be insufficient to reverse recent risk aversion, but it does suggest that dollar’s weakness could reassert itself more quickly and forcefully than many anticipate once conditions settle down,” says the bank. Citigroup: warning for USD bulls Analysts expect Aussie to weaken early in 2012 2011-12-22 17:25 Analysts at Commonwealth Bank have so far lowered forecast for AUD/USD to $0.9800 by March 2012 and to $0.9500 by June 2012. Reasons: general strength of US dollar due to improved US economic data (opposite views to Citigroup); funding demand for the US dollar in response to Basel III capital requirement; central banks slow down their diversification efforts out of US dollar into euro as the European debt problems persist. Strategists at TD Securities expect Aussie to slide to $0.9500 by the end of the first half of 2012. Reasons: slowing growth in the global economy with the deep recession in the euro zone and the United States; China’s economic slowdown. Westpac economists think that AUD/USD will rise to $1.0200 in the near term as it’s supported by foreign direct investment inflows. Never the less, Aussie has been trading above its fair value in the $0.91 area for a long time and the odds are that it will depreciate. Analysts at National Australia Bank also claim that Australian currency will end December at $1.0200, then drop to $0.9600 by March before rising gradually to $0.9800 by June and then to parity by September. Barclays thinks that AUD/USD will weaken to $0.9800 by the first quarter and then rise to $1.0100 by June. In the short term Aussie will stay under pressure as the euro zone governments failed to commit to faster fiscal consolidation and the ECB refused to extend bond purchases. In the medium term, however, the bank retains a constructive view due to many factors including limited impact on Australia's macro fundamentals from deteriorating euro zone’s growth, expectations of more easing from China, stability in local-currency commodity prices which are helped by weaker currencies. Chart. Daily AUD/USD Analysts expect Aussie to weaken early in 2012 UniCredit: forecasts for EUR/USD and GBP/USD 2011-12-22 18:24 EUR/USD: the single currency will keep weakening in the first quarter of 2012. The pair may slide to $1.25. If the tensions at the market ease, euro will be able to rebound, though sustainable rally seems unlikely. GBP/USD: British pound may decline versus the greenback in the first half of the next year as US currency will keep enjoying strong demand, while the bank of England will continue asset purchases. In the second part of 2012 the outlook for pound is less negative, though UK economic growth will remain sluggish. As a result, the pair GBP/USD will be capped by the levels in the $1.60 area. Chart. Daily EUR/USD Chart. Daily GBP/USD UniCredit: forecasts for EUR/USD and GBP/USD

Europe: event to watch today 2011-12-22 12:25 Italy's government will hold confidence vote on austerity in Senate around 2 p.m. GMT: the lawmakers are set to give final approval today to Prime Minister Mario Monti’s 30 billion-euro ($39 billion) emergency budget plan, including a pension overhaul and a levy on primary residences. The draconian austerity measures will affect the nation’s weak economy. Data released yesterday showed that Italy’s GDP shrank contracted by 0.2% in the third quarter after 0.3% growth in the previous 3 months. The government forecasts contraction in the fourth quarter, 0.6% growth in 2011 and a 0.4% contraction in 2012. European Central Bank President Mario Draghi speaks today in Frankfurt after a meeting of the European Systemic Risk Board which begins at 4 p.m. GMT. Yesterday the ECB made the region’s banking sector a Christmas present – the central bank lend a record sum of 489 billion euro ($638 billion) to 523 euro-area banks in 3-year loans. That was the first of ECB’s LTROs announced on December 8. The second one will be allotted on February 29, 2012. According to Goldman Sachs, the borrowings equal about 63% of the European bank debt maturing in 2012. The majority of analysts argue that the ECB’s move won’t be efficient as the region’s banks can decide on their own where to invest the obtained funds and they aren’t very likely to invest in the peripheral debt. Chart. Daily EUR/USD Europe: event to watch today St. George: 2012 forecast for AUD/USD 2011-12-22 13:37 Analysts at St. George believe that although Australian dollar will be affected in 2012 by the euro zone’s problems and potential slowdown in China, it will fall, but not much. The specialists note that Aussie has shown greater resilience during bouts of risk aversion this year in comparison to previous episodes of risk aversion due to its strong underlying fundamentals. The bank expects AUD/USD to trade around $1.0000 in March, in the $0.9900 area in June and near $1.0100 at the end of 2012. Chart. Daily AUD/USD St. George: 2012 forecast for AUD/USD Japan: government revised economic forecasts 2011-12-22 14:01 Japanese government reduced forecast for the nation’s real GDP growth in 2012 fiscal year which begins in April from 2.7%-2.9% to 2.2% (y/y). The estimate of this year’s growth were lowered from +0.5% to -0.1%. As the reason of the revision the officials cited negative impact of the yen's appreciation and the ongoing sovereign debt crisis in the euro area. At the same time, the next fiscal year Japan’s economy is expected to “recover moderately” on the assumption that the global situation starts improving. Consumer prices will add 0.1% in fiscal 2012 (y/y) after showing declines in the previous three years, says the government. In fiscal 2011 CPI will drop by 0.2% (previous forecast was the 0.2% rise). Japan: government revised economic forecasts

ECB conducted first 3-year LTRO, analysts’ comments 2011-12-21 17:01 The ECB has reported a strong demand for its 3-year longer term refinancing operation allotment. The central bank lend more than 489 billion euro to 523 financial institutions at the fixed rate of 1% and to be paid January 2015. The analysts were expecting the amount of about 300 billion euro. It was the first of the two 3-year loan auctions announced ECB president Mario Draghi at the central bank’s last meeting on December 8. The next one will be allotted on 29 February 2012. Reuters sited the following analysts’ comments: Societe Generale: “This is good. It's a positive number, at the top end of expectations. You have to regard it as a positive result. This is at least a solid 240 billion euro (net) increase for banks. But it is still short of covering all of the banks' financing for next year. So, it could ease fears of a credit crunch somewhat.” ING: “…the lower number of participating banks (523 versus 1121 previously) suggests that the take-up is currently less widespread — and probably more concentrated in banking systems in peripheral euro zone countries. We will be keeping a close eye on national central bank data over the next few weeks for further clues on which countries' banking systems tapped the three-year facility.” Analysts at UBS claim that though the LTRO will provide breathing space for banks it won't improve the long-term outlook for the European financial sector. The pair EUR/USD climbed to the weekly maximum in the $1.3200 area on the ECB’s announcement before sliding back to $1.3090. Chart. Daily EUR/USD ECB conducted first 3-year LTRO, analysts Japan: monetary policy and efforts to stem yen 2011-12-21 18:13 Bank of Japan: monetary policy unchanged The Bank of Japan kept monetary settings unchanged at today’s meeting, but cut its economic assessment saying that the nation’s GDP growth will stagnate at least until spring next year. Japan's economy recovered from a recession triggered by the March earthquake but is expected to slow sharply in the fourth quarter as the initial rebound driven by companies restoring supply chains and production facilities dies out and the overseas demand decreases. BOJ Governor Masaaki Shirakawa underlined that the euro zone’s debt crisis and economic weakness have negative impact on the global economy in general and on Japan in particular. The central bank left the key interest rate below 0.1%. The BOJ didn’t increase asset purchases after 2 months of doing so, trying to save this option for future action. Analysts at Nomura expect more easing in January-March referring to the risk of a credit rating downgrade for European sovereign debt and the possibility of more stimulus from the Fed and the ECB. Japan’s government: intervention fund increased Yesterday Japanese government decided to boost its currency market intervention fund by 30 trillion yen ($385 billion) from 165 to 195 trillion yen – that’s the second biggest* increase and the sign that Japan’s officials are keen to prevent sharp advances of the national currency. Finance Minister Jun Azumi announced that Japan is ready to act at any moment if necessary. The increase was included in a fourth extra budget approved by the government Tuesday. The extra budget is aimed to revive Japanese economy and will be submitted to the regular parliamentary session starting January along with a main budget for the next fiscal year. Japanese authorities had to lift up the intervention fund as they spent 9.092 trillion yen between October 28 and November 28 trying to stem yen’s appreciation and support exporters, so it was needed to replenish it. Japanese government kept its economic assessment intact in its monthly report issued on Wednesday but cut its view on business sentiment, reflecting worsening confidence among big manufacturers in the BOJ's December Tankan survey. *The biggest one was 40-trillion increase in 2004 fiscal year which was conducted after yen-selling intervention campaign of 2003-2004. According to the estimates of Barclays Capital, the actual amount available to the central bank for selling yen may increase from about 40 to 70 trillion yen. The analysts say that taking into account the general strengthening of US dollar seen so far and better economic data, the intervention fund will be able to satisfy the need for selling yen during several months. Chart. Daily USD/JPY Japan: monetary policy and efforts to stem yen

