3 M’s That Move The FX Market Boris Schlossberg Kathy Lien Directors of Currency Research

IMPORTANT NOTE: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts. Past performance is not necessarily indicative of future results. DISCLAIMER: This presentation and the information provided here should not be relied upon as a substitute for extensive independent research before making your investment decisions. Global Forex Trading is merely providing this presentation for your general information. This presentation and its information does not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision based upon this presentation or any information contained within. In addition, any projections or views of the market provided by the author may not prove to be accurate. Some of the information was obtained from third party sources, and believed to be reliable, but data may have changed as of the published date of this presentation. Global Forex Trading, Boris Schlossberg, and Kathy Lien will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained in this column. Global Forex Trading, Boris Schlossberg, and Kathy Lien do not render investment, legal, accounting, tax or other professional advice. If such advice is sought, or other expert assistance is required, the services of a competent professional should be sought. CD08M Disclaimer B

The 3 M’s Macro Micro Monetary Policy B

Macro Factors Macro Political Conflict Equities and Risk Appetite Oil and Gold k

Geopolitics Generally, currency markets avoid political risk Sell first, ask questions later Capital seeks stability Source: DealBook 360 k

Risk Appetite Risk On! Risk Off! Carry usually follows But you must always be aware of context Source: DealBook 360 k

Correlation: SP500 & USD/JPY Blue Line = USD/JPY Red Line = SP500 Weekly Chart Source: GFT K Source: DealBook

Correlation: SP500 & USD/JPY Blue Line = USD/JPY Red Line = SP500 Hourly Chart K Source: DealBook

Oil Oil vs. EURUSD 70% correlation since start of 2008 Why? Because US economy is most sensitive among G-3 to price of crude But, note the divergence lately Source: DealBook 360 k

Gold Aussie and Gold: Ignore the connection at your own risk? Source: DealBook 360 k

Micro Factors Key Micro Data NFP (Labor Data) ISM (Manufacturing and Services Data) Inflation Sentiment B

Labor Data Why is labor so critical to the economy? Jobs = Greater Income = Greater Spending = Greater Growth In G-3 economies the consumer represents between 60%-70% of GDP B

Labor Data – US Unemployment Rate B

Labor Data – EZ Unemployment Rate B

Labor Data – German Unemployment Rolls B

ISM/PMI – State of Business ISM and PMI Surveys Measure Health of Business > 50 Generally Means Expansion < 50 Suggests Contraction B

Production Data – US Manufacturing ISM B

Production Data – US Services ISM B

Production Data – EZ Composite PMI B

Inflation – The Bane of CB’s Inflation is the Key Driver of Interest Rates All things being equal: Hotter inflation generally leads to higher interest rates Higher rates generally lead to higher currency k

US Headline CPI k

CPI vs. Oil Source: GFT k

EZ Headline CPI k

The Power of Sentiment Sentiment Can Create Its Own Reality Cautionary attitude could lead to retrenchment in spending and ultimately deceleration of growth. k

US U of Mich k

German IFO k

Monetary Policy Know The Players Know The Mandates Prepare Properly B

Ben Bernanke The Academic Believes in transparency Has only presided over rate cuts B

Jean Claude Trichet The Godfather Price stability drives policy Wage price inflation – key concern K

Masaaki Shirakawa The Conformist Hemmed in by stagnant economy B

Mervyn King The Gentleman Banker Caught between a rock and a hard place K

Macro Trade Example Macro Trade Dow drops, EUR/JPY follows Source: DealBook 360 B

Micro Trade Example Micro Trade EZ Trade Balance: -6.4B vs forecast Source: DealBook 360 K

Monetary Policy Trade Example Monetary Policy Trade RBA Cuts Rate by 100 bp Source: DealBook 360 B

Sticking With the Trend K

Sticking with the Trend EUR/USD B Source: DealBook

USD/JPY B Sticking with the Trend Source: DealBook

How to Trade the Bollinger Bands 1.The First Break 2.Retrace K Sticking with the Trend

EUR/USD K The First Break Source: DealBook

AUD/JPY K The First Break Source: DealBook

GBP/USD K Retrace Source: DealBook

USD/CHF B Retrace Source: DealBook

Help Increase Your Chance of Success By Keeping an Eye on Data B Sticking with the Trend

IMPORTANT NOTE: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts. Past performance is not necessarily indicative of future results. DISCLAIMER: This presentation and the information provided here should not be relied upon as a substitute for extensive independent research before making your investment decisions. Global Forex Trading is merely providing this presentation for your general information. This presentation and its information does not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision based upon this presentation or any information contained within. In addition, any projections or views of the market provided by the author may not prove to be accurate. Some of the information was obtained from third party sources, and believed to be reliable, but data may have changed as of the published date of this presentation. Global Forex Trading, Boris Schlossberg, and Kathy Lien will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained in this column. Global Forex Trading, Boris Schlossberg, and Kathy Lien do not render investment, legal, accounting, tax or other professional advice. If such advice is sought, or other expert assistance is required, the services of a competent professional should be sought. CD08M Disclaimer