weekly roundup -06!16!11 - final

7/31/2019 Weekly Roundup -06!16!11 - Final

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Market Commentary - for Institutional Client use only.

Refer to information, disclosures and qualifications at the end of this publication.

16 June 2011 Tom Fitzpatrick (1-212-723-1344)Shyam Devani (44-207-986-3453)

Alex Good (1-212- 723-3469)CitiFX Technicals Portfolio [email protected]

Weekly Roundup

Chart of the Week:Europe: Oops

Stresses in Europe have once again intensified.

This week we look at the Euro, European fixed income and also European Equity indices

Oh dear!...............

Page 2

Equities

The S&P, the Dow Transports and the Nikkei 225 are near pivotal long term levelsthat could suggest the beginning of substantial downside moves if breached

Page 21

Foreign Exchange

As our analysis on the Euro would imply, the dollar looks to outperform its majorcounterparts

Page 23

Commodities

Both crude oil and copper have bearish technical set ups with crude looking especiallyprecarious if oil moves below $93 and copper moves beneath $400

Page 24

Emerging Markets

USDBRL and USDINR have put in bases at meaningful long term levels Incremental USD strength across EM could accelerate if nearby levels give way The Sensex, the Bovespa and the Shanghai Composite, the three major equity

indices of India, Brazil and China respectively are all in established downtrends andare nearing long term supports

Page 25

TechnicalsTechnical Developments in the Foreign Exchange andAsset Markets
mailto:[email protected]:[email protected]:[email protected]


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CitiFX Technicals 016 June 2011



2

Chart of the Week: Europe ... Oops

Stresses in Europe have once again intensified.

This week we look at the Euro, European fixed income and also European Equityindices

Oh dear!...............

EURUSD-Daily chart

Source: Aspen Graphics / EBS 16 June 2011

EURUSD posted an almost perfect 76.4% pullback with its recent high of 1.4696 (The 76.4%pullback level was 1.4711) missing it by just 16 pips. (The USD-Index missed its 76.4% pullbackby just 5 pips)Since then it has fallen quite rapidly and is now approaching the 1.3968 low posted on 23

rdMay.

A close below here would suggest an acceleration in its losses- but how far can it go?A minimum target on the break would be for a return to its 200 day moving average at 1.3817but that would seem quite a shallow move if we break that 1.3968 pivot, so our sense is that the

move would be deeper than that. Rising trend line support below here comes in at 1.3577If we were to see a move of equal magnitude to that seen from 1.4940 to 1.3968 (972 pips) offthe recent 1.4696 high it would give us 1.3724If we look at retracements of the move from low to high this year (1.2860 to 1.4940) we see the61.8% pullback at 1.3655 and the 76.4% pullback at 1.3351

If we look at retracements of the move from 1.1876 last June to the 1.4940 high we seepullbacks as follows

1.3770- 38.2% 1.3408- 50% 1.3046- 61.80% 1.2599- 76.4%

The 55 week moving average comes in at 1.3524


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Now let us look at the chart of 1 month implied volatility on EURUSD

Source: Aspen Graphics / Bloomberg16 June 2011

The recent push higher here has brokeno Downward sloping trend line resistanceo Horizontal trend line resistanceo The neckline of a well defined inverted head and shoulders

This would suggest a minimum target of 17%Recent overlay of this volatility chart and EURUSD (Inverted)

Source: Aspen Graphics / Bloomberg 16 June 2011

This simple overlay would suggest that if we were to head towards 17% on 1 month implied volatilitythat USDEUR could be around .76 which equates to something close to 1.3150 on EURUSD

That is before we even look at the more medium term chart of 1 month volatility


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EURUSD 1 month implied volatility

Source: Aspen Graphics / Bloomberg 16 June 2011It cannot be ruled out (although we hope not) that this chart is forming a major double bottom with aneckline around 17.75%.A break of that level if it were to occur would suggest a move towards 26%+Why do we hope not?