BBH: euro will decline to $1.24 2011-12-21 14:29 Analysts at Brown Brothers Harriman expect the single currency to decline versus the greenback in the coming months to end the first 3 months of the next year at $1.24. The specialists note that euro is still overvalued as its fair value is in the $1.20 zone. The fact that EUR/USD was trading rather high may be explained by the repatriation and the ongoing diversification of reserve inflows which supported the European currency. At the same time, BBH says that these processes may slow down euro’s slump, but won’t stop it. According to the bank, the pair will find itself under pressure due to the euro area’s economic weakness amid tough austerity measures and the tensions at the peripheral band markets. Such outlook increases euro risk premium and the possibility of further rates cuts by the ECB. Chart. Daily EUR/USD BBH: euro will decline to $1.24 GBP/USD: MPC minutes and technical comments 2011-12-21 16:48 Bank of England Monetary Policy Committee members voted unanimously at their December meeting to keep policy unchanged as uncertainty over the economic outlook remained high. All nine members of the MPC voted to continue with the current 275 billion pounds of asset purchases and to leave the benchmark interest at 0.5%. Divisions on the MPC remained over the outlook, with some members saying the November Inflation Report projections meant more quantitative easing was likely to be needed. UK Borrowing turned out to be lower than expected in November: 18.1 billion pounds versus the forecast of 19.6 billion. Although UK central bank left door open for more easing in February, pound strengthened versus the greenback. GBP/USD tested the levels in the $1.5773 zone. Support for British currency is situated at $1.5650. Watch the bullish “double bottom” pattern: it will be confirmed if sterling overcomes resistance in the $1.5768/77 area. Chart. Daily GBP/USD GBP/USD: MPC minutes and technical comments

December 20: news and data to watch 2011-12-20 11:32 News: RBA meeting minutes (full text here): -comments are less dovish than expected; -Australian economy will keep expanding even though euro zone’s debt crisis has a negative impact on the global economic growth. So, RBA rate cuts in the near future are unlikely. Australian dollar has managed to gain a bit on the news rising from $0.9890 to $0.9950. UK consumer confidence improved in November (40 vs. 36 in October). Watch today: Germany: Ifo Business Climate (decline is expected); Spain: 3- and 6-month bills auction; The ECB begins longer-term refinancing operation (LTRO) in which banks can borrow unlimited funds in return for eligible collateral, including euro-region government bonds. The banks will be able to decide what to do with the funds on their own. The single currency may find some support in the short term as the LTRO may provide a new source of demand by banks for euro-zone sovereign debt. December 20: news and data to watch BofA: sell EUR/USD on the rallies 2011-12-20 17:17 Technical analysts at Bank of America believe that the single currency may fall to 1-year minimum versus the greenback at $1.2510 (last visited in July 2010). The specialists make such forecast as on December 14EUR/USD went below October minimum at $1.3145 sliding to $1.2945. In their view, support in the $1.2901/2859 area will be the last obstacle ahead of $1.2533. In their view, the pair is with no doubts trading within the downtrend. The analysts note that as the market's sentiment about euro is extremely bearish, short squeezes are possible and the pair has chances to rise to $1.3250. At that point Bank of America recommends opening short positions. Chart. Daily EUR/USD BofA: sell EUR/USD on the rallies NAB: forecast for AUD/USD in 2012 2011-12-20 17:50 Analysts at National Australia Bank believe that Australian dollar will be fluctuating in 2012 between $0.9000 and $1.0500 versus its US counterpart. The specialists note that the pair AUD/USD, which has set this year’s maximum at $1.10 on July 27, will be capped by this level during the next year. According to the bank, in the first quarter of 2012 Aussie will drop to the $0.9600 zone as the global growth prospects deteriorate and then stay around parity in the second half of the next year. In the worst case, if some European nation defaults and the euro zone falls into recession making the global economy contract as well, AUS/USD will drop to $0.8500. Chart. Daily AUD/USD NAB: forecast for AUD/USD in 2012

Ichimoku. Weekly forecast. USD/CHF 2011-12-19 15:24 Weekly USD/CHF There are no surprises on the USD/CHF chart: the prices are still inside the Cloud, while the bulls are patiently trying to overcome this obstacle. It’s quite likely that in a few weeks Kumo will be left behind. The lines Tenkan-sen (1) and Kijun-sen (2) climbed a bit higher and then once again turned horizontal. The pair is supported by the Turning line (1) and Senkou Span A (4). The Ichimoku Cloud, which has so far switched upwards, isn’t wide, though stable (3). Tenkan-sen (1) and Kijun-sen (2) are holding weak, but still “golden cross”. It’s necessary to note that the prices managed to get above resistance provided by October maximums. The next target of the bulls is Senkou Span B (5). Chart. Weekly USD/CHF Daily USD/CHF On the daily chart one may see that last week the greenback managed to set a new high, but then it slid lower, though is still trading above October highs. The pair USD/CHF is testing support provided by the Turning line (1). The next support for US currency will be the Standard line (2). Strong “golden cross” (3) remains in place, rising Ichimoku Cloud is widening (4), while the lagging Chinkou Span (5) finds itself above the price chart – the bullish signal. Taking into account the horizontal state of Tenkan-sen (1) and Kijun-sen (2), it’s possible to expect some consolidation of the pair. The general technical picture is still positive. Chart. Daily USD/CHF Ichimoku. Weekly forecast. USD/CHF

