Weekly Review

Currency Tentions Ease Monday, October 18, 2010

Currency tension between the US and China reached a new climax this week as China’s foreign reserves reached a
staggering record $2.65trln.The $194Bln spike in foreign reserves was attributed to the strong rebound in exports but
also to massive inflows of investment into China. Although China’s trade balance slide from its $20Bln last month to
16.9Bln as China’s imports jumped. The continuing rise in China’s foreign reserves has awaken tension between the US
and China over the undervalued Yuan. The US accuses China of violating rules in international trade by manipulating its
currency. China holds the Yuan in a so called undervalued rate against the Dollar to maintain low cost manufacturing in
the country and protect growth. However as China continues to grow in double digit figures while the US and Europe are
stagnate brings a lot of heat towards China and its Yuan policy. The US China tension reached its new levels last week as
the US administration threatened to label China as a formal currency manipulator. Such as political move would bring
tough levees on imports from China to the US and would weight significantly on China’s export industry. The threat which
usually seems more hung in the air was suddenly perceived as probable with the US elections on the horizon.
Nevertheless the tension between the two super powers eventually eased as both sides silently agreed to back down
from their tough stance. China allowed the Yuan to rise 2.4% and raised reserve requirements for the country’s biggest
banks, a move that is expected to ease investment inflows to the country and reduce China’s ballooning foreign reserves.
The move apparently was received well by Washington as the administration eventually agreed to postpone the decision
on labeling China as a currency manipulator until after the US election. Long term as US unemployment continues to be
above 9.5% and growth is subdued, the internal political pressure on the Administration to act against China is likely to
continue. Investors will be following closely on any developments in the long lasting tango between the world’s largest
consumer and the world’s largest manufacture

Will QE be different this time?

Although current fundamentals support the broad Dollar selloff with the Fed expected to execute $1Trln QE. However
one should ask wither the Dollar weakness in sustainable for the long-term? After all Dollar pricing gaps created by the
first QE where eventually closed, and Euro collapsed very close to parity after several months. Why in fact this time
should the s QE have a permanent effect on the Dollar weakness? Another case study which supports the fact that the
long term dollar weakness might not be sustainably is the Japanese credit crisis. The Japanese economy experienced a
very similar credit crisis and Japanese policy makers used very similar measures. However the government and the BoJ
were eventually exhausted reaching the edge of their ability to lower funding cost. Now after 20years of constant easing,
Japan is still stagnant and the Yen still trades close to record highs. Can the US really avoid the same fate?

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Trading in the Foreign Exchange market might carry potential rewards, but also potential risks. You must be aware of the risks and be willing to accept
them in order to trade in the foreign exchange market. Don't trade with money you can't afford to lose.
Weekly Review - Open Book Performance

So who traded better?

The week was dominated with Dollar weakness with currencies such as the Aussie
and the CAD reaching parity with the Dollar. The Euro traded above the 1.4
threshold and the Sterling above the 1.6$.OpenBook traders were able to use this
Dollar weakness well focusing mainly on long EUR/USD and long AUD/USD.
Traders 1971guo and merv456798 where especially effective in using Dollar
th
weakness reaching place 5th and 4 for the week in the Open Book ranking.
Trader 1971guo opened a long trade on the EUR/USD at around 1.387-1.389
recognizing the pair is aiming towards the 1.4 threshold. Trader 1971guo closed
his trade after just one day with the Euro reaching his target and trading at
1.4$.The fact that trader 1971guo was able to recognize the move towards 1.4
opening just a day before, indicates good trading senses and most importantly
good timing. The trader was able to gain a total of 522 pips in 5 parallel trades on
EUR/USD with a return on investment of 87.1% for the week.

The Critical error- Trader merv456798 was also very good in using dollar
weakness trading long on the AUD/USD recognizing the Aussie is well in place for
a strong run to parity with the Greenback. Trader merv456798 opened a long
AUD/USD position around 0.987 and closed his positions around 0.998 very close
to parity. The trader was able to gain around 200Pips in 3 parallel AUD/USD
trades. However the trader later made a critical error. After gaining well from the
Aussie rise, trader merv456798 decided to bet once again on long AUD/USD. The
trader opened 3 parallel positions and failed to realize that the AUD/USD is
heading for a correction after a rally to parity with the Dollar. Instead of finishing
among the first 3, trader merv456798 was pushed to 4th place with a 91.7% gain
on investment for the week.

For more market analysis and news visit www.eToro.net

Trading in the Foreign Exchange market might carry potential rewards, but also potential risks. You must be aware of the risks and be willing to accept
them in order to trade in the foreign exchange market. Don't trade with money you can't afford to lose.
Weekly Review - Open Book Performance

The winner - Chidori

Trader Chidori and trader qing88 reached the first places for the week exceling in short term highly leveraged trades. In fact both
traders were quick to indentify the upcoming correction in the EUR/USD and in the GBP/USD opening short positions on the
EUR/USD and the GBP/USD at around 1.41 and 1.6$ respectively. Both closed the week with a high gain with very close results.
Trader qing88 closed the week with a 96.7% gain while trader Chidori closed the week with a 109%.In fact when examining both
closely in terms of win ratio it was qing88 with the best result with a win ratio of 8 out of 8 for the week. However since Chidori used
a leverage of X400 and qing88 used a 100X Chidori was able to gain 12% more and move the first spot.

The Winning Trade-Trader Chidori moved to a EUR/USD short around 1.398 with a 100Pips gain closing at 1.388 gaining most of the
EUR/USD bearish correction. The EUR/USD later edged higher surpassing the 1.4 threshold however Chidori was very quick to react
and close his trade before the Euro rebounded again to the 1.4 level.