1. The only prior time we had a run to levels of that magnitude was the move close to 29% in October2008 off a low of around 8% in August that year.(The present low was just over 9% in earlyApril).That period, as we know, was one of extreme financial stress which saw EURUSD drop fromover 1.60 in July to a low at 1.2329 by October

2. The last time we saw a big double bottom like this that we did not want to see complete was. The VIX in October of 2008


The neckline was at 50% and suggested a move towards 90% which at the time seemed nothingshort of ridiculous.The peak was 89.5% in October 2008.

However, that longer term chart remains a work in progress unless and until we see a movetowards that 16%+ level on volatility. As a consequence the present set up suggests a dangerthat the EURUSD move could extend to at least the mid to high 1.30s (1.35 -1.38) with apossibility that it extends to the low 1.30s.


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However...we are developing some concerns with regard to our big picture assessment which bearvoicing.We have long believed that this chart has been the best overlay for EURUSDEURUSD (Comparison of 1985-1995 EURUSD (EUR as its components) with 2002-2012


It is this chart that led us to establish a 2011 target of EURUSD of 1.4850 for end 2011 and a highin the move sometime in early 2012 possibly above 1.50. We have not at this point abandonedthat view BUT.......Herein lies the conundrum. The move up that we saw in EURUSD to the 1.4940 peak pretty muchsatisfied our 2011 and overall trend targets as per this overlay. However, that was the move weexpected by the finish of 2011. A move to much higher levels followed by a fall away towards 1.4850or a move lower followed by a strong bounce towards 1.4850 later in the year would both satisfy the leveland timeframe targets but then the pattern would look nothing like the overlay.In November 2009 as EURUSD stood at 1.5145 we were convinced that as per the overlay above we

were set to move to new highs above the 1.6040 level set in July 2008. It never happened as we initiallyunderestimated the magnitude of the European sovereign crisis that was brewing.As a consequence the rally was truncated early and we saw EURUSD fall from 1.5145 in November2009 to 1.1876 by June 2010 breaking below the 2008 lows. That move was similar to the EUR (as itscomponents) fall below the 1991 lows into its lows in July 1993.That dynamic taught us that overlays with history can work very well all else being equal butcan become very distorted if a major new event comes into play.What if what we are wrong about here is the timeframe and not the levels???? What if EURUSDhas already made the move that signalled the last rally in the decade long bear market for the USD into1995?The 1995 peak did not overcome the 2 prior peaks set in 1991 and 1992 just as so far the 2011 peakhas not overcome the highs posted in 2008 and 2009.While it is too early to establish this as our base case scenario, we are now raising questions about a

medium term view that we have held for some time. For now, we will stick with the view that what we are

?


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seeing is another trend correction in EURUSD before higher again but for the first time given thedynamic of the backdrop in Europe and European markets we are watching things with a morebalanced view

EURUSD (As its components) 1992-1995 and 2009-2011


Unlikely though it looked at the time that ended up being the peak of the uptrend and the USD ralliedagainst the Euro (components) for the next five years.

This coincided with the final blow apart of the ERM (Exchange rate mechanism) rates with everythingfrom DEMITL (Deutsche mark versus Italian Lire) to DEMFRF (Deutsche French Franc) accelerating

Falls 26% over 10 monthsin 1992-1993

Falls 22% over 7 months in2009-2010

Bounces 28% over 21months and turns after itfalls and posts a 76.4%pullback

Bounces 26% (so far) over11 months and failed at76.4% pullback area (so far)


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aggressively higher. In Sept. 1994 Europe had capitulated and widened the ERM currency bandsfrom +- 2.25% to +- 15%.

From FebApril 1995 (the period when EURUSD hit its high) USDDEM hit the trend low at around1.35 as the peripheral currencies had their final blowout. In that Feb-April period alone the ItalianLire depreciated over 20% vis a vis the Deutsche Mark.

A rather troubling overlayComparison of the devaluation and eventual final surge in DEMITL into Q1 1995 and the deteriorationin the 2 year yield spread between Greece and Germany that began in earnest as the crisis began tounfold in Sept. 2009


Obviously today there is no exchange rate regime but rather the EURO (Which we call a fixedexchange rate masquerading as a single currency) which ties the core and the periphery together.The stresses this time are not in short term interest rates (Single ECB rate) or the currency rates(Single currency) so the imbalances have shown up in the Govt. Bond market and the surge in thosespreads.