Ichimoku. Weekly forecast. USD/JPY 2011-12-19 15:10 Weekly USD/JPY The pair USD/JPY is consolidating inside Tenkan_Kijun channel: the Turning line acts as support (1), while the Standard line from which the prices have been staying away since March provided resistance (2). It’s difficult not to note that the pair is stuck in the narrow range. The position of the lines on the chart doesn’t change much: Tenkan-sen (1) and Kijun-sen (2) are horizontal, the descending Cloud retains its size (3, 4). The fact that the greenback has been able to stay above Tenkan-sen means that the position of bulls is slowly but surely strengthening. The outlook for the pair will significantly improve, when the US currency will finally manage to overcome Kijun-sen (2). One would be able to speak about the pair’s future with more certainty in a few weeks when the lagging Chinkou Span, which is marked green on the chart, approached the price chart. In the near future the pair will keep trading sideways. Chart. Weekly USD/JPY Daily USD/JPY On the daily chart the prices were holding above Tenkan-sen during the entire last week (2) – the Turning line has so far provided the pair good support. In addition, a bit lower stays Kijun-sen (1) which will also help to hold bears if they strengthen. The extremely thin Cloud itself (3) is unlikely to be much of a support. Neither bulls, nor bears have enough strength to change the situation to their profit: Kumo is till almost a line. The Standard line (1) keeps moving horizontally, so the general sideways trend isn’t over and won’t be at least until the end of the month. Chart. Daily USD/JPY Ichimoku. Weekly forecast. USD/JPY

Ichimoku. Weekly forecast. GBP/USD 2011-12-19 14:53 Weekly GBP/USD British pound keeps gradually moving down versus its US counterpart though it still managed to hold above November lows. Tenkan-sen and Kijun-sen are going sideways (1, 2), while bearish Ichimoku Cloud retains its side (4) – the signs that the consolidation is likely to continue. On the upside, sterling is capped by the strong resistance provided by the Turning line (1), the Standard line (2) and Senkou Span “B” (3). On the downside, the prices are supported by November and October minimums. Chart. Weekly GBP/USD Daily GBP/USD At the beginning of the last week GBP/USD breached Tenkan-sen (1) and consolidated below this line which is currently action as a resistance. It’s necessary to note that here as well as on the weekly chart the Turning and the Standard lines (1, 2) are horizontal that means the trend is flat. The Ichimoku Cloud has so far rather often changed its mode and is thin so that it can’t be viewed as a serious obstacle, though to get to Kumo the prices will need to overcome Tenkan-sen (1) and Kijun-sen (2). In addition, descending Cloud has recently begun widening showing that the bears become stronger. Pound’s likely to stay below Tenkan-sen. Chart. Daily GBP/USD Ichimoku. Weekly forecast. GBP/USD

December 19: new trading week starts 2011-12-19 12:06 News: The market became concerned about increased instability in North Korea as the nation’s leader Kim Jong-il died. His little-known third son, Kim Jong Un, is likely to succeed to the power that may cause tensions. As a result, save haven currencies strengthened. ECB President Mario Draghi signaled in an interview to the Financial Times that the central bank won’t step up bond purchases to tame the sovereign debt crisis. Bank of England released quarterly bulletin: - disposable income of the households keeps declining due to the austerity measures; - assessment of financial markets pointed to worsening conditions due to the euro zone's debt crisis; - Chief Economist Spencer Dale wrote that the recovery “has been disappointing and there are signs that output growth has slowed in recent months”. Data: New Zealand’s consumer confidence declined from 112 in the third quarter to 101 in the final 3 months of the year. Commodity Futures Trading Commission: futures traders increased net bearish bets on EUR/USD from 95,814 to 116,457 in the five-day period ended December 13. Market’s talk: Market's expecting Standard & Poor's to downgrade France sometime this week. On Friday, December 16 Fitch Ratings lowered its outlook for France’s AAA credit rating from stable to negative. Watch today: French debt auction: the nation plans to sell 7 billion euro ($9.1 billion) of bills. Bloomberg reports citing the unnamed officials that European finance ministers will hold a conference call today to discuss funding of the euro zone’s indebted nations through the IMF. Draghi is speaking in Brussels at 3:30 p.m. GMT. December 19: new trading week starts

December 16: economic events and data releases 2011-12-16 10:38 Events: Troika ends their 4-day visit to Greece. Important data: US CPI (1:30 p.m. GMT). Bond auctions: none (keep in mind, however, that France plans to sell 7 billion euro ($9.1 billion) of bills on December 19. Spain and Greece will also offer short-term government securities next week – these upcoming events weight on euro as the market seems pessimistic on the euro zone’s prospects). Elsewhere in the world: The Reserve Bank of India announced measures to curb speculation in the foreign-exchange market (companies won’t be allowed to enter into multiple forward contracts to cover a single overseas transaction, the amount of open positions dealers can maintain overnight will be reduced). As a result, rupee climbed to more than 2 ½-year maximum. Russia joins the World Trade Organization. The world’s biggest energy exporter is set to receive the final approval to join the WTO after 18 years of negotiations. Joining the WTO should drive bigger investment inflows, trade and higher competition. It may improve Russia’s credit rating. (14:30 GMT). December 16: economic events and data releases Danske Bank: outlook for 2012 2011-12-16 18:01 Analysts at Danske Bank shared their expectations about global economic development in 2012. The specialists advance several assumptions: Concerns about recession are exaggerated – an overly negative economic and financial outlook is priced into financial assets; The world’s central banks will keep easing monetary policy; Euro zone crisis will continue, though the currency union won’t break up; Volatility will remain high; US dollar will experience structural weakness; Currency interventions will continue. Danske give several arguments against euro zone’s break-up: It’s consequences would be worse than those of Lehman Brothers’ collapse; The costs of the break-up would be enormous both peripheral and core economies4 The single currency is secured by political support as most of the member nations seem ready to give up more sovereignty. The strategists, however, don’t rule out the possibility that the euro area may split, the exit would be very risky and potentially very costly for any country. As for US dollar’s structural weakness, the analysts note that the greenback has been steadily depreciating during the last decade (with only a few interruptions like due to the introduction of the homeland investment act in 2005 and the global financial crisis in 2008). Among the reasons of such USD dynamics the specialists cite: Euro’s initial strong undervaluation versus the greenback; America’s persistent current account deficit; Rising commodity prices; On average easier monetary conditions. In the absence of a global recession the dollar will lose to stronger currencies, such as Australian, New Zealand’s and Canadian dollars. The Dollar Index may decline in such case by about 4%, though not more as Danske isn’t bullish on riskier assets, but expects weak US fundamentals to drive a dollar depreciation trend in a “normal” risk environment. As for EUR/USD, the analysts see the pair below $1.30 during the next few months until the market prices in new ECB monetary policy regime and then rebound end 2012 higher. Danske Bank: outlook for 2012

