OVERVIEW SENTIMENT FOCUS TECHNICAL ANALYSIS WEEKLY PROJECTIONS FX ORDERBOOK

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1 TIER1FX WEEKLY

2 OVERVIEW SENTIMENT FOC TECHNICAL ANALYSIS WEEKLY PROJECTIONS FX ORDERBOOK 2

3 SENTIMENT FOC The UK referendum vote to leave came as a big surprise to the financial markets as both the recent polls and betting odds were clearly in favor of the remain campaign. So we expect the turmoil to continue into next week s trading with focus on uncertainty and lack of a solid global growth outlook, which should lead to further risk aversion on the short term horizon Over the weekend we have seen more than 20 Labour Party resignations and should the pressure from other unsatisfied EU members lead to further speculations of more EU referendum campaigns it could increase the odds of a more sustained downside on risky assets, which should also lead to further speculation of further central bank intervention from multiple contingents As a market participant, we will in the upcoming trading week, pay particularly focus on the lows on the European equity indices that were established Friday morning post the UK referendum as alert levels, for a clear and sustained short term bearish bias. Also FX spreads may continue to widen again if we see the above mentioned levels being broken throughout the trading week 3

4 TECHNICAL OUTLOOK DAX The DAX cash index saw a significant gap post the UK referendum and with 10,525 resistance still intact, and the inability for the index to close above the 9,740 retracement (in the 11,433 8,687 wave) level after Friday s bounce gives scope for more short term selling interest in the week to come. The selling recommendation with the best odds, would be to have the discipline to wait for a break below the Friday lows at 9,159 which would open up for risk aversion to really pick up across the board and target the 2016 lows on the near term horizon. We expect that the greatest risk for this view not be successful would be central bank intervention to stimulate stocks on a global scale DAX ECB DAX Direction Last Meeting: (03/06/2016) Central Bank Directions Vol Reading Comments ECB (03/06/2016) 127% The table picture remains mixed from a central bank stand point, but from a technical outlook we favor the downside as long as 10,500 resistance remains intact. A break below goves scope for more agreesive selling of the cash index and for a near term test of the 2016 lows at

5 TECHNICAL OUTLOOK CRUDE OIL We have chosen to give have a closer look a light sweet crude oil this week. The reason being, is that crude oil looks to have formed a toppish base, because of the inability to find sustained bids above $50. This is supported by our breakout indicator reading has fallen to a level that suggest volatility is likely to pick up. And with the current market theme of risk aversion and the present divergence between our long term bearish reading and our bullish short term trend (please see our ORDERBOOK feature) gives scope for the downside to come back into focus. At the moment support lies in the $45,60-$46.70 level which we expect to be tested in the upcoming trading and a break would open up for a short term downside correction of $4-5 per barrel. Crude oil EIA Inventories Last Release: (22/06/2016) Central Bank Directions Retail Flow Vol Reading Comments 85% Our overall table reading remains short term negative, reinforced by crude oil's inability to find sustained biidding above $50 per barrel. We continue to favor selling rallies on the short term horizon unless crude oil manages to make a daily close above $51 5

6 TECHNICAL OUTLOOK EURD EURD ECB (03/06/2016) EURD looks to be at s pivotal point from a technical stand point, supported by the increasing uncertainty surrounding the European union and the strength and loyalty of its members. Our table reading for EURD has shown a bullish bias since mid January 2016, but with last week s price action we expect that a daily close below could reverse the present bullish bias and give scope for more aggressive selling in the near term. Retail traders remain short EURD and have been since early December And after have spend more then a decade analyzing retail flow we expect that if EURD starts to find sustained offers after breaking through the handle it would potentially lead to a test of the 2015 lows between now and Q3. So it is imperative that EURD finds support ahead of the above mentioned level to keep the current technical picture intact Central Bank Directions Retail Flow CitiFX Surprise Indices Vol Reading Comments Very Bullish Euro Zone Marco Surprise 119% EURD sold off heavily post the Brexit vote, but our table reading is still in favour of a higher EURD. There has been no change to our central bank readings, macro data remains EURD bullish and retail flow still remains short EURD. So we keep the bullish bias, but should the pair trade below the lows from Friday, the pair has scope for a test of support 6

