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EUR/USD: what’s next? Friday, May 25, 2012 - 07:16 The single currency hit 2-year minimum this week on the concerns that Greece may leave the euro area – how long the bears have been waiting for this to happen! What’s next? After the parliamentary elections the indebted country is closer to the exit from the euro zone than ever before. The uncertainty is likely to dominate the market before the new elections on June 17. In the beginning of the week market participants looked to the EU summit; however, on Wednesday EU leaders didn’t reach any agreement on the question of Eurobonds. Nevertheless, they underlined that they want Greece to stay in the euro zone. On Thursday euro zone released a bunch of negative PMI data. Analysts at BBH underline that the market sentiment is still very fragile. In the longer term EUR/USD needs improvement of the euro zone’s economic figures. In the short term, however, there’s room for correction on short covering. Bank of Tokyo-Mitsubishi UFJ also look forward to some consolidation in the $1.25 area. Analysts at Scotia Capital note that euro’s RSI is at 21, so the currency is oversold and may temporarily recover, especially as markets have already priced in much of the negative scenario for Greece. The specialists underline that they don’t believe that EUR/USD may show any sustained advance. The bank sees the pair ending 2012 at $1.25 expecting no collapse of the European currency. Despite this talk about some retracement higher, analysts do think that EUR/USD will breach $1.2500 (option barrier) and start descending to $1.1875 (June 2010 minimum). Societe Generale proposes to go short at $1.2600 stopping at $1.2750 and targeting $1.2100. Chart. Weekly EUR/USD EUR/USD: what

May 25: economic background Friday, May 25, 2012 - 07:01 EUR/USD fell by 2.5% this week amid the renewed concerns about Greece. New round of risk aversion weighs on the high-yielding currencies and supports the US dollar as a “safe haven”: AUD/USD dropped by 0.7%, NZD/USD declined by 0.3% and USD/CAD grew by 0.4%. GBP/USD went down by 0.9% on concerns that Britain’s monetary policy may become more “dovish”. USD/JPY strengthened by 0.6% despite the overall trend remains downward. USD/CHF added 1.6% this week. Italian Prime Minister Mario Monti claimed yesterday that the majority of EU leaders approved the idea of common euro-area bonds at this week’s summit and that and Italy can help persuade Germany which is currently against this proposal. From the first sight Monti’s comments look inspiring, but Luxembourg Prime Minister Jean-Claude Juncker said quite the opposite thing after the meeting: joint Eurobonds didn’t find much support. To describe the situation we need one word – uncertainty. German Gfk consumer climate released today came unchanged this month at 5.7 in line with forecasts. Consumer views on economic conditions remain stable. The same can’t be said about business climate and activity – remember poor data released yesterday. Japanese National Core CPI rose by 0.2% in March – still below 1% target set by the Bank of Japan. That means that deflation risks remain and more QE is likely. That’s confirmed by Tokyo CPI which contracted in April by 0.8% (vs. -0.6% expected and -0.5% in March). Yen weaken against US dollar after the release. Asian stocks fell – MSCI Asia Pacific Index lost 0.5%. There was an earthquake in New Zealand, but with no damage reported market’s reaction wasn’t strong. There are no major news releases today. For more information consult FBS economic calendar. May 25: economic background // FBS Markets Inc.

HSBC: yen is our only refuge Thursday, May 24, 2012 - 17:33 Analysts at HSBC note that Japanese yen rose sharply as the euro zone crisis intensified. In their view, bullish pressure on yen will remain strong as uncertainty seems set to continue. In addition, the market’s positioning is also supportive for JPY: IMM futures positioning data shows that yen remains in net shorts which will be closed or reversed. HSBC thinks that Japanese officials may tolerate USD/JPY as long it’s above 76 yen. The specialists point out that even despite potential attempts of Japanese monetary authorities to weaken the currency, yen will likely remain strong as the only true safe haven currency. To explain its view HSBC cites the structure of Japan's external finances: Japan has $3.1 trillion of net overseas assets, while its immense government debt is almost entirely held by domestic investors. As a result, the decision of Japanese investors not to increase their already large overseas asset holdings would be enough to make yen appreciate. The bank even says that increased QE in Japan seems to have turned from a currency negative to a currency positive factor as it’s aimed to help the nation’s economy and doesn’t offset strong demand for yen. HSBC: yen is our only refuge // FBS Markets Inc.

