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Financial Pacific - ECB Trichet uses the magic words (third party)
Financial Pacific - ECB Trichet uses the magic words (third party)
Financial Pacific - ECB Trichet uses the magic words (third party)
Financial Pacific - ECB Trichet uses the magic words (third party)
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Financial Pacific - ECB Trichet uses the magic words (third party)


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  • 1. Wealth Management Research 9 June 2011 UBS daily forex US ECB Trichet uses the magic words At Thursday's ECB press conference, Trichet underlined again that monetary policy is still very accommodative and that upside pressure on inflation persists. As market participants widely expected the magic words "strong vigilance" and already priced in a rate hike for July on that, some investors consequently took profits after the strong rise from 1.40 to 1.47, which let EURUSD drop below 1.45 during the conference. Headlines on further financing needs of Greece simultaneously to the ECB press conference and also the current discussion about a "soft patch" of the global economy raised market doubts that the ECB might be over-tightening and stall the recent recovery in Europe, which was another reason for the dropping euro. Overall we keep our view of a short term stronger US dollar and believe EURUSD to dive back into the 1.30-1.40 range over the coming months, which should be used to sell the dollar and aim for long term dollar weakness. s NZD: Outlook for rate hikes lifted the Kiwi s AUD: Disappointing employment sends Aussie south Constantin Bolz analyst, UBS AG FX heat map Currency Pair Actual Volatility Comment 3m 6m Bias 2. Support 1. Support 1. Resistance 2. Resistance 3m 6m Comment EURUSD 1.4534 1.35 1.38 bullish 1.4158 1.4282 1.4940 1.5144 11.65 12.21 Volatility is high in USDJPY 80.10 88 90 neutral 76.25 80.20 85.93 87.95 10.10 11.05 relation to last 12 months. GBPUSD 1.6379 1.60 1.65 neutral 1.5297 1.5937 1.6747 1.7041 8.79 9.64 Volatility is low in USDCHF 0.8414 0.98 0.96 bearish 0.8000 0.8554 0.9012 0.9340 11.44 11.94 in relation to last 12 months. USDSEK 6.2204 6.48 6.23 bearish 5.8218 5.9789 6.5499 7.0734 13.20 13.60 USDNOK 5.4139 5.70 5.51 bearish 4.9439 5.2174 5.7234 6.2370 13.21 13.81 Clients can find information on USDCAD 0.9737 0.95 0.93 neutral 0.9058 0.9500 0.9974 1.0350 8.64 9.10 the construction and elements AUDUSD 1.0643 1.00 1.00 bullish 0.9706 1.0256 1.1012 1.1230 12.40 13.20 of the FX Heat Map under NZDUSD 0.8293 0.74 0.74 neutral 0.7118 0.7620 0.8122 0.8214 12.75 13.60 Currencies from the Online USDBRL 1.5833 1.65 1.65 N/A na na na na 11.15 12.20 Services Research platform. USDMXN 11.7817 11.80 11.90 bearish 10.6417 11.4800 12.2410 12.5960 9.60 10.45 USDZAR 6.7261 7.10 6.85 N/A na na na na 14.45 14.65 Date & Time / 09.06.2011 / 12:09:14 / EST Source: THOMSON REUTERS; UBS WMR Technical IndicationsForecast Implied Volatility This report has been prepared by UBS AG. Please see important disclaimers and disclosures that begin on page 3.
  • 2. NZD: Outlook for rate hikes lifted the Kiwi At the RBNZ meeting, the benchmark interest rate was kept unchanged at a record low. Further Governor Bollard mentioned that "as GDP growth picks up, inflation is expected to rise" and "a gradual increase in the official cash rate over the next two years will be required to offset this." The Kiwi reacted with a decent rise and NZDUSD trades with nearly a 1% gain. We continue to see the Kiwi being overvalued and do not recommend to enter at current levels. Constantin Bolz, analyst AUD: Disappointing employment sends Aussie south The April employment report showed, that the Australian employers created fewer jobs than markets expected. The number of employed rose by only 7.8K compared to the expected 25K increase. The unemployment rate thereby stayed flat at 4.9%. Subsequently to the disappointing data, the Aussie dropped about 1%. However, as the labour market remains tight and the RBA is likely to hike its policy rate in August, the AUD remains strong against the USD. Constantin Bolz, analyst UBS daily forex US Wealth Management Research 9 June 2011 2
  • 3. Appendix The FX Heatmap is designed to serve as a guide to short-to-medium-term investment decisions concerning major currency pairs. The elements in this concise table may help your timing and positioning decisions when considering a foreign exchange transaction. WMR Foreign Exchange Research publishes the FX Heatmap in the UBS daily forex and UBS daily guide. In our view, an ideal FX Heatmap should contain the relevant items that an investor should consider when making short- to medium-term decisions in the foreign exchange market. The WMR FX Heatmap contains in the first column the spot rate (actual rate), provided as a mid-rate by Reuters and refreshed daily. In the second and third columns are the three-month and six-month WMR forecasts. Next come the technical indications, and in the last two columns, the traded volatility of the exchange rate is indicated. Fundamental Forecast is not a trading target WMR makes its three- and six-month forecasts using its 'three-pillar' approach: Fundamentals, cyclical influences and market drivers. The purpose of the forecast is to indicate a direction, justified by the fundamentals, and to show the strength of drift within a given forecast horizon. WMR forecast the exchange rate that we consider most likely to be reached in the last couple of weeks of the forecast horizon. This might differ substantially from a trading target, which we define as an exchange rate that diverges as much as