Publications and analysis of economic events during the coming week; FOREX analysis; equity markets; economic news; consensus sentiment index.

1. Vision Capital M Economic Newsletter
I. New Publications
II. The Week Ahead
I. New Publications
Forex Consensus Optimism Index, 2013, Week 36
This week’s analysts optimistic expectations are a bit above the middle of the range (64%). This is about 45% higher than the previous week’s
optimistic expectations. Consensuses are more optimistic for the European data (75%) than for the U.S. one ...
II. The Week Ahead
Geopolitical situation
The tension surrounding the situation in Syria leaves its mark on the markets. Last week was a typical example of how war rhetoric is able to
influence equities, currencies, commodities and bonds. We expect such type of rhetoric to continue to govern major world markets in the weeks
to come. Generally the pro-war talks would hurt risk-on assets and could initiate a flight to safety among investors. Beneficiaries from such a
© Vision Capital M, 2013; Contact Person: Emil Emilov, Research Analyst 1 info@visioncapitalm.com | www.visioncapitalm.com

2. flight could be the safe haven currencies like the USD, CHF, JPY and hedging commodities like gold and oil. The problem could escalate if there
are several countries involved on opposite fronts, like there are already indications of such intentions. This general increase of the tension in the
world could weigh on equities worldwide.
Recently the U.S. insisted they may attack Syria without much of international support a
. Still, no war is expected to start before the week of
September 9, 2013, because Mr. Obama, the President of the U.S., decided to ask the Congress for support. The vote on the strike could not be
held before the mentioned week due to the summer recess of the Congress.
Another factor for a pressure on the risk-on assets remains the expected FED's tightening of its monetary policy during September. It already
affected the developing markets, both in the equities and currencies fields by extracting foreign capital from their economies. Given the tightening
happens to be stronger than expected, this deleveraging process could continue.
Possible strategies for protecting the capital in the current environment would be anything aimed at taking advantage of the possible decrease of
the values of risk-on assets, for instance shorting indexes, risk-on currencies (directly or through some of the available ETFs) or investing in a
hedging commodities like gold, oil or in any of their respective ETFs (gold - IAU, SGOL, GLD, etc.; oil – USO, OIL, DBO, etc.).
Still, it is nice to keep in mind that with all this fear across the markets, surprises on the opposite side are not excluded.
a. Source: Marketwatch
EUR/USD
The expected decline of the euro against the USD took part during the last week. The euro closed the week at $1.322, with a loss of 1.25%. The
single currency touched its 32.8% Fibonacci retracement level ($1.3170/80) of the rise from $1.2755 to $1.3443. The possibility of a rather
sooner than later tapering on behalf of the FED continues to drive the EUR/USD exchange rate. In this situation, a decrease of the main
refinancing interest rate on behalf of the ECB during the current week will make the euro even less attractive compared to the USD regarding the
interest rate differential. Hence, such a decrease of the rate seems rather improbable because it would have the potential to withdraw more
money from the EU economy.
The tension between the U.S. and Syria is the other main factor of influence on the currency pair. Generally, a pro-war rhetoric would benefit the
USD while a cons-war one would lift some pressure from the euro.
Technically speaking, the EUR/USD rate remains in a vulnerable territory. A certain correction is possible here but it could be limited to below
$1.33. Currently the pair trades around $1.322 level which is just below the 23% Fibonacci retracement level of the decline between the top at
$1.3396 and the current low at $1.3174. If this level is surpassed, the next resistance could lay around $1.3255/60 and then $1.3275/80.
However, the effect of the bearish MACD divergences on the daily graph is currently under development, with Stochastic pointing downward on
the weekly, as well. Hence, the decline still does not seem to be exhausted. The next levels on the downside are $1.3140/50 and if surpassed,
the 50% Fibonacci is at around $1.31/05.
© Vision Capital M, 2013; Contact Person: Emil Emilov, Research Analyst 2 info@visioncapitalm.com | www.visioncapitalm.com

3. The coming week has some important economic events with the ECB rate decision and especially the EU Central bank's press conference
leading the way (Thursday, GMT 11:45 and 12:30, respectively). The U.S. non-farm payrolls and unemployment (Friday, GMT 12:30) are the
other main risk events of the week with a potential to direct the EUR/USD exchange rate in the near future. Those are the times during the week
where the most volatility in the EUR/USD currency trading could be expected.
GOLD
On the monthly graph gold continues to be on a negative territory. On the weekly however, it is trading on the positive and rising MACD so any
current decline should be limited. The precious metal touched today the 23 Fibonacci retracement of the current corrective upside movement at
$1375 and currently is trading above that. On the daily graph it looks like it is under pressure but is still trading on the positive side.
Fundamentally gold should act as a safe haven or a hedging asset in case of a world turbulence but as the same role these days could be played
by the USD, gold's appreciation could be limited. Moreover, the deleveraging process in the emerging markets could hurt some of the greatest
consumers of gold, as India. This possibly could decrease the demand despite the lower USD price of gold.
OIL
Nowadays oil has become more a strategic hedging asset than a pure commodity. In case of a war in the middle East, its price might get a boost
due to expectations about a decrease in the supply. Syria by itself is not a big supplier of oil and has not exported any oil since the sanctions on
the country due to the civil war were imposed two years ago. The danger here is the possible inclusion in the war of other countries, some of
which play a significant role in the oil market, like Iran or Saudi Arabia. The answer of Iran to a war conflict in the region is not quite sure
(although the country's Supreme Leader Ali Khamenei said a Western attack would be a "disaster for the region" b
) because of the willingness of
the new President Hassan Rouhani to improve Iran's relationship with the West. In case the war spreads to include other countries, oil supply
and transportation might suffer which will have its increasing effect on the oil price.
Technically speaking, on both the daily and weekly graphs oil is still on a positive territory. There is a slight divergence between the price graphs
of UKOil and USOil according to which it seems that in front of the UKOil there is more room for an increase than in front of the USOil. Both types
of oils however are still in an uptrend. The oil price increase might be postponed for some time after almost touching it previous high at $119 last
week but a second test of this level could follow in the coming week(s). If it is successful, the next target would be around $125.
b. Source: BBC News
S&P500
During the last week the S&P500 continued its decline and closed the week at 1633.96 which is exactly the 50% Fibonacci retracement level.
Currently the index futures are higher and trade around the 1648 level. Generally, the index is still in a downtrend but the short term technical
perspectives in front of the U.S. stocks does not seem so negative as they were two weeks ago. The index is currently bound between a range of
the current low of 1627 and the previous high at 1664. A break above 1664 could lead the S&P500 to a test of 1674 and if that is successful, to a
© Vision Capital M, 2013; Contact Person: Emil Emilov, Research Analyst 3 info@visioncapitalm.com | www.visioncapitalm.com

