CITI cb wklytech 21 11 14.pdf
Market Commentary │ November 20, 2014
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Chart of the Week – Shades of 1998 - Give “thanks” to the strong USD trade at the end of
November but look for “Santa” to deliver further on the Oil and Equity trends into Christmas
We retain our strongly bullish medium term view for the USD. At the same time our road map for where we
are today remains our piece from 16 October titled Weekly Roundup: Is 2014 - "1998 Lite"? In that respect
we suspect that we could see some more USD strength into the end of this month but that December could
see this trade “flattening out”/ correcting before a resumption in January.
Looking at Oil (WTI) and the Equity markets we suspect the existing trends (Oil lower and Equity markets
higher) will likely continue into year end.
In Fixed Income we may also see a consolidation period before yields head higher again.
EURUSD- August-November 1998
EURUSD peaks during
the “carnage” in October
Subsequent down move hits
it’s low at Thanksgiving
before a correction higher
into year end.
Source: Aspen graphics/Bloomberg November 19, 2014.
Between August and October 1998 USDDEM collapsed (EURUSD surged) as huge positioning to “hedge” the
Russian crisis was unwound. As things “blew up” in October 1998 the result was that “anything that was
owned” was cut. This led to a EURUSD move (As its components that were entering the EURO in January
1999) from 1.08 to a peak of 1.22 in October 1998.
Thereafter the trend lower in EURUSD resumed until 27 November (Day after Thanksgiving) hitting a low of
1.1450. That was it for the year and EURUSD went into a correction/consolidation for the month of December
providing better levels to sell on the first trading day of 1999.That saw EURUSD head lower in a very steady
trend for the first half of 1999.(From above 1.18 in January to 1.01 by July)
Market Commentary – for Institutional Client Use
Only. Refer to informational disclosures and
qualifications at the end of this publication.
November 20, 2014