ERM 1 ended in a creative destruction type of dynamic. The existing structure was to all intents andpurposes abandoned. Countries (peripheral) devalued aggressively against Germany (Good forthem and bad for Germany), interest rates eventually started to fall again and the ERM 2 project(EURO) was born. During this rebuilding process the USD ended up outperforming Europeancurrencies for pretty much 5 years.

DEMITL final surge inQ1, 1995

2 year Greece versus 2year Germany today.


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Is 2011 signalling another transition period where Europe has to once again make decisions abouthow to proceed forward as penal interest rates and artificial measures to support a flawed structureare once again stressing the system? Have we reached the point where Europe needs to decidewhether it is a nation of individual states with individual accountability of a real Union? Have wereached an impasse where more loans and more austerity only makes things worse botheconomically and socially, not better? Have we got to where Europe needs to decide whether to

share the burden (Core and periphery) and not just penalise the periphery into depression? IsEurope underestimating the pain threshold past which a nationally elected Government will not signup to?

These are all big questions and we do not pretend to know the answers. What we do know is that thepresent band aid approach is not working. Europe needs to decide whether their future liestogether (Economically, socially, fiscally, politically etc) or not.

We suspect that they will make the decision over time to become more integrated but not withoutfurther stresses and fallout first. It took pretty much 5 years to pick up the pieces from ERM1 and goto ERM 2 (The Euro) and the virtual destruction of the ERM 1 model.

This is a political decision- not an economic one. In the near term the citizens of the core countriesdont want to lend more money and the citizens at the periphery do not want fu rther austerity and agenerational burden of debt. Little real progress has been made in the past year and the chartsabove (and below) suggest that we are approaching crunch time.

We remain nervous that the possibility of bad and or slow policy decisions in the comingweeks could send things from bad to worse and as a consequence have negativeimplications that could reverberate not just through the EURO and European markets butalso across financial markets/economies in general.

It would not be an exaggeration to say that we think that whatever happens or does not happenin the next few months may be very instrumental in determining that path of a whole host offinancial markets in the 2

ndhalf of 2011 and possibly beyond.

European fixed incomeGreece-Germany 10 year spread


New highs posted in this spread today as Greek 10 year yields topped 18%


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Greece-Germany 2 year spread


Has risen nearly 7 percentage points in 9 days as Greek 2 year yields topped 30% today.

Greece 2s versus 10s curve


New lows as it has now bear flattened to an inversion of more than 11%


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Ireland -Germany 10 year spread


New highs posted in this spread today as Irish 10 year yields hit 11.65%

Ireland-Germany 2 year spread


Has risen over 200 basis points in 9 days. Irish 2 year yields trade close to 13% today.


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Ireland 2s versus 10s curve


Has begun to bear flatten again and sits 132 basis points inverted.

Portugal -Germany 10 year spread


New highs posted in this spread today as Portugal 10 year yields are close to 11%


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Portugal-Germany 2 year spread


Has risen over 200 basis points in 9 days. Portuguese 2 year yields trade close to 13% today.

Portugal 2s versus 10s curve


Has begun to bear flatten again and sits 203 basis points inverted.


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Italy -Germany 10 year spread


Now just 8 basis points from the Nov. 2010 highs as Italy 10 year yields hit 4.85% today and look setto revisit the trend highs.

Italy 10 year yield


Clear inverted head and shoulders that targets at least the 5% area


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Italy -Germany 2 year spread


Has been rising again in last week to 10 days and has now broken out to the topside

Italy 2s versus 10s curve


Has been slowly rising in May-June with a slight roll down today. Not yet concerning but does bearwatching if it starts to bear flatten.


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Spain -Germany 10 year spread


Has been rising steadily and is now just 13 basis points from the Nov 2010 highs.

Spain 10 year yield


We remain convinced that this has just been in a triangle consolidation since last November and isnow breaking out to the upside.While the minimum target would be to test the 6% area last seen in 2000 there is a real danger that ifthat goes an extended measured move target to 6.75-7.00% could be on the cards.