7 TECHNICAL OUTLOOK DCAD We have chosen to put focus on DCAD in this weekly report, as the pair was unable to find further buying interest after the break above the resistance area and we expect that if the pair manages to close below in the upcoming trading week, it would give scope for further accelerated downside and a test of the support area. This would also support that we once again see convergence between the bullish short term trend and the longer term overall technical bearish bias we have seen throughout 2016 DCAD (27/4/2016) BOC (25/5/2016) Very Canada 71% Most indicators in our table still gives scope for DCAD to continue to head lower and with last week's bounce from the bottom and this week's sideways pattern along with a relative stable oil price, we expect DCAD to take a leg lower in the upcoming trading 7

8 WEEKLY PROJECTIONS Last Week Close Weekly Projections Weekly Change YtD% + 2 Std Dev + 1 Std Dev - 1 Std Dev - 2 Std Dev EURD % 2.35% GBPD % -7.19% AUDD % 2.52% DCAD % -6.06% DJPY % % DCHF % -2.86% GOLD % 24.00% Crude oil % 28.62% DAX % % S&P % -0.32% Source: Tier1FX, Reuters 8

9 WEEKLY PROJECTIONS Central Bank Directions Retail Flow CitiFX Surprise Indices Vol Reading Comments EURD GBPD ECB (03/06/2016) BOE (16/6/2016) Very Bullish Euro Zone Marco Surprise UK 119% 267% EURD sold off heavily post the Brexit vote, but our table reading is still in favour of a higher EURD. There has been no change to our central bank readings, macro data remains EURD bullish and retail flow still remains short EURD. So we keep the bullish bias, but should the pair trade below the lows from Friday, the pair has scope for a test of support Our table reading last week pointed to a lower GBPD and last week's referendum only supported this view. Retail Flow was long ahead of the vote and still remains long post the vote and the heavy sell off, so we expect Cable to remain bearish in the upcoming trading week and we expect that the BoE will not intervene if GBPD continues to slide AUDD DCAD DJPY RBA (7/6/2016) BOC (25/5/2016) BOJ (16/6/2016) Very Very Australia Canada Japan 114% 126% 158% The table reading for DJPY does not give a bias in direction from central banks and only slightly bearish bias on the macro data index. The only clear reading is that retail flows have a clear bias towards being long, which suggest a slightly bearish bias. Technically AUDD looks stuck in a range. A break of these levels should help clear up the picture DCAD found support on a general D bid post the UK referendum, but our table reading finds support both from a central bank, macro data and from a retail flow bias, which suggest a sell of rallies for this currency cross. Expect a few stops to be triggered above the handle, but for the pair to remain technically bearish as long as retracement resistance remain intact The table reading for DJPY has shown a strong bearish bias through the past couple of weeks and was only reinforced in last weeks' trading, but as we have noted in the past, traders should take caution as we trade close to the handle where as we saw last week the BOJ seems to find their pain threshold to the exchange rate of DJPY DCHF SNB (27/4/2016) Very Switzerland 94% DCHF rebounded from recent lows on general D strength and support by SNB intervention in EURCHF helping CHF flow to be on the offer. The current intervention "overrules" any of our table reading and we would take a neutral stance for now, until we see price action throughout the upcoming trading week GOLD Crude oil DAX S&P 500 Gold Direction Price Disrepancy: Last Meeting: (15/6/2016) EIA Inventories Last Release: (22/06/2016) ECB DAX Direction Last Meeting: (03/06/2016) S&P 500 Direction Last Meeting: (15/6/2016) ECB (03/06/2016) 155% 85% Very Bullish 127% 86% Our general table reading suggests a slightly negative bias, but with the current strong risk aversion theme in the market, makes the short term directional bias difficult to predict. In general the overall technical picture remains bullish above $1200, but expect sharp sell offs on upside bounces in stocks Our overall table reading remains short term negative, reinforced by crude oil's inability to find sustained bidding above $50 per barrel. We continue to favour selling rallies on the short term horizon unless crude oil manages to make a daily close above $51 The table picture remains mixed from a central bank stand point, but from a technical outlook we favour the downside as long as 10,500 resistance remains intact. A break below gives scope for more aggressive selling of the cash index and for a near term test of the 2016 lows at the S&P 500 cash index is starting to show convergence between the short and long term trends and we expect the negative bias to continue to be favoured and we look for a break below handle to give scope for stops to be triggered Source: Tier1FX, Reuters 9

