in association with

Market Bulletin 10th December 2009

Euribor’s wobble: how nervous should we

be?
The Technical Trader’s view:
Sep 11 Euribor
99.2
99.1
99.0
98.9
98.8
WEEKLY CHART
98.7
98.6
98.5
98.4
98.3
The market is dithering at
98.2
98.1
98.0
the top of a long uptrend.
97.9
97.3750 High 97.8
97.7
97.6
97.5
But is it a reversal of the
97.4
97.3
97.2
Trend?
97.1
97.0
96.9

96.16 High
96.8
96.7 Look closer.
96.6
96.5
96.4
96.3
96.2
96.1
96.0
95.9
95.8
95.7
95.6
95.5
95.4
95.3
95.2
95.1
95.0
94.9
94.8
94.7

500000

A S O N D 2008 M A M J J A S O N D 2009 M A M J J A S O N D 2010 M A M J J A S

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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,
relationship or arrangement in relation to them.
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98.9250 High
Sep 11 Euribor
DAILY CHART
98.95

98.90

98.85

98.80 The position is less like a

98.75

98.70 Head and Shoulders

98.65
98.68 Lows
98.60 Reversal than a Multiple
98.55

98.50 Top.
98.45
98.2750
98.40

98.35

98.30 The double low of 98.68 is

98.25

98.20 important if there is a

98.15

98.10 confirmed (ie twice) close

98.05

98.00 beneath it.

97.95

97.90

97.85

97.80 The volume on the sell-off

97.75

97.70 today was significant.

97.65

250000
200000
150000
100000
50000
But we have seen that sort
25 1 8
February
15 22 1
March
8 15 22 29 5
April
12 19 26 3
May
10 17 24 31
June
7 14 21 28 5
July
12
of volume before – in early
May. And, there is a
possibility of a large bull flag
too, looking at the wider
context.

So for the moment we are

skeptics, until a close is
confirmed beneath 98.68. If that
happens then the market will be
pressured lower. But even then,
other things being equal, the
diagonal at 98.55 is important…

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Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
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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

The Macro Trader’s view:

Since the beginning of May, Euribor has traded in a clearly defined sideways pattern. Our
analysis of this contract had broadly been that it had little room to rally further due to the
economic recovery clearly underway, but no reason to turn into a bear market yet since that
recovery was still too fragile.

More recently, we judged Euribor remained trapped in a period of sideways trading that could
last for a considerable period, as a result of the uncertainty caused by the Euro zone sovereign
debt crisis.

Until the crisis morphed from being Greek centric, the Euro zone economy was in recovery
mode with Germany pulling the rest along much like a locomotive dragging its trucks. But as
the crisis began to engulf additional countries, forcing each in turn to adopt austerity measures,
until Germany its self was infected, traders began to fret that growth would be the most
conspicuous victim.

Even in the US, after initially sounding reasonably relaxed about the consequences of the Euro
zone drama, the Fed now fears the US economy could feel more than just “ripple” effects.

The main problem currently is the Euro zone banking system. It is judged to be heavily over-
exposed to the Government bonds of those peripheral Euro zone countries that initially
sparked the crisis and have suffered steep sovereign debt downgrades.

Other Banks have become reluctant to lend to Euro zone Banks for fear the money might not
be repaid and this has forced the Euro LIBOR rate up, which in turn has begun to feed into the
Euribor futures markets.

The problem is serious because those Banks thought to be most at risk are those in Germany
and France. Some estimate that the affected banks require large capital injections from the
state, or the emergency fund created recently by the EU/EZ/IMF designed to bailout any Euro
zone state at risk of default.

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

So the recent sell off in Euribor that has seen the two month old range break, isn’t so much a
market view on the ECB tightening interest rates, but a reflection of tightening conditions in the
Wholesale interbank money markets.

We saw these conditions develop earlier during the original financial crisis, but then the Global
Banking system was affected; now it is more localized. The ECB is alert to this and continues
to provide liquidity as needed despite fears it was about to begin removing some emergency
support this week.

So is Euribor turning bearish? We don’t think so, yet.

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.