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Spain -Germany 2 year spread


Breaking to new highs in this move

Spain 2s versus 10s curve


While not yet overly concerning because it has bee bear steepening the March-June pattern isominously similar to the price action seen in August-October 2010 before it started bear flatteningagain.

?


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Spain 2s versus 10s curve- Could a double top be forming?


A break below 163 if seen would suggest as low as 92 basis points (2010 lows were 149 basispoints

All in all the directional (yields up), spread (widening to Germany) and curve (Bear Flattening) movesin the periphery show reason for concern.

At the same time German 2 and 10 year yields are dropping and the curve is bull flattening (Flight toquality)

?


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Peripheral Equity markets

AEX (Greece)


Double top suggest more losses on the cards

ISEQ (Ireland)


Looks ominously like a double top forming


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PSI (Portugal)


Looks set to break lower

MIB (Italy)


Under pressure


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Ibex (Spain)


Also breaking lower

European banks index


Hanging on by a thread. A decisive move below 149-151 could see losses accelerate.

To conclude:It appears that we are at a very pivotal point in this whole European dynamic.At the same time that this is happening there are concerns about how robust U.S. and globalgrowth is looking.The U.S. equity market is also experiencing some strain and the stimulus of QE2 is drawingto a close.Looking at the European markets and indeed the various charts across other markets in thisweeks report we remain very concerned that we may have more turbulent times coming inthe weeks ahead in financial markets.


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Equities

The S&P, the Dow Transports and the Nikkei 225 are near pivotal long term levels that couldsuggest the beginning of substantial downside moves if breached

S&P 500


The S&P 500 Index will look very vulnerable if it cracks through 1250 supports that correspond withthe 200 day moving average, the March lows and the upward sloping trend channelSuch a break could suggest a move to long term supports at 1050

Dow Jones Transportation Index


Given our focus on this Index as a leading indicator for asset markets in general, a close beneath the5000 area would be a bearish signal opening the way to the May 2010 4800 pivot level and the 4000level below that

Important support: 5000

Important support: 1250


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Nikkei 225


Trending beneath both 200 and 55 day moving averages, the Nikkei 225 will breach its head andshoulders neckline if it goes through 9300. This would suggest a push lower through 86318631 is beneath the long term 76.4% Fibonacci retracement neckline which sits at 8800. A breach of8800 would suggest a major push lower in the Nikkei

Near 76.4% FibonacciRetracement

Head and shoulders facingdifferent directions

FibonacciNeckline: 8800


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Foreign Exchange

As our analysis on the Euro would imply, the dollar looks to outperform its major counterpartsGBPUSD (Daily

Source: Aspen Graphics / Reuters 016 June 2011

GBPUSD is nearing a long term head and shoulders neckline at 1.6078, a breach of which wouldtarget 1.5429, slightly above long term supports at 1.5350

Dollar Index


The US Dollar Index posted a 76.4% Fibonacci hold near the base of its move in 2008 as it hasrecently. It also broke out of linear declining tops in 2008 much as it will if the DXY clears 76.36The overall stretch of the DXY is not as severe this time implying we will not see the USD move to

the same extent as the 2008 meltdown but the chart still suggests a strong dollar positive move

2008 and Now:76.4% Fibonacci holdsat the base of a move

2008 and Now: Breach ofdescending highs

In 2008: the USDreversal took place at afar more stretched level


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Commodities

Both crude oil and copper have bearish technical set ups with crude looking especially precariousif oil moves below $93 and copper moves beneath $400

Crude Oil


Crude looks to push lower especially if it goes through its $93 supports which correspond with the200 day moving average and recurring supports from late 2010Such a break would open the way to the 84 area that has been a repeated pivot on Crude, mostrecently in February 2011. This also corresponds closely with the 200 week moving average

Copper


Copper is beneath its 55 day moving average and has been chopping around the $400-$410 areawhich should be fairly pivotal given that it is the neckline of the 76.4% retracement posted at $450 offthe all time highsAn acceleration through $400 would open the way to the channel base at $380