Danske Bank: forecast for ECB and Fed’s rates 2011-12-15 17:19 Analysts at Danske Bank think that at its next meeting in January the European Central Bank will reduce its benchmark rate by 25 basis points to 0.75%. The specialists note that the euro area risks falling into recession during the next few months, the European policymakers still haven’t solved the crisis and the periphery bond yields remain high while the ECB is reluctant to extend its purchases of the European debt. Danske claims that the outlook for US economy seems to be much better and expect American GDP to show decent growth in the coming quarters. As a result, the Federal Reserve is seen keeping the rates unchanged with the prospect of increase as the economic conditions improve. So, make your conclusions. Chart. Daily EUR/USD Danske Bank: forecast for ECB and Fed

December 15: key economic events and data 2011-12-15 11:39 Released data: Tankan survey: business sentiment deteriorated; China’s HSBC Flash Manufacturing PMI rose from 47.7 in November to 49.0 in December. Market’s talk: Investors are speculating about potential downgrade of France’s credit rating. All euro zone’s nations are exposed so such outcome after the warnings of S&P and Moody’s, but France is considered to be especially vulnerable. French Foreign Minister Alain Juppe claimed today that for France to lose its triple-A debt rating would be bad news but “not a cataclysm”. Be cautious during today’s US session. To watch today: The SNB’s 3-month Libor rate and press conference at 8:30 GMT. According to Goldman Sachs, the central bank could lift EUR/CHF floor from 1.20 to 1.30 due to deflationary risks, though not at today’s meeting. The analysts say SNB’s statement “will leave the door open for such a move at a later stage during the first quarter of next year”. One can’t rule out the possibility of surprises; European flash PMIs; British retail sales (9:30 a.m. GMT); US data (1:30 p.m. GMT); Spanish bond auction; 11:00 GMT — ECB President Mario Draghi speaks in Berlin on «Last Resort ECB? Monetary Policy Leeway In The Social Market Economy». December 15: key economic events and data Westpac, E&Y: Europe’s heading to recession 2011-12-15 14:13 The majority of experts sound pessimistic on the prospects of the euro area's economic growth. Analysts at Westpac claim that the austerity measures will lead the region into a “fully blown recession”. Economists at Ernst & Young also believe that European economy’s going to contract and add that the actions of the EU authorities haven’t completely eliminated the risk of the euro area’s breakup. In their view, the currency union’s GDP will drop in the current and next quarters and the rebound will begin only by the end of the next year, while the 2012 growth won’t exceed 0.1% (in 2013 the situation might improve – the analysts project 1.5-2% growth). The unemployment level is seen above 10% until 2015. E&Y reminds that the next year the large amounts of sovereign debt will require refinancing. As a result, the debt turmoil is likely to continue and the ECB will likely have to consider acting as a lender of last resort and keep buying government bonds. Westpac, E&Y: Europe Nomura: EUR/USD is sliding to $1.20 2011-12-15 15:17 Analysts at Nomura who have been bearish on euro this year still think that the single currency is going to weaken versus its US counterpart. The specialists note that if in the longer term it’s possible to see some light ahead, the short-term picture looks rather dim. According to the bank, EUR/USD will hit $1.20 by the end of the first quarter of 2012. Nomura says that the pace of euro’s decline will depend primarily on the results of the upcoming bond auctions in Europe and the 3-year ECB money tender which is launch on December 21. In addition, the strategists claim that one shouldn’t rule out the possibility of the pair’s drop to the parity level the next year. Chart. Weekly EUR/USD Nomura: EUR/USD is sliding to $1.20 SNB meeting: results, comments, EUR/CHF 2011-12-15 16:47 Swiss National Bank left today the left the floor for EUR/CHF at 1.20 and repeated to defend it will all efforts amid the pressure from the Swiss exporters to lift up this level (franc has been pegged to euro during already 3 months). The SNB has also left its key interest rate at 0%. The SNB’s President Philipp Hildebrand claimed that the central bank is ready to act in case deflation risks emerge, though today deflation isn’t yet a danger for the Swiss economy. According to the SNB’s forecast, consumer prices will fall by 0.3% the next year, but we won’t see sustained decline in the general price level. Swiss central bank expects the nation’s GDP growth to slow from 1.5-2% this year to 0.5% in 2012. Analysts’ comments Credit Agricole: the SNB is going to stay on hold watching the dynamic of the economic indicators. In other words, the central bank won’t raise the limit for franc preferring verbal interventions. The pressure on Swiss exporters has eased a bit as franc has so far weakened versus US dollar. Swissquote Bank, Capital Economics: as the situation in the euro area may deteriorate, the upward pressure on franc risks strengthening. Goldman Sachs: the SNB is in a very difficult position due to the low inflation and poor economic growth. Rabobank: the central bank is still likely to increase EUR/CHF floor. Swiss economy is affected by slowing economic growth of the euro area. Franc is overvalued and the deflation is at the door. The analysts advise buying euro on the dips. UniCredit: SNB's growth and inflation forecasts don’t change much. If the central bank lifts the EUR/CHF floor to 1.25, that won’t be enough to help the exporters. If the SNB raises the limit to 1.30, it will face strong market’s pressure as well as the accusations of currency manipulation. As a result, the analysts expect the floor to stay at the current level. Swiss franc is seen slowly depreciating in 2012. EUR/CHF Bloomberg survey: EUR/CHF will trade in the 1.23 area in the first quarter of 2012 and then rise to 1.26 in the last 3 months of the next year. Bayern LB: euro has upward potential against franc. If EUR/CHF manages to get above 1.2475, it will be able to climb to 1.26 even without any actions on the part of the SNB. Chart. Daily EUR/CHF SNB meeting: results, comments, EUR/CHF