Citigroup: if Greece leaves euro area… Thursday, May 24, 2012 - 11:47 Analysts at Citigroup believe that the odds of Geek exit from the euro area (“Grexit” as they say now) are increasing and account currently for 50-75%. In their view, the most important question is whether other countries will follow. According to Citigroup, if Greece is the only nation leaving the euro area its exit will be a positive factor for euro as with the elimination of the weak link the rest of the region will become stronger. However, one should remember that we are dealing with the market’s sentiment: if Greece leaves, the fears about other peripheral economies will mount and risk premiums will surge making it impossible for these nations to meet the fiscal and growth targets. As a result, the fate of euro would depend on the ability of the European authorities to convince the market of their determination to stick to euro. Taking into account the current inability of the policymakers to reach consensus and deliver some credible anti-crisis measures, euro will likely remain under heavy pressure until investors become convinced of the policymakers’ resolve. The specialists think that if Greece leaves the currency union, Portugal and Ireland will ask for second aid packages; Spain will get some form of aid; the ECB will cut its benchmark rate to 0.5% and probably resume longer-term refinancing operations. In addition, Portugal, Ireland, Spain and Italy will be downgraded. Image from Greek News, Greece, Cyprus, Economy, Politics, Greek Soccer | Greece.GreekReporter.com Citigroup: if Greece leaves euro area

Key options expiring today Thursday, May 24, 2012 - 09:51 Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (2 p.m. GMT). Here are the key options expiring today: EUR/USD: $1.2525, $1.2550, $1.2600 and $1.2625; GBP/USD: $1.5700 and $1.5750; USD/JPY: 79.40/50 and 80.00; AUD/USD: 0.9750 and 0.9800; EUR/GBP: 0.8050 (smaller at 0.8000). Image from yourmoneydictionary.com Key options expiring today // FBS Markets Inc.

EUR/USD hit 2-year minimum Thursday, May 24, 2012 - 09:14 Bears push the single currency lower and lower – EUR/USD hit today 2-year minimum at $1.2515 and where will be the bottom? Or, more precisely, will there be a bottom? Euro got another blow as the PMI data of the euro zone’s leading economies came worse than expected (more information here). Commerzbank: although the outlook is negative, euro’s slump was rapid enough, so to confirm another down leg in the term the pair needs to close below $1.2530 (78.6% Fibonacci retracement of the pair’s advance from 2010 to 2011). Otherwise, EUR/USD will rise to $1.2720 and $1.2820/30. Danske Bank: downside for EUR/USD and a test of $1.2500 seems imminent. RBS: sell EUR/USD at targeting $1.2329 (2008 post financial crisis minimum) and stopping above $1.2640/90 (the range caught 2 lows in 2006, 2009 minimum and then almost caught the Jun 2010 maximum). BNP Paribas: “With a Greek exit once again being discussed, the pressure on the euro should continue especially with the lack of clarity on any of the pressing issues.” Chart. Daily EUR/USD EUR/USD hit 2-year minimum // FBS Markets Inc.

Germany avoids recession, but PMIs upset Thursday, May 24, 2012 - 08:37   On Thursday final GDP release confirmed that Germany, avoided technical recession: the largest euro zone’s economy grew in Q1 after a worrisome contraction in Q4 2011. Germany resumed growth due to increase in exports and private consumption. ING analysts comment the rejection of Francois Hollande’s idea of Eurobonds by Angela Merkel: “While the euro zone is still searching for growth, Germany already has it”. However, German business confidence came below expectations in May on Greek concerns, and so did the economic activity data (PMIs). Table. Euro zone's economic data (May 24) Germany avoids recession, but PMIs upset // FBS Markets Inc.