Important support: $93

Important support: $400


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Emerging Markets

USDBRL and USDINR are showing similar patterns in that they found supports at meaningful longterm levels and have put in technical bases (76.4% Fibonacci and Double Bottom) that could

encourage USD strength The Sensex, the Bovespa and the Shanghai Composite, the three major equity indices of India,

Brazil and China respectively are all in established downtrends and are nearing long termsupports

USDINR (Weekly)

Source: Aspen Graphics / Reuters 016 June 2011USDINR has a double bottom formation within a triangle wedge. The double bottom formed near the44 area which is the long term 61.8% Fibonacci retracement drawn from the 2008 lows to the 2009highs. This same area was a major support from 2005-2006A breach of the 55 week moving average at 45.41 would open the way to the double bottom necklineat 46. A push through 46 would argue a move to 48

EURUSD V1M (EURUSD 1 Month Option Volatility)


We saw a very similar pattern on Euro volatility yesterday before a large move upwards in volatilityThe double bottom formation within a triangle wedge often precedes high volatility movements

This short term EURUSD VolatilityChart reminds us of the long termUSDINR chart which implies USDstrength.

Double bottom andbreach of declining tops

Double bottom andbreach of declining tops

Close up


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USDBRL Weekly (Brazil)


USDBRL paused almost exactly at the 2008 low of 1.5545 which serves as strong downside supportIt marginally overshot a 76.4% retracement at 1.5776 before pushing back upMuch like USDINR, the downward sloping tops are the first resistance but the major resistance is the76.4% neckline at 1.6500, a move through which would open the way to the 55 week movingaverage and important 2009 support at 1.70

SENSEX (India, Monthly)


The Sensex posted a long term double top and has continued to fall, last month closing through the12 month moving average the second time after a shallow rallyThe last time the Sensex dropped from 2007 to the 2009 lows, it cracked through the 12 monthaverage the first time, had a shallow rally- but when it went back through it did not look back for9,000 pointsThe breaking point last time was in the 17000 area which is the support

Similar price action

The breaking point last time was17,000 which is now the major support

Long term bottom: 1.5545

Near 76.4% at the lows,potential break of

downward sloping highs

1.70 is a major topside level


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SHCOMP INDEX (China)


The Shanghai Composite is trending lower as it is both below the 55 and 200 week moving averagesat 2770 and 3135 respectively, which serve as topside resistancesThe Index looks very vulnerable if it cracks through 2661 supports which is the neckline of a 76.4%Fibonacci retracement drawn from November 2010 highs to April 2011 interim highsA push through this support would open the way to the 2319 pivot seen in June 2010 and potentiallylower

Bovespa Index (Brazil)


The Bovespa Index broke through its 2nd 76.4% Fibonacci retracement neckline at 64,000, arguing forthe Index to push lower through its channel support at 60,000

The breach of the channel supports would suggest an acceleration downwards on the Bovespa to atleast 57,633. This is the neckline of a double top-like formation that if breached would suggest amove to 43,000

Double 76.4%,neckline broken at64,000

Breach ofchannel supportat 60,000 opensthe way to57,633

Long term top, similar toIndian equities

76.4% Retracement

Major caution on global asset

markets warranted if the indexmoves through 2661


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PLEASE NOTE THAT: The tables and information specified below under Short Term Conviction views, Long TermConviction views, CitiFX Technicals Portfolio, Strategic Portfolio, and Tactical Portfolio ARE NOT INTENDED AS, ANDDO NOT CONSTITUTE, AN OFFER, RECOMMENDATION, ADVICE OR A SOLICITATION TO BUY, SELL OR TO ENGAGE IN ANYSTRATEGY, WHATSOEVER, IN ANY FOREIGN CURRENCY CONRACT OR ANY INSTRUMENT OR INVESTMENT. EACHDECISION BY YOU TO ENTER INTO ANY FOREIGN CURRENCY CONRACT OR TO INVEST IN ANY INSTRUMENT OR ENGAGEIN ANY STRATEGY MUST BE BASED ON DILIGENCE AND ANALYSIS INDEPENDENTLY UNDERTAKEN BY YOU AND YOURADVISORS. PLEASE CAREFULLY REVIEW THE DISCLAIMERS AT THE LAST PAGE OF THIS DOCUMENT.