BoA: sell Aussie versus loonie 2011-12-14 14:17 Analysts at Bank of America Merrill Lynch advise traders to sell Australian dollar against its Canadian counterpart. In their view, AUD will weaken as the prospects of Australian currency for the next few weeks seem rather dim: - Shanghai Composite Index has breached important support levels (Aussie is extremely vulnerable to the deterioration of the economic situation in China as the latter is Australian key trading partner). - Continuous Commodity Index has also dropped below key support (commodities represent the key part of the Australian economy, so AUD will likely suffer). The specialists propose to sell Aussie versus loonie because though Canadian dollar is also a commodity currency, it’s not affected by the dynamic of commodity prices as Australian dollar is. Moreover, AUD/CAD is facing the long-term resistance level which has been in place since the 1980s. According to the bank, it’s necessary to open shorts on the pair at 1.0440 stopping above 1.0660 and targeting 0.9840. Chart. Daily AUD/CAD BoA: sell Aussie versus loonie FOMC: results of the meeting and analysts' comments 2011-12-14 16:36 FOMC (Federal Open Market Committee) repeated its pledge to keep the interest rates at the minimal level near zero at least until the middle of 2013 and maintained Operation Twist, the operation which allows the central bank to lengthen the maturity of Treasuries in its $400 billion portfolio. Note that Chicago Fed President Charles Evans once again called for additional easing. The Fed’s Chairman Ben Bernanke claimed that the European debt crisis may affect US economy, so that further monetary stimulus measures will be needed. Despite the fact that the unemployment level unexpectedly dropped in November to the minimal level since March 2009 of 8.6%, the FOMC said that this number is still “elevated” and that the jobless rate will decline “only gradually”. Although some recent data was quite positive (CB consumer confidence, ISM Manufacturing PMI), the Fed underlined that the pace of business fixed investment growth is still low and housing market “remains depressed”. Analysts’ comments Analysts at BNP Paribas expect that the central bank could unveil measures aimed to support growth and improve the public understanding of Fed’s policy already at the next meeting on January 25-26. In their view, the Federal Reserve will launch QE3 in the second quarter or even earlier, in January or March, in case economic conditions worsen. The specialists also expect the central bank to publish their forecasts for the federal funds rate and define the levels of economic growth and unemployment which would allow it to tighten monetary policy. Strategists at ING also point out that due to the annual rotation the hawks – Federal Reserve presidents Charles Plosser of Philadelphia, Richard Fisher of Dallas, and Narayana Kocherlakota of Minneapolis – and their place will be taken by the doves – San Francisco Fed President John Williams, Atlanta Fed President Dennis Lockhart and Cleveland Fed President Sandra Pianalto. Some analysts think that the Fed is already conducting QE (that explains low yields of the Treasuries) without announcing that officially. At the same time, economists at UBS, Barclays, Citigroup, Deutsche Bank и JP Morgan Chase believe that the central bank will be buying only mortgage bonds. Anyway the Fed’s decision will likely be based on the inflationary expectations and the fact that last month the inflation forecasts were lowered speaks in favor of the potential QE. Pay attention to the fact that Bernanke will hold press conference on January 26 after the meeting, an event that occurs quite rarely. FOMC: results of the meeting and analysts' comments

JPMorgan Chase: euro may renew 2011 low 2011-12-14 12:04 The single currency fell versus the greenback diving below October minimums to the levels in the $1.3010 area. Technical analysts at JPMorgan Chase claim that EUR/USD breached important support at $1.3047 (61.8% Fibonacci retracement from a 4-year minimum reached in June 2010) and may retest 2011 low at $1.2873 hit on January 10. In their view, the pair’s trading within downtrend and the outlook for euro will remain negative as long as it stays below $1.3145/3212. Chart. Daily EUR/USD JPMorgan Chase: euro may renew 2011 low Westpac: advices on trading euro 2011-12-14 12:41 Analysts at Westpac believe that the single currency is on the way down to $1.2860. In their view, euro will weaken versus US dollar due to the risk that the rating agencies downgrade European nations and high probability of the region’s falling into recession. At the same time, the specialists underline that there are now too many short positions on euro, so they don’t recommend selling euro at the current levels. According to the bank, it’s necessary to wait for a short squeeze back toward $1.3400 before going short on EUR/USD. In addition, Westpac advised selling Australian dollar against its New Zealand’s counterpart as the Reserve Bank of Australia is more likely to reduce the interest rates. Chart. Daily EUR/USD Westpac: advices on trading euro Commerzbank: technical comments for the majors 2011-12-14 13:28 EUR/USD: the pair went below the October 4 minimum at $1.3145, the next downside target lies at $1.2860 (2011 minimum) and at $1.20 in the longer term. The key resistance is situated at $1.3355. Chart. Daily EUR/USD USD/JPY: the pair recovered from support in the 77.11/21 area (55- and 100-day MA). Resistance is found in the 78.28/30 zone (last week maximum and 8-month resistance line), 78.66 (4-year downtrend resistance line) and 80.12 (55-week MA). Chart. Daily USD/JPY USD/CHF: the pair reached the maximal levels in 10 months and managed to rise above 0.9399 (50% Fibonacci retracement of the decline in 2010-2011). If US dollar closes above 0.9400, it will be able to advance to 0.9776/84 (2011 maximum) and then to 0.9950 (61.8% Fibonacci retracement of the decline from 2010). Chart. Daily USD/CHF Commerzbank: technical comments for the majors

Mizuho: short-term recommendations for majors 2011-12-13 13:40 EUR/USD (bullish, target $1.3525, stop below $1.3135) Resistance: $1.3250, $1.3310 and $1.3360 Support: $1.3145 and $1.3055 Chart. H4 EUR/USD GBP/USD (bullish, target $1.5795, stop below $1.5495) Resistance: $1.5665, $1.5735 and $1.5770 Support: $1.5525 and $1.5465 Chart. H4 GBP/USD USD/JPY (bearish, target 76.95, stop above 78.58) Resistance: 78.00, 78.15 and 78.29 Support: 77.49, 77.12 and 76.96 Chart. H4 USD/JPY Mizuho: short-term recommendations for majors J.P. Morgan on trading EUR/USD 2011-12-13 14:46 Analysts at J.P. Morgan believe that the EU summit on Friday passed as usual – the policymakers achieved some results, but the markets didn’t feel relieved. The specialists doubt that the European nations will be able to come up with the final by March as the previous ones took 1-2 years to prepare. J.P. Morgan believes that the crisis will keep on and the European Central Bank will be finally forced to do more. As a result, the economists expect EUR/USD to decline and recommend selling the pair on rallies. The specialists underline that with all the events affecting the market such as the FOMC and OPEC meetings it’s very difficult to find where to enter the market. In their view, one open shorts on euro if it reaches $1.36 targeting $1.31/30 and placing stops at $1.3820. Chart. Daily EUR/USD J.P. Morgan on trading EUR/USD BIS: following trend vs. carry trades during crisis 2011-12-13 15:53 Economists at Bank for International Settlements claim that during the times of the crisis it’s better to use so-called momentum strategies or, in other words, to follow trends than doing carry trades. The latter is borrowing in currencies with low rates to investing in the higher-yielding ones. The market players usually fund their portfolio by US dollars and buy assets in Australian dollar, New Zealand’s dollar, emerging markets’ currencies. According to BIS calculations, carry traders lost 12% in January 1998 (Asian crisis) and 6% in October 2008 (global financial crisis) and suffered severe losses in August and September this year. On the other hand, those who applied momentum strategies gained during the same periods. BIS specialists note that though carry trade is popular because most of the time investors are getting small but stable gains, these positions may lead to large losses – you can lose all you’ve gained in 1-2 years of average returns in 1 month when the situation becomes unfavorable. BIS: following trend vs. carry trades during crisis CME Group: technical comments for EUR/USD 2011-12-13 16:25 The single currency is trading versus the greenback around 2-month minimum in the $1.3160 area. Technical analysts at CME Group claim that the pair EUR/USD will consolidate in the short term as it’s currently a bit oversold, while in the medium term the specialists are bearish on euro thinking that the crisis is far from being over. Such forecast is confirmed by the negative picture on the daily Ichimoku chart. According to CME, support for euro is situated at $1.3142, $1.3070 and $1.2965, while resistance is found at $1.3215, $1.3280 and $1.3335. Chart. H4 EUR/USD CME Group: technical comments for EUR/USD