USD/CHF approached 2012 highs Thursday, May 24, 2012 - 08:10 It’s been a long time since we wrote something about Swiss franc. The greenback keeps rising versus Swiss franc – USD/CHF has approached the maximal levels since the beginning of the year close to 0.9600. If the pair managed to make to break above this area and close there, US dollar will be able to test 0.9700/0.9800. Both Tenkan-sen (red) and Kijun-sen (blue) are going up on the Ichimoku chart, though note that the Cloud is still very narrow, so the bulls don’t have much power yet and resistance in the 0.9600 region may prove to be strong. Support lies at 0.9500 (May 18 maximum) and 0.9462 (May 16 maximum). 50-day MA is getting ready to cross the 100-day one bottom-up – it will be a positive signal and the lines will provide good support for the pair. The picture seems bullish, so buying on the dips seems reasonable enough. In the longer term we expect US currency to keep gradually appreciating versus its Swiss counterpart. In the situations of uncertainty investors usually tend to go to safe havens – US dollar and Japanese yen. Swiss franc used to belong to this category, but the SNB’s policy response (EUR/CHF peg at 1.20), but the demand for Swiss currency isn’t now as high as it used to be. Chart. Daily USD/CHF USD/CHF approached 2012 highs // FBS Markets Inc.

NZD: economic, fundamental comments Thursday, May 24, 2012 - 07:24 New Zealand delivered a tough annual budget on Thursday, targeted at a return to a budget surplus by 2015. According to the budget forecasts, deficit will fall sharply in the next two years and a NZ$197 surplus will be reached by 2014-15. Finance Minister Bill English said the new budget will reduce upwards pressure on interest and exchange rates and stop the debt rising. Government is planning to reduce social overhead costs and increase taxes. ANZ: With spending capped New Zealand's interest rates are likely to stay low for a prolonged period. New Zealand's trade balance surplus widened in April to NZ$355 million compared with a previous reading NZ$186 million, but came below the forecasts. The kiwi is strengthening against the greenback on today’s news and on speculation its decline to the lowest levels this year was excessive. Analysts at Westpac expect the downtrend of NZD/USD to extend to at least 0.7370 (Nov 25 minimum) and to 0.7000 in a month. This week a correction to the 0.7650-0.7850 area is expected given its currently oversold reading (14-day RSI is below 30). Chart. Daily NZD/USD NZD: economic, fundamental comments // FBS Markets Inc.

May 24: economic events Thursday, May 24, 2012 - 10:04 There are many headlines today. Firstly, the EU summit revealed that the leaders aren’t willing to compromise: the agreement on Eurobonds wasn’t reached. According to French President Francois Hollande, Eurobonds are necessary to protect the indebted countries from high borrowing costs. German Chancellor Angela Merkel, however, said much stronger economic cooperation in the region is needed before Eurobonds can be issued. EU leaders underlined that they want Greece to remain in the euro area while respecting its commitments. EUR/USD touched $1.2545 yesterday, the lowest level since July 13, 2010, due to mounting worries about a disorderly Greek exit from the euro zone. Elsewhere Chinese HSBC flash Manufacturing PMI fell from 49.3 in April to 48.7 in May indicating that business conditions for Chinese manufacturers deteriorated (the index was already below the benchmark level of 50 points). New Zealand’s trade surplus increased from March reading, but came significantly below the forecasts (355M vs. 450M expected). The nation’s authorities released the budget: deficit’s seen at NZD$ -7.9 billion this year and next before returning to surplus in 2014. NZD/USD is rising after 2-day decline as traders realized that kiwi’s recent depreciation was too rapid. Today watch for European PMI data (forecast mixed, but the bias is negative), UK revised GDP (recession will likely get confirmed) and US core durable goods and unemployment claims figures. May 24: economic events // FBS Markets Inc.

EUR renewed 2012 minimum Thursday, May 24, 2012 - 00:23 Today EUR/USD slid to $1.2614 renewing the year's minimum. Then euro managed to recover to $1.2650 helped by option buyers. Experts say that there is a barrier at $1.2600 with likely stops just beneath ahead of more sell stops through $1.2580. Commerzbank notes that if we see a sustainable bearish breakthrough below $1.2624 (previous 2012 minimum), EUR/USD will head to support at $1.2530 and $1.2066. Resistance lies at $1.2750 (May 17 maximum). In the longer term the outlook for EUR/USD will remain bearish as long as it’s trading below $1.2875/1.3000. On the fundamental part, Morgan Stanley claims that “very little is likely to come out of this summit... The pressure remains on the downside in EUR/USD and any rebounds will be sold into in this environment.” Chart. Daily EUR/USD EUR renewed 2012 minimum // FBS Markets Inc.