possible from spot while having a fair chance to be reached at any point within the next three (or six) months. Chart Technical Support and Resistance The technical elements within the FX Heatmap are first and second supports and resistances, and a technical bias, which can be bullish (exchange rate moves higher), bearish (exchange rate moves lower) or neutral. Technical analysis is one approach to market forecasting. It is based on the study of past price movements, human psychology and the laws of probability. Technical analysts study market behavior, primarily using charts, for the purpose of forecasting future price trends. WMR chartists use bar charts that consist of daily highs, lows and closes. First-level support/resistance is then defined as initial support/resistance and comprises of a technical outlook of several days to several weeks. Second-level support/resistance is secondary support/resistance encompassing several weeks to several months. Typically, they utilize one- to three-months of daily bar charts for most of the FX technical analysis. Volatility Indication The last two columns of the FX Heatmap table contain the one- and three-month implied option volatility, as they are traded in the interbank over-the-counter option market. The data provider is Reuters. WMR indicates the volatilities, which are relevant for option contracts with a strike level at the one-month (or three-month) forward rate of the exchange rate. Historical analysis suggests that most currency volatilities tend to revert to a stable mean. We use this characteristic to evaluate the level of current volatility. Disclaimer Wealth Management Research is published by Wealth Management & Swiss Bank and Wealth Management Americas, Business Divisions of UBS AG (UBS) or an affiliate thereof. In certain countries UBS AG is referred to as UBS SA. This publication is for your information only and is not intended as an offer, or a solicitation of an offer, to buy or sell any investment or other specific product. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different results. Certain services and products are subject to legal restrictions and cannot be offered worldwide on an unrestricted basis and/or may not be eligible for sale to all investors. All information and opinions expressed in this document were obtained from sources believed to be reliable and in good faith, but no representation or warranty, express or implied, is made as to its accuracy or completeness (other than disclosures relating to UBS and its affiliates). All information and opinions as well as any prices indicated are current as of the date of this report, and are subject to change without notice. Opinions expressed herein may differ or be contrary to those expressed by other business areas or divisions of UBS as a result of using different assumptions and/or criteria. At any time UBS AG and other companies in the UBS group (or employees thereof) may have a long or short position, or deal as principal or agent, in relevant securities or provide advisory or other services to the issuer of relevant securities or to a company connected with an issuer. Some investments may not be readily realizable since the market in the securities is illiquid and therefore valuing the investment and identifying the risk to which you are exposed may be difficult to quantify. UBS relies on information barriers to control the flow of information contained in one or more areas within UBS, into other areas, units, divisions or affiliates of UBS. Futures and options trading is considered risky. Past performance of an investment is no guarantee for its future performance. Some investments may be subject to sudden and large falls in value and on realization you may receive back less than you invested or may be required to pay more. Changes in FX rates may have an adverse effect on the price, value or income of an investment. We are of necessity unable to take into account the particular investment objectives, financial situation and needs of our individual clients and we would recommend that you take financial and/or tax advice as to the implications (including tax) of investing in any of the products mentioned herein. This document may not be reproduced or copies circulated without prior authority of UBS or a subsidiary of UBS. UBS expressly prohibits the distribution and transfer of this document to third parties for any reason. UBS will not be liable for any claims or lawsuits from any third parties arising from the use or distribution of this document. This report is for distribution only under such circumstances as may be permitted by applicable law. Australia: 1) Clients of UBS Wealth Management Australia Ltd: This notice is distributed to clients of UBS Wealth Management Australia Ltd ABN 50 005 311 937 (Holder of Australian Financial Services Licence No. 231127), Chifley Tower, 2 Chifley Square, Sydney, New South Wales, NSW 2000, by UBS Wealth Management Australia Ltd.: This Document contains general information and/or general advice only and does not constitute personal financial product advice. As such the content of the Document was prepared without taking into account the objectives, financial situation or needs of any specific recipient. Prior to making any investment decision, a recipient should obtain personal financial product advice from an independent adviser and consider any relevant offer documents (including any product disclosure statement) where the acquisition of financial products is being considered. 