MARKET DRIVERS – CURRENCIES

FX Research • 29.07.2010 • Jyske Markets

Today’s Comment
Wednesday turned out to be extraordinarily
quiet in the FX markets, as no economic
indicators were published that could boost
the level of activity. The publication of Fed’s
Beige Book last night (Danish time) was the
only considerable event (in addition to
inflation figures from Germany). Overall, the
Beige Book revealed that the economy is still
improving but the report generally gave a
picture of a slightly weaker economic
development than in June. This did not,
however, come as a surprise considering
that generally the economic indicators have
been a bit on the slow side recently, and the
market did not react in any considerable
way to the announcements. Hence the dollar
closed more or less unchanged against the
euro.
Yesterday BoE’s King and the other
members of the monetary-policy committee
attended a hearing by the House of
Commons’ Treasury Select Committee . In
his initial remarks, King stated that there is
still some way to go before interest rates in
the UK are back at a normal level, and David
Miles (one of the ordinary members’ of the
monetary policy committee) indicated that,
if necessary, Bank of England would increase Today’s Chart – EUR/GBP
the quantitative easing to protect economic
growth. Hence it was made clear that
neither King nor Miles share Andrew
Sentance’s wish to raise the interest rate to
dampen the inflationary pressure. And
indeed, we believe that inflation will weaken 0,92
due to the many idle resources in the
economy, and considering the 0,90
intensification of the fiscal tightening in the
recently presented crisis budget, we think 0,88
Bank of England will keep the rate
unchanged until February. Therefore the 0,86
market did not seem to be particularly
surprised by yesterday’s announcements, 0,84
and therefore we only saw very small
fluctuations for pound sterling. 0,82
Today’s Key Events 0,80
09:15 Consumer confidence (SEK)
09:30 Retail sales (SEK) 0,78
09:55 Unemployment (DEM) 11 feb 25 mar 06 maj 17 jun 29 jul
14:30 Jobless claims (USD)
Thursday night: Moving Average (55D ) Moving Average (100D )
01:15 PMI manufacturing (JPY)
01:30:00 Consumer prices (JPY)
01:30:00 Unemployment (JPY)
01:50:00 Industrial production, preliminary Source: Bloomberg/Jyske Bank
(JPY)

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MARKET DRIVERS – CURRENCIES
FX Research • 29.07.2010 • Jyske Markets

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

target
Majors
EUR/USD 130.10 Focus on internal imbalances in the euro zone, political disagreement and pressure on Southern European govt. bonds sent down EUR - Resistance 130.25 next 131.00
The US is somewhat ahead of Europe in the economic cycle, and for some time economic indicators have shown good trends - Support: 124.80 next 124.00 123
The Fed’s quantitative easing keeps the USD value low; higher government debt does not result in increases in the US market rate as it should +
USDDKK 572.77 Focus on internal imbalances in the euro zone, political disagreement and pressure on Southern European govt. bonds sent down EUR + Resistance 597.08 next 600.93
The US is somewhat ahead of Europe in the economic cycle, and for some time economic indicators have shown good trends + Support: 572.09 next 568.82 606
The Fed’s quantitative easing keeps the USD value low; higher government debt does not result in increases in the US market rate as it should -
EURGBP 83.30 Focus on very negative public finances: Uncertainty about future fiscal tightening (and UK’s rating) may weaken pound sterling + Resistance 83.95 next 85.30
Pound sterling was under massive pressure when the financial crisis peaked, and (too) much misery has already been discounted - Support: 83.15 next 82.10 82.50
We expect that the quantitative easing came to an end in February and that the BoE will start normalising its monetary policy in H2 -
GBPDKK 894.47 Focus on very negative public finances: Uncertainty about future fiscal tightening (and UK’s rating) may weaken pound sterling - Resistance 896.15 next 907.61
Pound sterling was under massive pressure when the financial crisis peaked, and (too) much misery has already been discounted + Support: 887.61 next 873.56 903
We expect that the quantitative easing came to an end in February and that the BoE will start normalising its monetary policy in H2 +
EURJPY 113.38 Focus on debts in Southern Europe has caused pressure on the single European currency and shifted the balance of power between EUR and JPY - Resistance 114.40 next 115.50
Risk of renewed risk aversion supports JPY slightly - Support: 113.15 next 111.60 110
Decent growth in recent months; the economy is, however, still fragile; low growth ahead and deflation may once again be a theme +
JPYDKK 6.57 Focus on debts in Southern Europe has caused pressure on the single European currency and shifted the balance of power between EUR and JPY + Resistance 6.59 next 6.68
Risk of renewed risk aversion supports JPY slightly + Support: 6.51 next 6.45 6.77
Decent growth in recent months; the economy is, however, still fragile; low growth ahead and deflation may once again be a theme -
EURCHF 137.41
Please refer to the publication, CHF: stil moving upwards -

CHFDKK 542.27
Please refer to the publication, CHF: stil moving upwards -
MARKET DRIVERS – CURRENCIES
FX Research • 29.07.2010 • Jyske Markets

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

target
Scandinavia
EURNOK 800.52 Continuing improvement of key indicators in Norway: labour market is strong and housing market is close to its record-high levels - Resistance 812 next 818
Norges Bank was one of the first ones to raise its interest rate. Even though we may be in for a slow start, we foresee 3% in the 1-year term - Support: 795 next 788 800
Correction in the equity market/rising risk aversion will still be able to put pressure on the NOK +
NOKDKK 93.04 Continuing improvement of key indicators in Norway: labour market is strong and housing market is close to its record-high levels + Resistance 93.72 next 94.56
Norges Bank was one of the first ones to raise its interest rate. Even though we may be in for a slow start, we foresee 3% in the 1-year term + Support: 91.76 next 91.09 93.10
Correction in the equity market/rising risk aversion will still be able to put pressure on the NOK -
EURSEK 948.62 Still risk that SEK will suffer a blow in the event of risk aversion - Resistance 965 next 980
Riksbanken expresses optimism about the economy and thinks Sweden has been through the worst part of the crisis + Support: 935 next 925 980
After GDP for Q2, Q3 and Q4 2009 has been revised up, an interest-rate hike in July is very likely +
SEKDKK 78.51 Still risk that SEK will suffer a blow in the event of risk aversion + Resistance 79.69 next 80.55
Riksbanken expresses optimism about the economy and thinks Sweden has been through the worst part of the crisis - Support: 77.21 next 76.03 76.00
After GDP for Q2, Q3 and Q4 2009 has been revised up, an interest-rate hike in July is very likely -
MARKET DRIVERS – CURRENCIES
FX Research • 29.07.2010 • Jyske Markets

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

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

Please note: We point out that FX investment is currently associated with extraordinarily high uncertainty.
But for long-term risk tolerant investors, there may be good investment opportunities in these turbulent
times. This recommendation is only relevant for very risk-tolerant clients with the right risk profile and the
overall financial strength to cope with any loss that may be incurred.
MARKET DRIVERS – CURRENCIES
FX Research • 29.07.2010 • Jyske Markets

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