Bloomberg L.P.

Global Weekly Technical Strategy

August 22nd, 2008

Topic: The Bloomberg Weekly Strategy is back! Going forward you will see a broader universe of
securities being analyzed, weekly themes such as a particular indicator or market, and input by
Bloombergs Application Specialists from around the world.

This week: The Trends in FX

Japanese Yen: A Zigzag Correction
Brazilian Real Futures: Support in a downtrend
Euro: The Breakdown

Indicator of the Week: The REX Oscillator

Seminars / Books:
Upcoming Bloomberg seminars in New York, Chicago, Boston, Stamford, San Francisco,
London, and Sao Paolo
Press has been gaining on - Fibonacci Analysis by Constance Brown
Visit {BOOKS<Go>} to place your order!

Market Recap as of 12:11pm EST:

AUD BGN Curncy

GBP BGN Curncy
CAD BGN Curncy
DKK BGN Curncy
EUR BGN Curncy
JPY BGN Curncy
NZD BGN Curncy
NOK BGN Curncy
SEK BGN Curncy
CHF BGN Curncy

Last Price
0.8689
1.85545
1.04612
5.0385
1.48045
109.87
0.71105
5.36255
6.3208
1.097

% Chg WTD
0.38
-0.40
1.26
0.85
0.86
0.51
0.91
1.17
0.58
0.13

Questions/Comments:
Paul Ciana, CMT pciana@bloomberg.net
Ron William, CMT, STA - rwilliam1@bloomberg.net
Juan Manuel Quintero jmquintero@bloomberg.net

% Chg MTD
-7.72
-6.33
-2.05
-5.04
-5.06
-1.87
-2.96
-4.29
-4.47
-4.50

%Chg YTD
-0.64
-6.37
-4.56
1.52
1.54
1.62
-6.96
1.39
2.15
3.39

Bloomberg L.P.
Chart of the Week {JPY Curncy<go>}

Japanese Yen, Daily Chart, One year

The Yen has been weakening against the dollar since setting a record low rate of 95.7610 in February
2008. Since then, the exchange rate has moved in favor of the US dollar by about 15%. The Directional
Movement Indicator coupled with the ADX line shows the rise in the USD and fall in the JPY may be short
lived. The ADX line is at a level of 17 suggests there is no trend that exists. The DMI lines have crossed
ten times since the low in February and further suggests no trend.
Since the high in June 2007, Ive counted five waves down and what looks to be a zigzag corrective wave
up. This type of wave consists of three waves (A,B,C) with five waves in A and C and 3 in B. Typically,
wave C is equal to or longer than wave A. Right now wave 3 of C appears to have completed at the 50%
retracement level of the entire trend and is entering wave 4. A logical path for the completion of this
corrective pattern would be Wave 4 could finding support at the cloud like wave B and wave 2 of C did,
and then wave 5 finishing near the 61.8% level.

- Paul Ciana

Bloomberg L.P.
Chart of the Week {UC1 Curncy}

Dolar Futuro: Brazilian Real Futures Contract - Daily - YTD

Devaluation finally came to Latin America after a long period of currency appreciation. This graph
displays the Dolar Futuro, the USD/BRL future traded at the Bolsa de Mercadorias e Futuros (BM&F),
along with the REX oscillator. This contract is one of the world's most actively traded currency futures.
The REX oscillator was developed by Brazilian trader Eduardo Moreira, who named it after his dog Rex. It
measures the market behavior based on the relationship between the closing value to the open, high, and
low values of the same bar. A big difference between the high and the close in a given period indicates
weakness, while a large difference between the low and the close indicates strength.
The REX oscillator shows divergence on this graph. The market price has reached low prices on Feb 28,
Apr 18, June 25 and in July 30. In each case the price is lower than the previous low, while the REX
oscillator for those same dates is reaching a low that fails to be lower than the previous, signaling the
divergence. This is an indication of weakness of the downtrend. This bearish move finished with a
number of up closes, starting on August 5.
Since the breakout above the downward sloping resistance line, price is comfortably finding support at
th
~1610, identified by the breakaway gap that formed on August 8 , 2008. Watch this level as it will finalize
the signal between a change in trend to up or a continuation of the downtrend.