S&P comments on the situation in the euro area 2011-12-13 11:13 Reuters cites the comments of Standard & Poor's chief economist on the situation in the euro area made yesterday: «There is probably yet another shock required before everybody in the euro zone reads from the same page, for instance a major German bank experiencing some real difficulties on the markets, which is a genuine possibility in the near term». According to S&P, EU summit agreement was a significant step forward, but not enough. Last week the ratings agency put 15 European nations on watch for potential downgrade. It usually takes the agency about 3 months to act after a warning. The agency said, however, that this time it may make the decision more quickly. S&P intends to urge the European authorities to solve the crisis as the next year the region is facing significant risk of recession and credit crunch. Analysts at Commerzbank claim that though much of the potential negative outcome has already been priced in, the downgrade by S&P would seriously hit the markets. S&P comments on the situation in the euro area Citigroup, BoA: expectations ahead of SNB meeting 2011-12-13 12:07 The Swiss National Bank meets on Thursday, December 15. The Libor rate is released at 8:30 a.m. GMT and is followed by the central bank’s press conference. The market’s widely expecting the SNB to do something to weaken franc as the officials have expressed concerns about the strength of the national currency. Currency strategists at Citigroup note that the leveraged funds turned short on franc for the first time in 13 months. Analysts at Bank of America Merrill Lynch claim that the market is estimating the possibility of the SNB raising floor for EUR/CHF from 1.20 to 1.25 by 25%. Some traders even talk about the floor raised to 1.30. The specialists say that for further hints about Swiss monetary policy one should analyze the micro survey of Swiss business that appears in the bank's quarterly bulletin (the one for the fourth quarter is released on December 23, the previous are available here). According to Merrill Lynch, the survey deterioration in September triggered the SNB’s intervention as well as verbal interventions in January and December 2010. Citigroup, BoA: expectations ahead of SNB meeting UBS: forecasts on the Fed, the SNB and the ECB will act 2011-12-13 12:43 Analysts at UBS believe that the Federal Reserve won’t announce the third round of quantitative easing at today’s meeting as the nation’s economic data has so far been rather strong. In their view, the Fed may reduce its discount rate and reinstate the Term Discount Window Facility in order to increase liquidity available to US banks. The specialists think that the Swiss National Bank will raise the floor for EUR/CHF from the current level of 1.20 to 1.25 as Swiss CPI declined for 2 months and the nation’s monetary authorities will try to diminish the risks of prolonged deflation. As for Europe, the UBS economists think that the European Central Bank will cut its benchmark interest rate by another 25 bps at its next meeting on January 12 and then once again on March 8. As a result, the borrowing costs in the euro area will slide from the current level of 1% to 0.5%. The strategists don’t rule out the possibility that the central bank will lower rated to 0.5% even earlier and that the ECB could be forced to consider such option as the quantitative easing. UBS underlines that the European economy will be under pressure from austerity measures and debt problems, so the ECB will probably be able to justify bond purchases by its mandate of maintaining price stability rather denying potential accusations in deliberate monetizing of the European debt. UBS: forecasts on the Fed, the SNB and the ECB will act SocGen: technical levels for USD/JPY 2011-12-13 13:01 Technical analysts at Societe Generale expect that the level of 77.15 yen will be able to support the greenback. The specialists note that for the pair USD/JPY could experience growth in the medium term, it should overcome resistance in the 78.30/55 yen area. Chart. Daily USD/JPY SocGen: technical levels for USD/JPY

Analysts on EU summit results and euro area's future 2011-12-12 15:51 UBS: though the results of the EU summit met by the market with mixed feelings, it’s clear that the single currency will suffer from the fundamentals of recession in the euro area. As a result, EUR/USD will weaken in 2012 towards its fair value at $1.20/25. BBH: the markets are still worried about the peripheral debt maturing at the beginning of the next year. As Britain refused to join new EU fiscal treaty its role as a safe haven may strengthen. Goldman Sachs: many issues still are to be clarified. The ECB will eventually towards more proactive purchases on a larger scale after the EU nations confirm their agreement and specify certain regulations. Citigroup: the funding needs of Italy and Spain for 2012 and a good part of 2013 seem to be covered – a good point. However, when the EFSF was established last year the markets rallied with relief, but now there’s no such reaction. RBS: the policymakers failed to find solution of the crisis. European imbalances are wider than just the budget problems – the growth divergence across the euro area will increase as the peripheral economies unlike the core ones will be hit by the austerity measures. In addition, the parliaments of the European nations may be reluctant to pass new fiscal legislation. Chart. Daily EUR/USD Analysts on EU summit results and euro area's future SocGen, UBS: euro’s declining after Moody’s statement 2011-12-12 16:50 The single currency dropped versus it’s the greenback to the minimal level in December in the $1.3250 area. US dollar and Japanese yen weakened versus their higher-yielding counterparts as the market’s risk aversion increased. Euro weakened as Moody’s Investors Service put the credit ratings of all EU nations under review. Explaining such decision the agency said that the European countries didn’t manage to produce “decisive” measures to solve the debt crisis (on Friday, December 9, the EU leaders announced new rule which limits annual structural deficit of the member nation by 0.5% and decided to provide up to 200 billion euro in bilateral loans to the IMF for financing the problem European nations). Another leading agency, Standard & Poor’s, warned before the Friday's summit that it may downgrade euro zone countries en masse if they fail to stem the debt crisis. The agency hasn’t given any comments on the situation yet. Analysts at Societe Generale note that Moody’s move is in line with investors’ sentiment as the market isn’t convinced the European authorities have done enough to solve the crisis. The specialists think that EUR/USD may fall below $1.3145, to the lowest levels since January. Strategists at UBS underline that if euro zone bonds again get under pressure, there won’t be enough positive factors to support euro. Economists at Bank of Tokyo Mitsubishi UFJ think that the euro zone’s debt crisis will intensify and European currency will keep declining. Сhart. Daily EUR/USD SocGen, UBS: euro