Short term conviction views 1

Instrument ViewDate view was

establishedTarget Level today

Crude

Bearish daily reversal at thehighs and breach of near termsupports suggest short termweakness

13 April

$97*Target Met and

extended to $93**$85 cannot be written

off

$94.96

EURUSD Bearish weekly reversal at the

trend highs09 May

1.4156**Target Met. Extended

to 1.37 (200 day)1.4137

CRB Index

Weekly reversal at the highs,momentum diveirgence andlarge 55-200 day movingaverage gap

09 May 317 (200 day) 336

NDX Breached the 55 day and trend

support arguing for a move tothe 200 day

24 May 2,200 2,209

EURCHF Breached 5 month

consolidatiojnj with a doubletop in place

23 May 1.20 if not 1.16 1.2009

EURGBP

Breached 55 day and 50%retrace of the rally from Jan.Setups in Fixed Incomespreads also argue for a movelower

25 May 0.8450 0.8766

USDJPY 76.4 against the highs and

close below 80.70 suggestslower levels ahead

06 June79.57 and possibly

78.4480.69

Source: CitFXTechnicals Views 016 June 2011

1Convictions represent the views of the CitiFX Technical staff and not actual trades.


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Long term conviction views1

Summary of our strong conviction 2011 views as we open the year.

(As we continually note, when and if factors/dynamics change, we will adjust them into our thoughtprocess. These are our views we hold with conviction today. As we head through the year we willupdate our level of conviction on an ongoing basis.)

Instrument View for 2011 on 03 Jan 2011Conviction on 03

Jan 2011Conviction today-

016 June 2011Level today

S&P 500

Bearish year with double digit

percentage down close of 15-16% (1,055-1070) expected.

Intra year bear market (High tolow fall of 20%+ ) also a danger.

Peak could well come in theopening days of the year.

Strong Strong 1,269

U.S. long endyields

10 year yields to head towards4% and possibly 4.5% by end ofyear.

30 year yields to head towards5%

Strong Strong10Y at 2.92%and 30Y at

4.15%

Crude A move above $100 and

possibly towards $120Strong

$100 target met. $120still looks very

possible$94.68

Gold $1,700 this year and as high as

$2,000 eventuallyStrong Strong $1,527

Palladium A move above $1,000 this year Strong Strong $758

EURUSD

A move to high 1.40s (1.4850)by end of year) with possible1.50+ and even 1.60+ in early2012

Strong Strong 1.4137

Data as at 016 June 2011


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CitiFXTechnicals PortfolioStrategic trades will likely be / intended to be of more medium term nature using the variety of building blocksthat we articulate in that medium term view.Tactical trades by definition are likely to be more short-term and driven more by day to day price dynamics,risk management P&L etc.

The strategic portfolio will be made up of 100 units of capital with the potential for modest leverage while thetactical portfolio will comprise 50 units of capital also with modest leverage potential.These portfolios represent actual trades in FX, EM, Fixed income, Commodities or Equity indices

Strategic PortfolioData as at 016 June 2011

Instrument PositionDate

establishedComment Entry

Stop(If breached

unlessspecified

otherwise)

TargetPresent

level

Tactical PortfolioData as at 016 June 2011

Instrument PositionDate

establishedComment Entry

Stop(If breached

unlessspecified

otherwise)

TargetPresent

level

EURCHF Short 23 May 2011

5 monthconsolidation

seems over andthe double top

argues for furtherlosses

1.2375 1.25201.20 andpossibly1.1575

1.2009

EURGBP

Long 0.8450Put Option

(expiry 06July)

25 May 2011

Price action issimilar to that

seen at the highs

in October 2010suggesting further

losses

Spot ref.