EUR/USD, Hourly Chart Source: eToro webtrader

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Trading in the Foreign Exchange market might carry potential rewards, but also potential risks. You must be aware of the risks and be willing to accept
them in order to trade in the foreign exchange market. Don't trade with money you can't afford to lose.
 Weekly Review - Exchange Rates
Instrument Trend Support II Support I Spot Resistance I Resistance II

EUR/USD 1.378 1.393 1.3976 1.416 1.42

GBP/USD 1.586 1.566 1.599 1.605 1.61

EUR/GBP 0.862 0.872 0.8744 0.881 0.90

USD/CHF 0.94 0.948 0.958 0.973 0.984

USD/JPY 80 80.8 81.43 83.3 86.5

USD/CAD 0.997 1.0 1.0098 1.014 1.0164

EUR/JPY 113 113.5 113.86 115 115.66

Oil 80 80.5 81.25 83.5 84.4

Gold 1,340 1,362 1,368 1,385 1,387

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Trading in the Foreign Exchange market might carry potential rewards, but also potential risks. You must be aware of the risks and be willing to accept
them in order to trade in the foreign exchange market. Don't trade with money you can't afford to lose.
Weekly Review - Technical Zone

USD/JPY Weekly
Source: Thomson Reuters

Direction: Bullish
Scenario: After sliding to new lows for the year and reaching very close to the
80 threshold the pair could be heading for short-Term technical rebound.

Notice-A weekly close below 80 would invalidate our scenario.

Key Figures
1st 2nd
Targets 83.1 85.5
Support 80.8 80

Pivots Description
83.28 EMA 28 days
86.51 EMA 120 Days
89.87 SMA 320 Days

52 week range: 80.88-94.98

Bollinger Bands: 80.8-84.18

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Trading in the Foreign Exchange market might carry potential rewards, but also potential risks. You must be aware of the risks and be willing to accept
them in order to trade in the foreign exchange market. Don't trade with money you can't afford to lose.
Weekly Review - Technical Zone

EUR/CHF Daily
Source: Thomson Reuters

Direction: Bearish
Scenario: The long Term remains bearish cycle is yet to be shaken with the
short term gains of the pair still failing to edge above the 1.35 resistance. The
pair’s failure to breach the 1.35 suggests a consolidation to the 1.32-1.33 area.

Notice-A weekly close above 1.35 would invalidate our scenario.

Key Figures
1st 2nd
Targets 1.333 1.317
Resistance 1.35 1.357

Pivots Description
1.3299 EMA 28 Days
1.356 EMA 120 Days
1.3949 SMA 200 Days

52 week range: 1.276-1.517

Bollinger Bands: 1.3237-1.3462

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Trading in the Foreign Exchange market might carry potential rewards, but also potential risks. You must be aware of the risks and be willing to accept
them in order to trade in the foreign exchange market. Don't trade with money you can't afford to lose.
 Weekly Review - FINANCIAL CALENDAR

Currency Time (GMT) Release Month Consensus Prior

NZD S 21:45 NZD CPI Q3 1% 0.3%

GBP S 23:01 Rightmove House Price Index Sep -1.1%

JPY S 23:50 Tertiary Index Aug -0.5% 1.6%

USD M 13:00 US Total Net TIC Flows Aug $63.7Bln

USD M 13:15 US Industrial Production Sep 0.2% 0.2%

USD M 13:15 US Capacity Utilization Sep 74.9% 74.7%

AUD T 01:30 RBA Meeting Minutes Oct

EUR T 08:00 Current Account Aug -€3.8B

EUR T 9:00 German ZEW Survey Oct 63.5 59.9

USD T 12:30 US Housing Starts Sep 0.58M 0.569M

CAD T 13:00 BoC Rate Decision 1% 1%

JPY W 05:00 Leading Economic Index Aug 100

EUR W 06:00 German PPI (YoY) Sep 3.8% 3.2%

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Trading in the Foreign Exchange market might carry potential rewards, but also potential risks. You must be aware of the risks and be willing to accept
them in order to trade in the foreign exchange market. Don't trade with money you can't afford to lose.
Weekly Review

GBP W 08:30 BoE Meeting Minutes

GBP W 08:30 Public Sector Net Barrowing Sep £14.6Bln £15.3Bln

Oil W 14:30 EIA Crude Oil Inventories Oct15 -0.3M

USD W 20:00 Fed’s Beige Book

JPY Thu 04:30 All Industry Activity (MoM) Aug -0.4% 1%

CHF Thu 06:15 Swiss Trade Balance Sep 1.2Bln 0.568Bln

EUR Thu 07:30 German PMI Oct 54.6 55.1

EUR Thu 08:00 EMU PMI Oct 53.7 54.1

GBP Thu 08:30 UK Retail Sales (MoM) Sep 0.3% -0.5%

CHF Thu 09:00 ZEW Survey Oct -5.1

USD Thu 12:30 Intial Jobless Claims Oct16 453K 462K

CAD Thu 12:30 Leading Indicators Sep 0.2% 0.3%

USD Thu 14:30 Philadelphia Fed Manufacturing Oct 0.5 -0.7

EUR F 08:00 German IFO business climate Oct 106.5 106.8

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Trading in the Foreign Exchange market might carry potential rewards, but also potential risks. You must be aware of the risks and be willing to accept
them in order to trade in the foreign exchange market. Don't trade with money you can't afford to lose.
Weekly Review

CAD F 11:00 BoC CPI (MoM) Sep 0.1% -0.1%

CAD F 12:30 Retail Sales Sep -0.1% -0.1%

For more market analysis and news visit www.eToro.net

Trading in the Foreign Exchange market might carry potential rewards, but also potential risks. You must be aware of the risks and be willing to accept
them in order to trade in the foreign exchange market. Don't trade with money you can't afford to lose.