Ichimoku. Weekly forecast. GBP/USD 2011-12-12 14:22 Weekly GBP/USD Last weeks the bulls attempted to get hold of the lower border of the Ichimoku Cloud (3) and consolidate inside of Kumo, but were defeated: the Turning line has once again provided resistance for the prices (1) and pound opened new week below Kumo. As a result, resistance for sterling has strengthened. The Ichimoku Cloud, though not wide, but is descending – the market is bearish. There is a possibility that the pair will resume declining after the 2 weeks of correction. At the same time, Tenkan-sen and Kijun-sen are moving sideways (1, 2), so GBP/USD is unlikely to drop below November minimums. Chart. Weekly GBP/USD Daily GBP/USD As it was expected, last week sterling consolidated above Tenkan-sen (2). However, at the beginning of this week the mentioned support was breached by the sharp bearish move down. At the same time, the Turning line is starting to incline upwards, while the descending Ichimoku Cloud has narrowed to 1 point and without being able to gain significant width. That means that it may be soon possible to buy pound on the dips. As for support GBP/USD has only November and October lows left. Resistance is provided by the Turning line (2) and the Standard line (1). Chart. Daily GBP/USD Ichimoku. Weekly forecast. GBP/USD Ichimoku. Weekly forecast. USD/JPY 2011-12-12 14:27 Weekly USD/JPY The bearish Ichimoku Cloud (3, 4) is still stable and keeps weighting on the prices. The Standard line (2) is providing strong resistance as the prices stay well below it since the beginning of March. The greenback is fighting to stay above the Turning line (1) and remain within the horizontal Tenkan-Kijun channel. If the support holds and the pair will be able to avoid dipping and get higher, it will mean that the position of bulls is slowly but surely strengthening. When US currency will finally manage to overcome Kijun-sen (2), the outlook for the pair will significantly improve. Chart. Weekly USD/JPY Daily USD/JPY On the daily chart the extremely thin Ichimoku Cloud remains an alarming signal as it means that neither bulls, nor bears are strong enough to change the situation to their profit. Though the pair has managed to consolidate above the Cloud, if the market’s sentiment seriously worsens, the thin Kumo won’t do any good as support, so one should be cautious. The Standard line (2) keeps moving horizontally, so the general sideways trend is unchanged and is likely to continue at least till the end of the month. If the greenback stays above Tenkan and Kijun, it will have change to rise higher, but we expect no strong advance. Chart. Daily USD/JPY Ichimoku. Weekly forecast. USD/JPY Ichimoku. Weekly forecast. USD/CHF 2011-12-12 14:35 Weekly USD/CHF As expected, the general weakness of the greenback a week before last didn’t do much harm to USD/CHF: the prices are still inside the Cloud, the bulls are patiently trying to overcome this obstacle. The pair is supported by the Turning line (1) and Senkou Span A (4). The Ichimoku Cloud, which has so far switched upwards, widened (3). Tenkan-sen (1) and Kijun-sen (2) are holding weak, but still “golden cross”. Though the bulls seem currently unable to move the prices above the recent maximum, they are moving the market sideways and it’s quite likely that in a few weeks they will succeed and leave Kumo behind. Chart. Weekly USD/CHF Daily USD/CHF On the daily chart US dollar continued consolidation – this time it was trading above the Turning line (1) which has so far showed itself as a good support. Strong “golden cross” (3) is still in place, rising Ichimoku Cloud is widening (4), while the lagging Chinkou Span (5) finds itself above the price chart – the bullish signal. In addition, the Standard line (2) is going up – if the Turning line (1) joins it and begins advancing, that would means that the uptrend is resuming. Chart. Daily USD/CHF Ichimoku. Weekly forecast. USD/CHF

EU summit: first results 2011-12-09 12:53 Only 23 out of the 27 EU nations agreed to join the new treaty which implies giving up some sovereignty of the fiscal policy and towards closer fiscal integration. The main points of the statement produced after the night of negotiations are: - Participants of the treaty will need to have balanced budgets with structural deficit which doesn’t exceed 0.5% of the GDP (this requirement must be included in the constitutions of the member states); - In case the rule mentioned above is breeched, the unspecified “automatic correction mechanism” will be activated; - Countries with deficits of more than 3% of the GDP will face sanctions; - Member nations will have to submit their national budgets to the European Commission, which will have the authority to ask for revisions. Member states will have to report in advance how much they plan to borrow. You can get acquainted with the whole text here (http://consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/126658.pdf). So, the proposed changes are approved by 17-member euro zone and 6 more EU nations. Britain which stays out of the single currency headed the opposition to the tighter fiscal union within the 27-nation European Union (idea promoted by Germany and France) claiming that such move will threaten its sovereignty and highly appreciated financial services industry. Among the 3 other states who disagreed with the changes to the treaty there are Hungary, Czech Republic and Sweden – the last 2 haven’t made the final decision yet. It’s also necessary to mention 2 more developments: - Euro area will lend 200 billion euro ($268 billion) to the IMF which the latter, in its turn, lend the indebted European states. Non-euro countries Sweden and Denmark agreed to contribute. - The EU's two bailout funds (the temporary EFSF and the permanent ESM would be managed by the European Central Bank). The meeting will continue later today. The goal is to specify the regulations of the new treaty, including the sanctions for the members who violate stricter budget rules. The policymakers aim to prepare the ultimate version of the treaty by March. The market’s sentiment is pessimistic. Asian stocks fell, the pair EUR/USD erased the advance it made on November 30 when the major central banks acted to help the euro zone get liquidity and sliding down to the levels in the $1.3280 area. At the same time, ECB president Mario Draghi and German Chancellor Angela Merkel regard the result of the meeting as positive claiming that Europe is on the way toward regaining market’s confidence. Chart. Daily EUR/USD EU summit: first results Ueda Harlow: forecast for EUR/JPY 2011-12-09 14:43 Analysts at Ueda Harlow note that the single currency is trading versus Japanese yen below the Turning or Conversion line – marked red on the daily Ichimoku chart. In addition, the specialists points out that the Lagging line, which represents the pair’s close level shifted backwards, is moving below the Cloud and price chart. The strategists claim that these factors mean that euro is likely to decline. In their view, EUR/JPY may slide next to 102.49 yen (November 25 minimum) and 100.76 yen (October 4 minimum, the lowest level since June 2001) and probably to the psychological 100 yen level. The strategists warn that everything will depend on the outcome of the European summit which ends today. Chart. Daily EUR/JPY Ueda Harlow: forecast for EUR/JPY Nomura, RBS: China will keep easing policy 2011-12-09 15:20 The economic data released today in China were mostly lower than expected. The nation’s industrial production contracted from 13.2% in October to 12.4% in November (y/y). Analysts at Nomura expect Chinese GDP growth will slow down from 9.1% in the third quarter of 2011 to 7.5% in the first 3 months of the next year. The specialists say that the country’s economy is rapidly weakening as its exports suffer from the reduced demand overseas and the property market is cooling. In their view, lower inflation (annual CPI growth dropped from 5.5% in October to 4.2% in November) would allow the nation’s monetary authorities to conduct further monetary easing. The bank expects the People’s Bank of China to cut reserve requirements rate in January. Analysts at Royal Bank of Canada claim that as Beijing claimed that it will maintain its “prudent” monetary policy stance, the policymakers will adjust the policy in the form of RRR cuts rather than a cut in benchmark policy rates or a shift to currency depreciation. Nomura, RBS: China will keep easing policy

