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SEVEN DAYS AHEAD  Professional trading guides and recommendations for the World's markets 

Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573E-MAIL MSTURDY@SEVENDAYSAHEAD.COM  WWW.SEVENDAYSAHEAD.COM This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sourcesbelieved to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness oraccuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold orheld on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein wereconsidered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,relationship or arrangement in relation to them.

in association with

Market Update 31st March 2011 

Sterling Euro suggests further Sterling weakness 

The Technical Trader’s view: 

n Jul Aug Sep Oct Nov Dec 2008 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2009 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2010 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2011 Feb Mar Apr May Ju

0.7600.765

0.7700.775

0.7800.785

0.7900.795

0.8000.805

0.8100.8150.820

0.8250.830

0.8350.840

0.8450.850

0.8550.860

0.8650.870

0.8750.880

0.885

0.8900.895

0.9000.905

0.9100.915

0.9200.925

0.9300.935

0.9400.9450.950

0.9550.960

0.9650.970

0.9750.980

0.9850.990

0.9951.000

1.005

0.9409 High

0.8185 High

0.8099

0.8071- 0.8144 Pivotal Prior Lows

0.8955 High

Euro-UK Pound Sterling

 

WEEKLY CHART

The big picture is of the

completion of a bull falling

wedge that has formed

since the beginning of 2009.

But fascinatingly, and

coincidentally, note thecompletion of a small Head

and Shoulders Reversal – 

adding greatly to the bull

impetus.

Look more closely.

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SEVEN DAYS AHEAD  Professional trading guides and recommendations for the World's markets 

Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573E-MAIL MSTURDY@SEVENDAYSAHEAD.COM  WWW.SEVENDAYSAHEAD.COM This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sourcesbelieved to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness oraccuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold orheld on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein wereconsidered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,relationship or arrangement in relation to them.

in association with

28 5

July

12 1 9 26 2 9

August

16 23 30 6 13

September

20 27 4 11

October

18 2 5 1 8

November

15 22 29 6 13

December

20 27 3

2011

10 17 24 31 7

February

14 21 28 7

March

14 21 28 4

April

11

0.805

0.810

0.815

0.820

0.825

0.830

0.835

0.840

0.845

0.850

0.855

0.860

0.865

0.870

0.875

0.880

0.885

0.890

0.895

0.900

0.905

0.910

0.915

0.920

61.8%

Prior High from Sept 2008 0.8185

Prior High from April 2008 0.8099

0.8336 Low

0.8672

0.8288 Low

Bull falling wedge

0.8654

Euro-UK Pound Sterling

 

DAILY CHART

The simultaneity of thecompletion of the H&S

Reversal is clear.

Note too, the importance of

the band 0.8654-8672.

Initially, this was resistance

overcome and then good

support. Indeed, the catalyst

for the completion moves.

Expect the Neckline currentlyat 0.876 to be good support

on any pull-back. 

The Macro Trader’s view: 

The outlook for Sterling against the other major currencies seems more or less unchanged -

except against the Euro.

Against both the Dollar and the Yen, Sterling appears to be holding up reasonably well:

- In the US the fiscal position weighs on the Dollar

- In Japan the combination of the threat of further G7 currency intervention and the possibility

that, away from Japan, the monetary policy cycle is close to turning. The ECB is talking up the

need for higher rates and the US QE2 policy is close to completion so the Yen currently looks

depressed.

Surprisingly, the Euro has emerged as the strongest of the leading currencies. Although the

Sovereign debt crisis continues, with Portugal downgraded recently and at risk of being

downgraded again and the Irish Bank crisis still rumbling on, foreign exchange traders are

looking beyond these concerns.

They see:

- The Euro zone economic recovery being powered by a strong Germany.

Minimum

Target

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SEVEN DAYS AHEAD  Professional trading guides and recommendations for the World's markets 

Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573E-MAIL MSTURDY@SEVENDAYSAHEAD.COM  WWW.SEVENDAYSAHEAD.COM This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sourcesbelieved to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness oraccuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold orheld on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein wereconsidered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,relationship or arrangement in relation to them.

in association with

- Germany taking the lead in how the Euro zone rescue fund should operate and dictating terms

about how debt laden states can access those funds.

- The ECB becoming increasingly restive about inflation,- The chance that Euro zone interest rates will rise as early as April (next week).

In the UK, the Government has taken bold steps to reign in runaway public debt, but risks a

serious economic slowdown if the private sector is unable to fill the void created by drastic

spending cuts and labour shedding.

But what really undermines Sterling, especially against the Euro, is the poor inflation

comparison and the Central Bank response to it.

In the UK inflation never collapsed as frequently forecast by the Bank of England, even though

in the Euro zone and US it fell so far deflation wasn’t just a risk but almost a reality. Now UK

inflation stands above 4% and policy makers openly suggest it could rise to 5% this year.  

Compared to the CPI target of 2%, interest rates should already be increasing, but the Bank is

nervous.

The majority of policy makers fear that if they tighten policy at the same time the government is

implementing draconian spending cuts, the economy could be tipped back into a deep

recession. Underpinning their decision to wait and see, is the belief that current inflation is a

result of one-off shocks:

- The VAT increase introduced this year,

- The depreciation of Sterling during the financial crisis/recession, and

- The spike in energy and commodity prices.

If they are right, then statistically inflation is set for a sharp fall, but are they blind to current

events?

The oil price is still rising and could rise very much further given unrest in the Arab world and

new fears about the safety of nuclear power. This is feeding into food costs. Additionally,

because of the policy stance in the UK and its great leap into the unknown, Sterling could

depreciate further.

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SEVEN DAYS AHEAD  Professional trading guides and recommendations for the World's markets 

Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573E-MAIL MSTURDY@SEVENDAYSAHEAD.COM  WWW.SEVENDAYSAHEAD.COM This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sourcesbelieved to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness oraccuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold orheld on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein wereconsidered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,relationship or arrangement in relation to them.

in association with

In short, the Pound is undermined against the Euro by uncertainty and until it becomes clear,

whether or not the current policy mix is working, the Pound looks set to weaken further against

a Euro supported by expectations of higher interest rates.

Mark Sturdy 

John Lewis 

Seven Days Ahead