OECD: GDP growth forecast Wednesday, May 23, 2012 - 17:28 According to the Organization for Economic Cooperation and Development (OECD), euro zone’s debt crisis may spill over outside the euro area with very serious consequences for the global economy The OECD left its 2012 growth forecasts for 34 member-countries unchanged at 1.6% (euro zone’s concerns were offset by the improving prospects of the U.S. economy). The OECD’s report recommends the ECB to be ready to resume quantitative easing if the situation in the euro region worsens. According to economists, declining inflationary pressure gives space for monetary stimulus. Table. OECD GDP growth forecast for euro region OECD: GDP growth forecast // FBS Markets Inc.

AUD/CAD: technical comments Wednesday, May 23, 2012 - 15:00 AUD/CAD keeps trading in a downward channel since January. Last week a bullish correction followed the break below parity, but the bulls were unable to reverse the long-term downtrend. However, analysts at RBS see the potential for the pair’s upward reversal. The specialists underline that the pattern resembling such reversal model as “doji” was formed last week (see the weekly chart). In their view, the value of this observation increases as the market is trading in oversold conditions (14-week RSI is close to 30). According to RBS, one may go long on AUD/CAD at $1.0060. The bank recommends increasing positions if Aussie overcomes 1.0112 (May 17 maximum). Bullish targets lie at 1.0430 onto 1.0557, while stops may be places around 0.9890. In our view, the picture on the daily and weekly Ichimoku charts is still too negative. We advise you to bear this trade in mind. If the pair rebounds in the 0.9925/00 area (and support looks solid enough), don’t hurry and watch for the parity level. If the rate overcomes 1.0000, get ready to follow the lead of RBS. Support levels: - 0.9943 (38.2% Fibonacci retracement of a 2010-2011 growth); - 0.9925 (support of a channel); - 0.9913 (2009 maximum, 100% Fibonacci retracement of a 2009 growth). Resistance levels: - 0.9977 (May 15 minimum); - 1.0175 (resistance of a channel); - 1.0000 (parity); - 1.0207 (double top in 2010); - 1.0430 (100-day MA, 123.6% Fibonacci retracement). Chart. Daily AUD/CAD

Pound is hurt by the news flow Wednesday, May 23, 2012 - 09:00 British pound is slapped by very poor retail sales data: the index contracted in April by 2.3% (the biggest decline since 2008) after adding 2% in March. Also note that the MPC released its May meeting minutes. The essentials are: * BoE is prepared for another round of QE, but doesn’t want to hurry as inflation will remain above the target 2% level in the medium term. * David Miles dissented from the majority opinion and voted for more QE (25-billion-pound increase). * Decision to keep rates unchanged at 0.50%, as expected, was unanimous. * The MPC would continue to monitor the outlook each month and further monetary stimulus could be added if the outlook warranted it. GBP/USD hit $1.5673, the minimal level since the mid-March after breaching 200-day MA yesterday. Technical analysts at Commerzbank claim that the next target for sterling on the downside lies at $1.5599 (March minimum). Chart. Daily GBP/USD Pound is hurt by the news flow // FBS Markets Inc.

RBS: comments on major currencies Wednesday, May 23, 2012 - 07:30 EUR: Weaker economic data expected later this week will limit EUR/USD upside potential from current levels. GBP: The sharper than expected fall in inflation in April may have lowered a potential barrier to more QE. GBP gains will be capped from here. The fair value for GBP/USD is at $1.54, so the pair may extend decline. A dovish set of BoE minutes is likely to support the ongoing squeeze higher in EUR/GBP. JPY: Japanese policy makers are expressing increased concern over JPY strength. Intervention risk will increase, if USD/JPY approaches 78 yen level. CHF: Swiss consumer confidence rebounded to the maximal level in a year, adding to the view that the economy is stabilizing. Renewed Euro zone fears are likely to increase demand for CHF amid safe haven flows, but the SNB stands ready to act. CAD: Core and headline y/y CPI for April increased and March manufacturing and wholesale sales improved. But there was foreign net selling of Canadian securities in March and external headwinds and positioning adjustments weighed on the CAD. AUD: Aussie has price in a lot of negative developments (lower commodity prices, weaker equities, narrower yield advantage, and domestic political uncertainty). At the same time, uncertainty in Europe suggests risks are still skewed to the downside. NZD: New Zealand’s government to deliver a credible budget on Thursday. Political stability much stronger than Australia. Recovery frustratingly slow, but looks somewhat oversold compared to the AUD. Image from beginforextrading.com RBS: comments on major currencies // FBS Markets Inc.