UBS: technical levels for majors 2011-12-09 12:49 EUR/USD Support: $1.3259 and $1.3212; Resistance: $1.3487. Chart. Daily EUR/USD GBP/USD Support: $1.5561 and $1.5526; Resistance: $1.5780 and $1.5883. Chart. Daily GBP/USD USD/JPY Support: 77.01 and 76.58; Resistance: 77.86 and 78.11. Chart. Daily USD/JPY USD/CHF Support: 0.9112; Resistance: 0.9331 and 0.9401. Chart. Daily USD/CHF UBS: technical levels for majors

Morgan Stanley: forecasts for EUR/USD and USD/JPY 2011-12-08 15:59 Analysts at Morgan Stanley believe that the single currency will be steadily declining versus the greenback the next year from $1.2500 in the first quarter to $1.2300 in the second, to $1.2100 in the third and to $1.2000 in the final 3 months of 2012. The specialists believe that in Europe the issues of the private sector will add to those of the public one. Trading is going to be volatile and the demand for safe havens will be high. In such circumstances US dollar and Japanese yen tend to benefit. The latter will be strengthening versus the former: the pair USD/JPY is expected to decline to 74.00 in the first quarter, to 73.00 in the second, to 72.00 in the third and 71.00 in the first 3 months of the next year. Chart. Weekly EUR/USD Chart. Weekly USD/JPY Morgan Stanley: forecasts for EUR/USD and USD/JPY Bank of England stays on hold 2011-12-08 16:39 The Bank of England decided to leave its benchmark rate unchanged at 0.5% and its assets purchase program at 275 billion pounds. Many economists expect the BoE to extend the amount of asset purchases in February when the 75-billion-pound purchase announced in October is over. UK economy is in a very poor state – according to the OECD (Organization or Economic Cooperation and Development), the nation has already entered mild recession. British central bank projects that inflation – the main obstacle for QE – will drop from the current levels close to the 3-year maximum of 5% below the 2% target level. The pair GBP/USD is trading on the upside but very close to the opening level. Chart. H4 GBP/USD Bank of England stays on hold ECB acts: rates are lowered by 25 bps 2011-12-08 17:03 As it was widely expected, the European Central Banks cut its benchmark rate by 25 basis points. The single currency bounced from the daily minimums in the $1.3380 area to the levels above $1.3400. According to Mario Draghi, the central bank’s president, the euro zone economy could be heading for a mild recession. The market’s awaiting the ECB’s press conference at 1:30 p.m. (GMT+4) for the hints on the bank's willingness to buy more government bonds of the indebted nations. Such step would help to ease down the borrowing costs for the peripheral European states. Chart. H1 EUR/USD ECB acts: rates are lowered by 25 bps Draghi: speech essentials 2011-12-08 18:12 The ECB president Mario Draghi announced that the central bank will conduct further (temporary) non-standard monetary policy measures in order to enhance banks access to liquidity: - 2 3-year LTROS (long-term refinancing operations) of 36 months; - Full allotment for banks at fixed rates (a form of QE) - Easier collateral rules for asset-backed securities; - National central banks are allowed to accept bank loans as collateral; - Reserve ratio is cut from 2% to 1% (effective from January 18). Forecasts: - Euro zone’s economic forecast reduced from 0.4-2.2% to -0.4%-1.0% - There are substantial downside risks to growth. Never the less, the single currency has takes a blow as Draghi: - Dismissed the talk that the ECB will be lending to the IMF as it’s not the member of the organization; - Said that the ECB won’t lend to the euro zone’s government as the treaty forbids that; - Dismissed the speculation that the ECB will buy bonds of the indebted euro zone’s nations if EU gets its fiscal house in order. EUR/USD hit weekly lows in the $1.3333 area. Chart. Daily EUR/USD Draghi: speech essentials

BMO on British economy and trading GBP/USD 2011-12-08 10:47 Analysts at BMO Capital expect the Bank of England to ease its monetary policy at today’s meeting. Such assumption is based on UK economic weakness. In particular, the specialists name the lowered growth forecast from the Office for Budget Responsibility and the nation’s latest manufacturing data that turned out to be worse than expected. The bank underlines that Britain is very vulnerable to the euro zone’s crisis as the monetary union is its biggest trading partner. BMO says that GBP/USD is trading within a downtrend channel and advises to sell the pair in the $1.5850 area stopping above $1.6000 and expecting sterling to slide down towards $1.5050. OBR reduced UK economic growth forecast from 1.7% to 0.9% in 2011 and from 2.5% to 0.7% in 2012. British Manufacturing PMI dropped in November by 0.2 to 47.6, the lowest level since June 2009. Chart. Weekly GBP/USD http://www.fbs.com/analytics/news_markets/view/11368 Reuters poll: where do analysts see EUR/USD in a year? 2011-12-08 11:23 According to the monthly poll conducted by Reuters among about 60 banks and analysts, the median forecast of the specialists is that the single currency will depreciate versus the greenback to $1.3000 in 3 months. The survey shows that the economists expect EUR/USD to trade in that area during 3 months and then recover to reach $1.3250 in a year from now. Chart. Daily EUR/USD Reuters poll: where do analysts see EUR/USD in a year? BOTMUFJ, RBS: all eyes on the ECB 2011-12-08 12:26 The single currency keeps consolidating versus the greenback ahead of the ECB meeting today and EU summit tomorrow. EUR/USD is hovering this week in the narrow range between $1.3333 (December 6 minimum) and $1.3486 (December 5 maximum). The market expects the central bank to lower its benchmark rate by at least 25 basis points to 1% and introduce 2- to 3-year long-term refinancing operations. If the ECB hinted at more aggressive bond buying and cut rates by 50 basis points, the experts see different possibilities: either euro will weaken to support at $1.3355 (trend line from November 25 minimum), $1.3210 (November minimum) and $1.3145 (October minimum), or, as the analysts at Bank of Tokyo-Mitsubishi UFJ say, rebound to on improved risk appetite which could activate strong short-covering to $1.35 or even to $1.3729/3851 (50% and 61.8% Fibonacci retracements of euro’s decline in November). Strategists at BOTMUFJ advise to buy Australian dollar in such case as there are no doubts that it will benefit from the ECB cut. If the European Central Bank doesn’t deliver the expected cut EUR/USD and EUR/JPY may fall by about 100 pips, according to RBS, but not more as investors they are also waiting for the outcome of the EU summit. Chart. Daily EUR/USD BOTMUFJ, RBS: all eyes on the ECB Morgan Stanley: 2012 forecast for GBP/USD 2011-12-08 14:06 Analysts at Morgan Stanley expect British pound to lose about 11% versus the greenback by the third quarter of 2012 sliding from the current levels in the $1.5700 area to the minimum since March 2009 at $1.3900. The specialists warn that with the 40% of its exports going to Europe British economy will seriously suffer from the euro zone’s crisis and the inevitable recession. In their view, the Bank of England will have to extend quantitative easing dampening the demand for British assets, especially for gilts. According to the bank, in the second half of the next year the positive effects of QE on UK economy begin to show up and the recovery begins. As a result, sterling will get a lift and return to $1.4100. Chart. Weekly GBP/USD Morgan Stanley: 2012 forecast for GBP/USD