2) Clients of UBS AG: This notice is issued by UBS AG ABN 47 088 129 613 (Holder of Australian Financial Services Licence No 231087): This Document is issued and distributed by UBS AG. This is the case despite anything to the contrary in the Document. The Document is intended for use only by “Wholesale Clients” as defined in section 761G (“Wholesale Clients”) of the Corporations Act 2001 (Cth) (“Corporations Act”). In no circumstances may the Document be made available by UBS AG to a “Retail Client” as defined in section 761G of the Corporations Act. UBS AG’s research services are only available to Wholesale Clients. The Document is general information only and does not take into account any person’s investment objectives, financial and taxation situation or particular needs. Austria: This publication is not intended to constitute a public offer or a comparable solicitation under Austrian law and will only be used under circumstances which will not be equivalent to a public offering of securities in Austria. The document may only be used by the direct recipient of this information and may under no circumstances be passed on to any other investor. Bahamas: This publication is distributed to private clients of UBS (Bahamas) Ltd and is not intended for distribution to persons designated as a Bahamian citizen or resident under the Bahamas Exchange Control Regulations. Canada: In Canada, this publication is distributed to clients of UBS Wealth Management Canada by UBS Investment Management Canada Inc.. Dubai: Research is issued by UBS AG Dubai Branch within the DIFC, is intended for professional clients only and is not for onward distribution within the United Arab Emirates. France: This publication is distributed by UBS (France) S.A., French "société anonyme" with share capital of € 125.726.944, 69, boulevard Haussmann F-75008 Paris, R.C.S. Paris B 421 255 670, to its clients and prospects. UBS (France) S.A. is a provider of investment services duly authorized according to the terms of the "Code Monétaire et Financier", regulated by French banking and financial authorities as the "Banque de France" and the "Autorité des Marchés Financiers". Germany: The issuer under German Law is UBS Deutschland AG, Bockenheimer Landstrasse 2-4, 60306 Frankfurt am Main. UBS Deutschland AG is authorized and regulated by the "Bundesanstalt für Finanzdienstleistungsaufsicht". Hong Kong: This publication is distributed to clients of UBS AG Hong Kong Branch by UBS AG Hong Kong Branch, a licensed bank under the Hong Kong Banking Ordinance and a registered institution under the Securities and Futures Ordinance. Indonesia: This research or publication is not intended and not prepared for purposes of public offering of securities under the Indonesian Capital Market Law and its implementing regulations. Securities mentioned in this material have not been, and will not be, registered under the Indonesian Capital Market Law and Regulations. Italy: This publication is distributed to the clients of UBS (Italia) S.p.A., via del vecchio politecnico 3, Milano, an Italian bank duly authorized by Bank of Italy to the provision of financial services and supervised by "Consob" and Bank of Italy. Jersey: UBS AG, Jersey Branch, is regulated and authorized by the Jersey Financial Services Commission for the conduct of banking, funds and investment business. Luxembourg: This publication is not intended to constitute a public offer under Luxembourg law, but might be made available for information purposes to clients of UBS (Luxembourg) S.A., a regulated bank under the supervision of the "Commission de Surveillance du Secteur Financier" (CSSF), to which this publication has not been submitted for approval. Singapore: Please contact UBS AG Singapore branch, an exempt financial adviser under the Singapore Financial Advisers Act (Cap. 110) and a wholesale bank licensed under the Singapore Banking Act (Cap. 19) regulated by the Monetary Authority of Singapore, in respect of any matters arising from, or in connection with, the analysis or report. Spain: This publication is distributed to clients of UBS Bank, S.A. by UBS Bank, S.A., a bank UBS daily forex US Wealth Management Research 9 June 2011 3
  • 4. Appendix registered with the Bank of Spain. UAE: This research report is not intended to constitute an offer, sale or delivery of shares or other securities under the laws of the United Arab Emirates (UAE). The contents of this report have not been and will not be approved by any authority in the United Arab Emirates including the UAE Central Bank or Dubai Financial Authorities, the Emirates Securities and Commodities Authority, the Dubai Financial Market, the Abu Dhabi Securities market or any other UAE exchange. UK: Approved by UBS AG, authorized and regulated in the UK by the Financial Services Authority. A member of the London Stock Exchange. This publication is distributed to private clients of UBS London in the UK. Where products or services are provided from outside the UK, they will not be covered by the UK regulatory regime or the Financial Services Compensation Scheme. USA: Distributed to US persons by UBS Financial Services Inc., a subsidiary of UBS AG. UBS Securities LLC is a subsidiary of UBS AG and an affiliate of UBS Financial Services Inc. UBS Financial Services Inc. accepts responsibility for the content of a report prepared by a non-US affiliate when it distributes reports to US persons. All transactions by a US person in the securities mentioned in this report should be effected through a US-registered broker dealer affiliated with UBS, and not through a non-US affiliate.Version as per January 2010. © UBS 2011.The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved. UBS daily forex US Wealth Management Research 9 June 2011 4