4. test of the current top above 1700. Having in mind the not-so-positive weekly graph however, such a test of the top could be postponed at least
with a week. The bearish divergence on the weekly graph should continue to weigh on the index.
Table 1. Daily Treasury Yield Curve Rates; source: www.treasury.gov
The idea of equity markets suffering from rising interest rates
as a result of FED's tapering was brought up in our last
newsletter. For the last 10 days there was a decrease in the
long end of the yield curve but the increase in the middle
continued. For 3Y to 10Y treasuries the increase in the yield
for August varied from 22% (3Y) to 1.5% (10Y). From Aug.
22 there is a decrease in the yields noticed in every maturity
point of the yield curve. A nice question here would be
whether these demand money came from any deleveraging
which happens in the emerging markets or from the U.S.
domestic investors who would think that treasuries have
become too cheap. Nevertheless, the idea remains that
given these rates provide a meaningful estimate of future
expected interest rates, such a rate increase would mean
more expensive money for the companies, thus reducing
their ability to take advantage of a cheap credit and
eventually affecting their bottom line, especially in debt
intensive industries.
Moreover, investing in treasuries in the face of a falling equity
market would suggest that bond investors might not see the
equities as yet being able to provide a better yield at the
moment.
© Vision Capital M, 2013; Contact Person: Emil Emilov, Research Analyst 4 info@visioncapitalm.com | www.visioncapitalm.com
Date 1 mo 3 mo 6 mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 20 yr 30 yr
08/01/13 0.02 0.04 0.08 0.13 0.35 0.65 1.49 2.15 2.74 3.48 3.77
08/02/13 0.02 0.04 0.07 0.11 0.3 0.59 1.36 2.01 2.63 3.39 3.69
08/05/13 0.03 0.05 0.08 0.12 0.32 0.61 1.39 2.04 2.67 3.42 3.73
08/06/13 0.05 0.04 0.08 0.12 0.32 0.62 1.39 2.04 2.67 3.42 3.73
08/07/13 0.05 0.05 0.08 0.12 0.32 0.61 1.38 2 2.61 3.37 3.68
08/08/13 0.05 0.05 0.07 0.12 0.3 0.61 1.36 1.98 2.58 3.37 3.65
08/09/13 0.05 0.05 0.07 0.11 0.32 0.61 1.36 1.98 2.57 3.36 3.63
08/12/13 0.05 0.06 0.08 0.12 0.32 0.62 1.39 2.01 2.61 3.39 3.67
08/13/13 0.06 0.06 0.08 0.12 0.34 0.68 1.49 2.13 2.71 3.48 3.75
08/14/13 0.06 0.05 0.07 0.12 0.34 0.67 1.48 2.12 2.71 3.48 3.75
08/15/13 0.05 0.05 0.08 0.13 0.36 0.7 1.54 2.18 2.77 3.54 3.81
08/16/13 0.05 0.05 0.08 0.13 0.36 0.73 1.6 2.25 2.84 3.61 3.86
08/19/13 0.03 0.06 0.08 0.13 0.36 0.76 1.63 2.29 2.88 3.64 3.89
08/20/13 0.03 0.04 0.07 0.13 0.36 0.73 1.57 2.22 2.82 3.59 3.86
08/21/13 0.02 0.04 0.07 0.14 0.38 0.76 1.64 2.3 2.87 3.64 3.9
08/22/13 0.01 0.03 0.06 0.14 0.42 0.82 1.71 2.34 2.9 3.63 3.88
08/23/13 0.02 0.03 0.06 0.14 0.4 0.8 1.66 2.27 2.82 3.55 3.8
08/26/13 0.03 0.04 0.07 0.13 0.41 0.79 1.61 2.23 2.79 3.52 3.77
08/27/13 0.04 0.05 0.07 0.12 0.38 0.77 1.56 2.15 2.72 3.45 3.7
08/28/13 0.04 0.03 0.07 0.14 0.4 0.79 1.62 2.22 2.78 3.5 3.75
08/29/13 0.03 0.02 0.06 0.14 0.39 0.79 1.6 2.2 2.75 3.45 3.7
08/30/13 0.02 0.03 0.05 0.13 0.39 0.79 1.62 2.24 2.78 3.46 3.7

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© Vision Capital M, 2013; Contact Person: Emil Emilov, Research Analyst 5 info@visioncapitalm.com | www.visioncapitalm.com