10 FX ORDERBOOK 10

11 EXPLANATIONS WEEKLY PROJECTIONS Central bank responsiveness: This gives a quantifiable directional bias which is based on central bank meetings synergized with a certain discrepancy in price action from the norm which assists the trader/investor in analyzing the short to medium term direction of a specific currency, not a specific currency cross Retail direction: We have had substantial work experience in analyzing retail flow and works as a great indicator to help grasp short term medium term direction. The key to retail flow is to know how substantial the bias has to be, to give a meaningful reading, which we have done by the color coding Short and Long term trend readings: A lot of technical indicators have been created to assist in defining a trend. We have found that the best overall bias is done by defining the trend by using slope readings with certain thresh holds, despite the market not being linear Breakout Potential: The breakout indicator assists the trader/investor to quickly find an overview of which financial products that we cover in the analysis have potential to outperform/underperform volatility wise on the short term horizon, by using a percentage threshold between the short and long term ranges Data surprise index: This is based on Citibank s surprise index on macro data in various countries which we cover in our research. This helps to grasp whether or not a country s economy is outperforming the predictions of leading economists, which then gives a bias towards understanding short to medium term sentiment towards a specific financial product Price projections for the upcoming trading week :The price projections given in the table should assist the investor/trader getting an idea of what one can expect of price movements in the financial products the we cover in the research note in the week to come. The projections are based on weekly data using 1 and 2 standard deviations from the mean 11

12 EXPLANATIONS FX ORDERBOOK The FX Orderbook is a tool created to both give an idea of trade ideas, but also to give an overview to where technical trends can be broken or reinforced. These levels could likely also act as key levels to where stops may be placed specifically in the currency market Understanding the color codes used in our research: Dark green: Strong bullish bias Light green: Bullish bias Yellow: Lack of trend and no meaningful directional bias Dark red: Strong bearish bias Light red: bearish bias Breakout indicator: Red means we expect volatility to rise on the short term horizon with the ideology of mean reversion Green gives the expectation of volatility trading above the norm Yellow indicates range volatility trading around the norm 12

13 DISCLAIMERS GENERAL DISCLAIMER This research has been prepared by TIER1FX It is provided for informational purposes only. It does not constitute or form part of, and shall under no circumstances be considered as, an offer to sell or a solicitation of an offer to purchase or sell any relevant financial instruments (i.e. financial instruments mentioned herein or other financial instruments of any issuer mentioned herein and/or options, warrants, rights or other interests with respect to any such financial instruments) ( Relevant Financial Instruments ). The research report has been prepared independently and solely on the basis of publicly available information that considers to be reliable. While reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and TIER1FX accepts no liability whatsoever for any direct or consequential loss, including without limitation any loss of profits, arising from reliance on this research report. The opinions expressed herein are the opinions of the research analysts responsible for the research report and reflect their judgement as of the date hereof. These opinions are subject to change and TIER1FX does not undertake to notify any recipient of this research report of any such change nor of any other changes related to the information provided in this research report. This research report is protected by copyright and is intended solely for the designated addressee. It may not be reproduced or distributed, in whole or in part, by any recipient for any purpose without TIER1FX prior written consent. 13