Yen strengthened as BOJ refrained from easing Wednesday, May 23, 2012 - 07:00 The Bank of Japan has chosen not to deliver more monetary stimulus this month. The central bank kept benchmark rate unchanged at 0.1% and announced no additional bond purchases (the size of asset-purchase fund remained at 40 trillion yen ($503 billion). According to the BOJ, Japanese economy is vulnerable due to the strong uncertainty over the global economic prospects and concerns about the euro area. Japanese monetary authorities assure the markets that they are ready to act if markets become destabilized and yen makes a new spike. The lack of easing made yen to strengthen versus all of its major peers. In addition, Japan’s trading deficit narrowed from 0.62T in March to 0.48T in April – another driver for Japanese currency. Yesterday Fitch cut the nation’s long-term foreign and local currency issuer default ratings to A+ with negative outlooks citing high rising public debt ratios. However, the downgrade didn’t have much impact on USD/JPY as most Japanese government bonds (JGB) are domestically owned. Analysts see the next move to more easing in July after the central bank releases its economic forecasts. NLI Research Institute points out that “Japan is likely finding it more difficult than before to intervene in the currency market given international pressure, so if the yen spikes to around 77 to the dollar, the BOJ may act first through monetary policy to weaken yen.” The pair USD/JPY is trading within gently sloping downtrend since the end of March. Chart. Daily USD/JPY Yen strengthened as BOJ refrained from easing // FBS Markets Inc.

Bank of America: EUR/JPY may gain Wednesday, May 23, 2012 - 07:00 According to Bank of America, the common currency may reach its highest level against the Japanse yen in almost three weeks. Analysts expect EUR/JPY to strengthen in a short term to 105.80 yen (50% Fibonacci retracement of a decline from March 21 maximum to May 18 minimum). In their view, the euro is looking oversold (14-day RSI is close to 30, signaling the downtrend may reverse) Since the end of March the euro has declined 8% versus the Japanese currency. Chart. Daily EUR/JPY Bank of America: EUR/JPY may gain // FBS Markets Inc.

JPMorgan: forecast for fx majors Wednesday, May 23, 2012 - 06:15 According to analysts at JPMorgan Chase, the greenback is likely to strengthen versus its major counterparts as a “safe-haven” against the backdrop of possible Greek exit from the euro zone. Analysts expect the economic slump in China and in the U.S. to weaken commodity currencies as the prices will fall. Japanese yen is the only currency that is expected to appreciate against the dollar. Specialists sharply lowered their forecasts for EUR/USD to $1.22 in Q2 and to $1.24 by the end of 2012. USD/CAD is forecasted to reach C$1.04 by mid-year AUD/USD may fall to $0.96, while NZD/USD – to $0.73. USD/JPY, however, may weaken to 78.00 yen in Q2. JPMorgan: forecast for fx majors // FBS Markets Inc.

Key options expiring today Wednesday, May 23, 2012 - 06:15 Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (2 p.m. GMT). Here are the key options expiring today: EUR/USD: $1.2650, $1.2725, $1.2730, $1.2750, $1.2850 and $1.2870; USD/JPY: 78.75, 79.00, 79.75, 79.85, 80.00 and 80.30; EUR/GBP: 0.8040 and 0.8100; USD/CHF: 0.9300 and 0.9400; AUD/USD: $0.9900 and $0.9950; USD/CAD: 1.0120 and 1.0140. Image from yourmoneydictionary.com Key options expiring today // FBS Markets Inc.

