Q1 Outlooks - 4 January 2010

FX OVERVIEW: Euro features a classic breakout setup for Q1. The key ‘trigger’ boundaries are Q1/yearly support at 1.4285/50 and 1.4600 resistance. The fact monthly trend fell from bullish to neutral in Dec and there is also significant intramonth resistance for Jan under 1.4250 handicaps the breakout to the downside. Expecting a 1.4600 to 1.3585 quarterly range. The other major trades are very widespread setups in Aussie (.9421 to .8385/02) and $/CAD from 1.0196 to 1.1087 (with bearish monthly trend at 1.0639 in between). GBP and $/JPY are more neutral – though $/JPY can see some pop above bearish Q1 trend at 93.16/20.(continued in subscribers area)

STOCK/BOND OVERVIEW: Quarterly trend turned bearish in bonds, 10s and 5s to end Q4; it fell neutral in 2s. Despite an initially neutral setup for Q1 above 4.745/77 in bonds, 3.893/93 in 10s and 2.92 in 5s, significant downside risk remains behind there and further eventual backup is seen over Q1. The projected targets are 5.33, 4.56, 3.345 and closest Q1 supports at 1.493/56 in 2s. Stocks have an incredibly clean trading setup for Q1 – a wide battle between bearish yearly trend at 1159.52 and bullish-leaning Q1 trend at 992.27. A cluster of combined Q1/yearly levels at 1159/1188 (plus Jan monthly zone at 1142/1147) are a formidable wall to sell against.(continued in subscribers area)