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Currency Currents Professional | Black Swan Capital www.blackswantrading.com Page 1 of 12
CURRENCY CURRENTS
Professional
23 May 2011 Weekly
Index
Existing Commitments – Commitment of Traders Report, P2
Yielding – Comparison of 3-month and 10-year Interest Rates, P3
FX Scripts and Charts – Technical Analysis and Commentary, P4-10
Intermarket View — Key correlations P11
Positioning – Open Position Summary, P12
Bottom Line Trades and setups
Dollar Index – Testing upper trend channel resistance. Working higher on key themes
playing out as expected: eurozone debt concerns and slowdown in Chinese growth. P4
USDJPY – Poised to rock’n roll or not. Recession and downgrades…hmmm!! P5
EURUSD – Breaking…finally…on news. P6
USDCHF – Still think it is game over for Swiss, but benefiting relatively on eurozone
turmoil… P7
GBPUSD – Working lower…inflation still a big concern i.e. keeping Bank of England in the
game, but the economy still looks quite ugly. P8
USDCAD – Same comments…Rallying right on E-Wave cue! Now testing the downtrend
line going back to August 2010. Move playing along with commodities correction. P9
AUDUSD Love coming out of commodities means premium fades here…question is how far
does this go? I think a lot farther. P10
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Existing Commitments Weekly Commitment of Traders Summary
Decent conversion flow from away from maximum dollar bearish may be underway—net
swing for the week of 71,761 contracts to dollar bullish positioning.
Euro and pound biggest swings, from bullish 73% and 64%, to 65% and 49%,
respectively.
Commitment of Traders Report Commitment of Traders Report
Currency Futures Currency Futures
17-May-11 10-May-11
Long % Short % Total Long % Short % Total
yen 38,016 63% 22,643 37% 60,659 yen 36,100 61% 23,046 39% 59,146
euro 89,941 65% 48,296 35% 138,237 euro 98,054 73% 36,607 27% 134,661
Swiss 24,409 74% 8,748 26% 33,157 Swiss 27,905 71% 11,569 29% 39,474
pound 30,327 49% 31,255 51% 61,582 pound 41,368 64% 23,250 36% 64,618
C$ 36,008 79% 9,717 21% 45,725 C$ 42,698 89% 5,495 11% 48,193
A$ 61,179 86% 10,260 14% 71,439 A$ 72,871 85% 12,550 15% 85,421
NZ$ 22,518 69% 9,894 31% 32,412 NZ$ 22,828 71% 9,114 29% 31,942
M. peso 112,311 94% 7,399 6% 119,710 M. peso 123,092 96% 5,027 4% 128,119
Total 414,709 74% 148,212 26% 562,921 Total 464,916 79% 126,658 21% 591,574
Commitment of Traders Report
Currency Futures
Change 10-May-11 to 17-May-11
Swing
Long Short Net L/(S) % Ttl
yen 1,916 (403) 2,319 3.9%
euro (8,113) 11,689 (19,802) -14.7%
Swiss (3,496) (2,821) (675) -1.7%
pound (11,041) 8,005 (19,046) -29.5%
C$ (6,690) 4,222 (10,912) -22.6%
A$ (11,692) (2,290) (9,402) -11.0%
NZ$ (310) 780 (1,090) -3.4%
M. peso (10,781) 2,372 (13,153) -10.3%
Total (50,207) 21,554 (71,761) -12.1%
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Yielding A look at major currency yield differentials
Yield across the industrialized world still aren’t reflecting much inflation concern. 10-yr
yields in all countries fell last week.
*Source of inflation data: The Economist
5/23/2011
Yield Weekly Diff. Yield Weekly Diff. Inflation Real Yield
3-month Change +/- $ Yld 10-year Change +/- $ Yld Rate 3-Month 10-year
JPY 0.112 0.000 0.067 1.131 -0.010 -2.001 0.0 0.102 1.12
EUR 0.922 0.000 0.877 3.024 -0.071 -0.108 2.8 -1.878 0.22
CHF 0.230 0.215 0.185 1.859 -0.066 -1.273 0.3 -0.070 1.56
GBP 0.599 -0.002 0.554 3.328 -0.079 0.196 4.5 -3.901 -1.17
CAD 0.967 -0.010 0.922 3.172 -0.042 0.040 3.3 -2.333 -0.13
AUD 4.828 -0.029 4.783 5.339 -0.099 2.207 3.3 1.528 2.04
USD 0.045 0.020 0.000 3.132 -0.071 0.000 3.2 -3.155 -0.07 …but eurozone periphery is still be hammered on risk. Greek restructing a foregone conclusion?
Greece 10-yr now at 17.3%! Spain at 5.6% and rising!
Ireland at 10.9% and testing old high!
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FX Scritps & Charts A look at our individual currency stories
US $ Index 7626 (last week 7553)…testing the upper channel.
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USDJPY Daily: No change to view…same expectations
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EURUSD Daily: Breaking on news! 50% retrace from B low at 1.3900.
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USDCHF Daily: Correction complete for wave 3 higher?
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GBPUSD Daily: Through channel resistance; next chart support at 1.6049
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USDCAD Daily: Above downtrend channel resistance
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AUDUSD Daily: Big test today; below 1.0500 sets the stage for a quick fall to 1.0360 (50%
retracement area).
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Intermarket Chart View Key intermarket relationships
Revisiting that USDJPY versus 10-year yield correlation; recession suggests rates go lower, but
risk says otherwise….a tug-a-war?
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Positioning Open Positions Summary
23 May 2011 8:00 a.m. ET
Open Positions
Entry Long Entry Stop Last Profit Profit Percent
Date Symbol (Short) Price Loss Price PIPs Target Returns
MAJORS
5/13/2011 EURUSD Short 1.4230 1.4350 1.4034 196 1.3720 1.4%
5/17/2011 USDJPY Long 81.62 80.1000 81.87 25 87.25 0.3%
Jack Crooks
Black Swan Capital