May 23: economic events Wednesday, May 23, 2012 - 05:45 The Bank of Japan has chosen not to deliver more monetary stimulus this month. The central bank kept benchmark rate unchanged at 0.1% and announced no additional bond purchases. The lack of easing made yen to strengthen versus all of its major peers. In addition, Japan’s trading deficit narrowed from 0.62T in March to 0.48T in April – another driver for Japanese currency. Risk sentiment today was also hurt by the reports of former Greece Prime Minister Lucas Papademos saying that preparations for the country's exit from the euro zone are being considered. Although Papademos regards such move as unlikely, the risk, according to him, seems real. Asian stocks lost 1.5% (MSCI Asia Pacific Index). AUD/USD hit the minimal level since 2011 sliding to 0.9741. EUR/USD is consolidating above 2012 minimum of $1.2624. Also watch today: • Great Britain: MPC meeting minutes. According to the forecasts, the MPC officials have voted unanimously to keep the monetary policy unchanged. Retail sales in April are forecasted to decline by 0.5% vs. a 1.8% growth in March – that would be a very bad sign indicating that the condition of the recessed UK economy aren’t improving at all. • Europe: Leaders of the EU 27 member states assemble in Brussels for a crisis meeting. New French President François Hollande will try to push the currency union from austerity to growth promotion and make Germany agree to the euro bonds – debt issued for the euro zone as a whole. Analysts at Westpac say that the outcome of the meeting will hardly stimulate markets. • Canada: Core retail sales in March may grow by 0.6% compared with a 0.5% increase in February. The nation’s economy for now seems stable enough. • U.S.: New home sales are also expected to increase to 336K in April vs. 328K in March. May 23: economic events // FBS Markets Inc.

GBP/USD: bearish outlook Tuesday, May 22, 2012 - 13:30 On Tuesday GBP/USD resumed a bullish trend after the Britain’s CPI data release and the IMF “dovish” comments. Annualized April CPI groth ratefell to 3.0% compared with the previous reading 3.5% and a 3.1% forecast. According to analysts, if the inflation declines further in May, the Bank of England will get freedom to add monetary stimulus to support the economy. According to the IMF, the Bank of England needs to inject more stimulus into the U.K. economy (through more bond purchases or interest rates cuts) as risks from the euro zone may underpin Britain’s growth. IHS: While it will take more than one month of improved inflation data to ease the Bank of England’s recently heightened concerns over its stickiness, April’s sharp drop nevertheless facilitates further QE by the central bank if the economy continues to struggle for growth or is seriously affected by events in Greece. Tomorrow minutes of the May 9-10 MPC meeting will be released, showing how policy makers voted. This month the bond-purchase program remained unchanged at 325 billion pounds. On Thursday Britain’s revised GDP in is expected to confirm that the economy shrank 0.2% in Q1 and, therefore, is in a technical recession. Lackluster economic data, “dovish” BoE comments and increasing concerns on a new QE are expected to weigh on the British currency. Chart. Great Britain's CPI Source: Forexstreet Chart. Daily GBP/USD GBP/USD: bearish outlook // FBS Markets Inc.

USD/CAD: technical comments Tuesday, May 22, 2012 - 12:00 This week the Canadian dollar strengthens against its U.S. counterpart due to the slightly improved risk sentiment. On the H4 chart, however, we see USD/CAD went up today after Fitch downgraded Japan’s long term rating and yields on Spanish bills increased. The cross has been trading in a bullish channel since early May, so the loonie’s growth is likely to be a correction. On the H4 chart USD/CAD is trading above the 55, 100 and 200 upward MAs. Strong support for the pair lies at C$1.0145 (23.6% Fibonacci retracement of the growth from April 27 minimum to May 21 maximum and the support of the upward trend line). On the H4 chart, however, MACD indicator stays in the positive territory, but below the signal line, giving a sell-signal. Resistance for the pair lies at C$1.0200, C$1.0225, C$1.0245 (local maximum), C$1.0275 and C$1.0300, while support – at C$1.0165, C$1.0130, C$1.0090, C$1.0050, C$1.0025 and C$1.0000. Chart. Daily USD/CAD USD/CAD: technical comments // FBS Markets Inc.