- Juan Manuel Quintero

Bloomberg L.P.
Chart of the Week {EUR Curncy}

FTSE 100 Index - Brent Crude / FTSE100 - Gold / FTSE100 - Weekly

The United Kingdom's FTSE100 equity index is currently staging a relief-rally, after declining sharply by
some 20% during May-June. Energy and mining stocks, notably BP, Royal Dutch Shell, Rio Tinto, and
BHP Billiton hold a significant index weighting and have arguably helped aggrevate the recent slide lower.
By charting Oil and Gold relative to the FTSE100, we can identify key changes in performance. The chart
above illustrates clear relationships between the price of the UKX and its performance against Brent
Crude Oil and Gold. The dashed blue lines point out the areas where the relative strength of Crude and
Gold vs. the UKX were peaking and the UKX was bottoming. The Gold/UKX chart (bottom panel) is
increasingly interesting as a double top has formed this year providing support for the recent rally in the
UKX. The UKX put in a lower low this year yet the performance of gold compared to the UKX did not
significantly improve. This is a sign that Gold is weakening and the UKX should benefit from it.

- Ron William

EUR/USD overlaid with Bollinger Band measures - Daily, Dec 2005 - Aug 2008
The Euro has fallen almost 9% from its all-time high against the greenback, having punched through one
of the largest consolidations recorded since the uptrend re-launched in late 2005. In hindsight, this wide,
yet persistent trading range, between $1.5283 to the all-time high of $1.6038, flagged a key distribution of
power from buyers to sellers.
Seasoned traders know there is a natural relationship between the extent of a price consolidation and its
subsequent breakout potential. A closer look at the chart above shows the recent consolidation (marked
C) was relatively larger, in terms of height, than prior ones, (B) and (A). Moreover, analysis of the
Bandwidth of Bollinger Bands (lower window), which measures a securitys volatility, tells us the current
breakout has reached a historical extreme (annotated with blue stars).
How much further can the major currency fall? By mirroring the range of the price consolidation lower,
worth 755 pips, a measured projection can be found nearby at $1.4528. Slippage below here is likely to
be cushioned by a confluence of support between 1.4310-65, given by the Dec-Jan lows, trend-line
support and 38.2% Fibonacci retracement of the previous uptrend. Only a sustained break would suggest
a half-way retracement to 1.3830.
-

Ron William

Bloomberg L.P.
Indicator of the Week REX Oscillator

The Rex Oscillator is a study that measures market behavior based on the relationship of the closing
value to the open, high, and low values of the same bar. The theory behind the Rex Oscillator is that a big
difference between the high and close on a bar indicates weakness. Conversely, wide disparity between
the low and close indicates strength. The difference between open and close also indicates market
performance.
The True Value of a Bar (TVB) gives us an indication of how healthy the market is. It is possible to have
a negative close and a positive TVB, and vice versa. This indicates that the market is building strength
on the opposing side of the trend.
The Rex Oscillator is a moving average of the TVB, indicating the inertia of the market. When the Rex
Oscillator turns positive in a bearish trend, a reversal is indicated. Likewise, Rex turning negative in a bull
market indicates a reversal to the downside.
The TVB is defined as:
TVB = (Close-Low) + (Close Open) (High Close), or
= 3 * Close (Low + Open + High)
Rex Oscillator (n periods) = moving average (n periods) of TVB
A special thank you to Eduardo Moreira of Banco UBS Pactual, Sao Paulo, creator of the Rex Oscillator.

- Tom Schneider

Bloomberg L.P.
Upcoming Seminars
New York:

9/ 4/08 3:45PM - How Green is Your Portfolio?

9/17/08 8:00AM - Earnings Guidance & Long-Term Value Creation

Chicago:

9/10/08 2:00PM Equity Search and Screening Tools

Boston:

9/15/08 4:30PM Technicals with Tom DeMark

Stamford:

9/16/08 4:30PM Technicals with Tom DeMark

San Francisco:
London:

8/19/08 2:00PM - Getting Started: Charting & Alerts

8/20/08 2:00PM - Advanced Technical Analysis

9/05/08 9:00AM Oil & Gas with Julio Bueno, Secretary of State of Rio De Janeiro
9/11/08 11:30AM Shining Some Light on Dark Pools: A Panel Discussion

Sao Paulo: 9/23/08 12:30PM Identifying Trends with Fibonacci, Candle Patterns and more
9/25/08 12:30PM Understanding Oscillators and DeMark Indicators

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