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Market Bulletin 31st March 2010

Has Sterling found its feet?

The Technical Trader’s view:
UK Pound Sterling - US Dollar
2.15

2.10 WEEKLY CHART

2.005 High from 1991 2.05

2.00
The market has been pressured
1.95

1.90
down from the Double Top that
1.85 formed beneath the resistance from
1.80 the Prior Lows at 1.7050 and
1.75
Low resistance 1.7050 from the low in Dec 2005
1.6802.
1.70
1.6802 Prior Low resistance
1.65

1.60 The measurable minimum move

1.5709
1.55 implied by that Top was actually
61.8% 1.5066
1.50
somewhat lower than where the
1.45

1.3688 Low Pivot from 2001 market got to. Probably as far as
1.40

1.35
1.45.
1.30

2007 M A M J J A S O N D 2008 M A M J J A S O N D 2009 M A M J J A S O N D 2010 M A M J

But the support from the Fibonacci
at 1.4860 has been considerable –
plus that from the High at 1.5066.

That has certainly held up the

bears.

But it may have reversed the move

as well…

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believed 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 or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered 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,
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UK Pound Sterling - US Dollar
1.655
1.650
1.645
1.640
DAILY CHART
1.635
1.630
1.625
1.620
1.615 The Double bounce from the
1.610
1.605
1.600
1.4798 low is clear. As is the
1.595
1.590
1.585
penetration of the (weak) falling
1.580
1.575 diagonal around 1.51.
1.570
1.565
1.560
1.5536 1.555
1.550
1.545
But the bulls should be wary of
1.5360 1.540
1.535 anticipating too much on the
1.530
1.525
1.520 upside.
1.515
1.510
1.505
1.500
1.495
1.490
Only a break up through 1.5360
1.485
1.4798 Low 1.480 would really get them going by
1.475
1.470
completing a Double Bottom
4 11 18 25 1 8 15 22 1 8 15 22 29 5 12
2010 February March April

And that is a little way off.

The Macro Trader’s view:

Until quite recently traders were almost queuing up to sell the Pound and there seemed an
almost endless list of reasons to justify their bearishness:
• The UK economy was the last of the major developed economies to emerge from recession,
• UK government spending had pushed the budget deficit to record levels with a rapid expansion
of the National debt,
• The trade data remained deep in negative territory as it refused to adjust after a prolonged spell
of currency weakness,
• Inflation never collapsed in line with official forecasts and remained above levels experienced in
other G7 countries, and of course
• The political landscape looked challenging to say the least. With an election drawing ever closer,
a hung Parliament looks likely making important difficult decisions look almost beyond
agreement.

So why has Sterling suddenly bucked up?

Over the last couple of weeks one or two of the ear factors above have changed. True, a hung
Parliament still looks the most likely outcome, and, whichever political Party emerges as the
largest will have a difficult time trying to push through necessary public spending cuts/tax hikes.

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Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
E-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 sources
believed 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 or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered 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.
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But the economic recovery looks a little more robust:

- The Q4 C/A deficit released yesterday shrank to £1.7, a fraction of what was expected.
- The final version of Q4 GDP showed an upward revision; recovery will still remain a
tepid affair, but talk of a dip back into negative growth looks misplaced.
- Inflation released the previous week corrected lower instead of the upward spike the
markets had feared, and
- Retail sales, which are by far the largest chunk of GDP, recorded a month on month
increase of 2.1% when released last week.

And despite a hung Parliament looking likely, politicians are at last starting to agree that the
deficit needs to be cut. The disagreement now is about how fast and by what route: spending
cuts, tax hikes or a mix of the two.

So now, when investors look at the UK and the Pound more specifically, they struggle to find
new reasons to be bearish. Against all three major currencies, the Dollar, Euro and Yen, the
Pound has rejected the lows. If the run of data can be maintained a recovery may be possible.

But the election result is likely the missing piece in the gig saw holding back a more robust
recovery. Note well that if the Conservatives were to win, the Pound could rally again and
smartly.

Mark Sturdy
John Lewis
Seven Days Ahead

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 933573
E-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 sources
believed 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 or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered 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.