EUR/USD: technical comments Tuesday, May 22, 2012 - 07:30 Analysts at RBS claim EUR/USD may rebound towards $1.2963 (50% Fibonacci retracement of the decline from May 1 maximum to May 18 minimum. The pair’s currently consolidating in the $1.2790 area (23.6% Fibonacci retracement). Though these levels may be considered as a good entry for shorts, note that euro’s got some support on H4 chart (trend line started to form, MACD and RSI are positive). In addition, one may see a “bullish engulfing” candle on the daily chart. On the upside, resistance levels for the single currency lie $1.2805 (H4 55 MA), $1.2825 (yesterday’s maximum) and $1.2869 (May 15 maximum). The general sentiment, however, remains bearish as long as EUR/USD trades below the psychological level of $1.3000, so euro’s still extremely vulnerable on the downside. Support is seen at $1.2780 and $1.2720 (H4 chart). The pair’s decline will accelerate if $1.2624 (2012 minimum) is breached with $1.1875 (June 2010 minimum) getting in focus. Chart. H4 EUR/USD Chart. Daily EUR/USD EUR/USD: technical comments // FBS Markets Inc.

May 22: economic background Tuesday, May 22, 2012 - 06:30 EUR/USD shows a two-day advance ahead of the EU summit on Wednesday, which is expected to show who stands where among the European leaders. German Chancellor Angela Merkel said yesterday that good cooperation “doesn’t exclude differing positions” referring to Francois Hollande’s intention to push through the idea of Eurobonds. US session was positive with S&P 500 rising by 1.6%. Asian stocks added 1.2% today (MSCI Asia Pacific Index). Risk sentiment managed to improve, though the markets lack momentum. Commodity currencies got slightly higher versus the greenback. Demand for the New Zealand dollar and for the Aussie was supported as Asian stocks extended a global rally. US dollar itself gained a bit against Japanese yen and Swiss franc. On Wednesday the markets will be eyeing the Bank of Japan’s meeting. The benchmark rate is seen unchanged at 0.10% level, though the central bank may be forced to do more easing. Events to watch: • Great Britain: Consumer Price Index (CPI) in April is forecasted to grow by 3.1% (a decline in comparison with a 3.5% growth in March, but still much higher, than a 2% BoE target). It’s possible, however, that the rate falls to 3% (the lowest since February 2010) saving the BoE Governor Sir Mervyn King from issuing the inflation letter (the letter is only required if the inflation is below 1% or above 3% and is written to explain why inflation has overshot the target). Public sector net borrowing in April may decline to minus 5.4B vs. 15.9B in March. • U.S.: Annualized number of existing home sales – the main gauge of housing market conditions – may increase from 4.48M in March to 4.65M in April supporting the idea of the nation’s economic rebound. The labor market is America’s weakest spot and many investors go the US nowadays only because it’s better than Europe. • Europe: Consumer confidence in the euro area will likely remain low. Don’t wait for any surprises here. Spain will sell 3- and 6-month bills. • The OECD (Organization of Economic Cooperation and Development) will release its global growth forecast. May 22: economic background // FBS Markets Inc.

EUR/USD: bulls vs. bears Monday, May 21, 2012 - 15:45 The common currency resumed a bullish correction vs. the greenback on Monday. The G8 meeting, held on May 18-19, didn’t give any clear answers, but the leaders expressed hope that Greece manages to stay in the euro zone. The G8 countries also stressed that their "imperative is to promote growth and jobs", giving a hint they are turning away from austerity. Growth is expected to be the main topic of the EU meeting on Wednesday (May 23), where French President Francois Hollande is expected to call for Eurobonds. According to analysts, focus on growth means the higher ECB involvement, “dovish” monetary policy and a weaker euro. The uncertainty in Europe persists: investors remain concerned about the possible consequences of the so-called “Grexit” (Greece may be forced to leave the euro zone if the anti-austerity party wins the elections in June) and about the situation in Spain’s banking sector (the country is expected to ask for bailout soon, 10-year bond yields increased to 6.29%). Bulls dominate the market on Monday; however, most analysts believe it's a short-time correction. EUR/USD still trades far below the 55-, 100- and 200-days MAs. MACD stays on the negative territory and below its signal line, giving sell-signals. The pair trades far below the daily Ichimoku Cloud. The bullish trend may strengthen if the pair manages to fix above the strong $1.2812 resistance (today’s maximum). Further resistance lies at $1.2845, $1.2880, $1.2910, $1.2930, $1.2950, $1.2970 and $1.3010, while support – at $1.2750, $1.2710, $1.2680, $1.2665 (May 17 minimum), $1.2640 (May 18 minimum). Chart. Daily EUR/USD EUR/USD: bulls vs. bears // FBS Markets Inc.