0.8666 Premium paid 0.8450 0.8766

EURUSD

Long 1.40 Putoption

(Expiry 28June)

27 May 2011

Short term priceaction looks

corrective and thesetups still remind

us of Nov 2010

Spot ref1.4235

Premium paid Sub 1.40 1.4137


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CitiFXTechnicals ProductsToday's Highlights - Sent Monday, Tuesday and Wednesday. Technical Strategy focused publicationdetailing important technical developments in the past 24 hours and looking at possible implications forother markets. Main focus is the FX market but the piece also covers important developments inEquity, Fixed Income and Commodity markets, especially where we believe the moves are significant

for FX. The publication also includes a daily grid with short comments on each major currency pair andsupport/resistance levels

Weekly Roundup - Sent late Thursday European time. Detailed coverage of all G10/EM FX Marketsand related asset markets, with charts of each market. The document is hyperlinked to ease use andnavigation. It should be thought of as an e-mailed website that can be kept for reference over thefollowing week.

Bulletins Ad hoc pieces sent where we believe particularly significant developments have takenplace. Often based on interrelationships between markets.

Portfolio Updates - We run a portfolio on the back of our ideas/views and as such send e-mailsdetailing changes to positions (targets/stops etc.) in relation to this.


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CitiFX Value Added Services & Products

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Tom Fitzpatrick New York 1-212-723-1344 [email protected]

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Disclaimer for Charts / Graphs that show Market Data:

Past performance is not indicative of future results, which may vary.Statistical information comes from sources that we believe to be reliable source(s); however, no information orrelated data has been independently verified by us. We assume no duty or obligation to update any information

or data. The information contained in this report is based on generally available information, its accuracy andcompleteness cannot be assured, and such information may be incomplete or condensed.Some indices are unmanaged and investors cannot directly invest in them. The composite index results are forillustrative purposes only and do not represent the performance of a specific investment.Supporting documentation will be furnished upon request for all claims, comparisons, recommendations,statistics or other technical data.Other Citi personnel may have made investment decisions or take positions that are inconsistent with therecommendations or views in this publication.Affiliates of Citi may serve as investment advisors to clients, including limited partnerships and other pooledinvestment vehicles. The affiliates may give advice and take action with respect to their clients that differs fromthe information and opinions included in this publication.This document and the information herein are made available to you at your request and for informationpurposes only. This document and any other information provided to you is not intended and does notconstitute an offer to buy or sell, or the solicitation of an offer to buy or sell, any foreign currency contracts, nor

is it intended to be advice or a recommendation of any kind whatsoever. Each decision by you to enter into aforeign currency contract and each decision whether a foreign currency contract is appropriate or proper for youis an independent decision by you.

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The total impact of the spreads and fees may be significant and may make it moredifficult for you to realize a profit from trading if replicating Short Term Convictionviews, Long Term Conviction views, CitiFX Technicals Portfolio, StrategicPortfolio, and Tactical Portfolio trades.

Over the Counter (OTC) trades in the CitiFX Technicals Portfolio are established at market prices fromindependent trading desks in the sales and trading department of Citigroup Global Markets Inc. or one of its affiliates

(collectively, Citi). Contract market positions in the CitiFX Technicals Portfolio are established on thelisting exchange.

OTC Positions are priced to market using bid/offer prices from independent Citi sources at time of publication.Contract market positions are priced at end of day settlement or current disseminated prices on the listingexchange at the time of publication.When OTC market prices are not readily available, positions are priced to fair market value, using techniquessuch as model or matrix pricing at time of publication. Examples of products that are priced to fair market valueinclude certain contractual commitments (i.e. interest rate swaps, options, etc.).

Cash, Forward or Options positions in foreign currencies are volatile and involve inherent risks including the effect ofleverage. Foreign exchange transactions are not appropriate for every investor and investors should refrain frominvesting (or hedging) in foreign exchange unless they are knowledgeable, experienced and fully understand the

terms and risks, including but not limited to:

Potential of loss. Because of the effect of leverage, relatively small market movement will have a proportionatelylarge impact of the funds deposited. This loss can be equal to, or in some instances greater than the full amount ofthe initial investment.Options. Investors should be fully aware of the standardized terms, special vocabulary (such as puts, calls, deltaand theta) and the potential high-risk characteristics of option transactions.Diversification does not ensure against loss.There may be additional risk associated with international investing, including foreign economic, political,monetary and/or legal factors, changing currency exchange rates, foreign taxes, and differences in financial andaccounting and regulatory standards. These risks may be magnified in emerging markets. International investingmay not be for everyone.Certain foreign exchange transactions are only available to Eligible Contract Participants as defined in the

Commodity Exchange Act.


