in association with

Market Update 31st March 2011

Sterling Euro suggests further Sterling

weakness

The Technical Trader’s view:

Euro-UK Pound Sterling

1.005
1.000
0.995
0.990 WEEKLY CHART
0.985
0.980
0.975
0.970
0.9409 High
0.965
0.960
The big picture is of the
0.955
0.950
0.945
completion of a bull falling
0.940
0.935 wedge that has formed
0.930
0.925
0.920
since the beginning of 2009.
0.8955 High 0.915
0.910
0.905
0.900
0.895 But fascinatingly, and
0.890
0.885
0.880
coincidentally, note the
0.875
0.870
0.865
completion of a small Head
0.860
0.855 and Shoulders Reversal –
0.850
0.8185 High
0.845
0.840
adding greatly to the bull
0.835
0.8099 0.830
0.825
impetus.
0.820
0.815
0.810
0.805
0.800 Look more closely.
0.795
0.8071- 0.8144 Pivotal Prior Lows 0.790
0.785
0.780
0.775
0.770
0.765
0.760

Jun 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 Jun

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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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 in association with
Euro-UK Pound Sterling

Minimum 0.920
DAILY CHART
0.915
Target 0.910 The simultaneity of the
0.905
completion of the H&S
0.900

0.895
Reversal is clear.
0.890

Bull falling wedge 0.885

Note too, the importance of
0.880

0.875
the band 0.8654-8672.
0.8672
0.870 Initially, this was resistance
0.8654
0.865
overcome and then good
0.860

0.855
support. Indeed, the catalyst
0.850 for the completion moves.
61.8% 0.845

0.840

0.8336 Low 0.835 Expect the Neckline currently

0.830 at 0.876 to be good support
0.8288 Low 0.825

0.820
on any pull-back.
Prior High from Sept 2008 0.8185 0.815

0.810
Prior High from April 2008 0.8099
0.805

28 5 12 19 26 2 9 16 23 30 6 13 20 27 4 11 18 25 1 8 15 22 29 6 13 20 27 3 10 17 24 31 7 14 21 28 7 14 21 28 4 11
July August September October November December 2011 February March April

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.

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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.
 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.

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.
 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

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.