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DisclaimerThis communication is issued by a member of the sales and trading department of Citigroup Global Markets Inc. or oneof its affiliates (collectively, Citi). Sales and trading department personnel are not research analysts, and the informationin this communication (Communication) is not intended to constitute research as that term is defined by applicableregulations. Unless otherwise indicated, any reference to a research report or research recommendation is not intendedto represent the whole report and is not in itself considered a recommendation or research report. All views, opinions andestimates expressed in this Communication (i) may change without notice and (ii) may differ from those views, opinionsand estimates held or expressed by Citi or other Citi personnel.This Communication is provided for information and discussion purposes only. Unless otherwise indicated, it does notconstitute an offer or solicitation to purchase or sell any financial instruments or other products and is not intended as anofficial confirmation of any transaction. Unless otherwise expressly indicated, this Communication does not take intoaccount the investment objectives or financial situation of any particular person. Recipients of this Communication shouldobtain advice based on their own individual circumstances from their own tax, financial, legal and other advisors beforemaking an investment decision, and only make such decisions on the basis of the investor's own objectives, experienceand resources. The information contained in this Communication is based on generally available information and,although obtained from sources believed by Citi to be reliable, its accuracy and completeness cannot be assured, andsuch information may be incomplete or condensed.Citi often acts as an issuer of financial instruments and other products, acts as a market maker and trades as principal in

many different financial instruments and other products, and can be expected to perform or seek to perform investmentbanking and other services for the issuer of such financial instruments or other products.The author of this Communication may have discussed the information contained therein with others within or outside Citiand the author and/or such other Citi personnel may have already acted on the basis of this information (including bytrading for Citi's proprietary accounts or communicating the information contained herein to other customers of Citi). Citi,Citi's personnel (including those with whom the author may have consulted in the preparation of this communication),and other customers of Citi may be long or short the financial instruments or other products referred to in thisCommunication, may have acquired such positions at prices and market conditions that are no longer available, and mayhave interests different from or adverse to your interests.Investments in financial instruments or other products carry significant risk, including the possible loss of the principalamount invested. Financial instruments or other products denominated in a foreign currency are subject to exchange ratefluctuations, which may have an adverse effect on the price or value of an investment in such products. No liability isaccepted by Citi for any loss (whether direct, indirect or consequential) that may arise from any use of the informationcontained in or derived from this Communication.

Past performance is not a guarantee or indication of future results. Any prices provided in this Communication (otherthan those that are identified as being historical) are indicative only and do not represent firm quotes as to either price orsize. You should contact your local representative directly if you are interested in buying or selling any financialinstrument or other product or pursuing any trading strategy that may be mentioned in this Communication.Although Citibank, N.A. (together with its subsidiaries and branches worldwide, "Citibank") is an affiliate of Citi, youshould be aware that none of the financial instruments or other products mentioned in this Communication (unlessexpressly stated otherwise) are (i) insured by the Federal Deposit Insurance Corporation or any other governmentalauthority, or (ii) deposits or other obligations of, or guaranteed by, Citibank or any other insured depository institution.IRS Circular 230 Disclosure: Citi and its employees are not in the business of providing, and do not provide, tax or legaladvice to any taxpayer outside of Citi. Any statements in this Communication to tax matters were not intended or writtento be used, and cannot be used or relied upon, by any taxpayer for the purpose of avoiding tax penalties. Any suchtaxpayer should seek advice based on the taxpayers particular circumstances from an independent tax advisor.

2011 Citigroup Global Markets Inc. Member SIPC. All rights reserved. Citi and Citi and Arc Design are trademarks andservice marks of Citigroup Inc. or its affiliates and are used and registered throughout the world.

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