MARGRAF ON THE MARKETS

27253 Timberlane, Monee, Illinois

(August 14, 1997) CURRENCIES: GERMAN D- MARK, SWISS FRANC–HIGHLIGHTS–Worries about possibilities of resumption of “traditional” U.S. inflation plus hints that the European Union common currency implementation will be smoother than expected earlier provided support to these continental currencies.

TECHNICAL ANALYSES–TRENDS: (D-mark) Long-term down, intermediate-term down, short-term up. (Swiss Franc) Long-term down, intermediate-term down, short-term erratic.

FUTURES: (D-mark) Close 5443 [5-day change = +76], resistance 5482, support 5363, 5311. (Swiss Franc) Close 6612 [5- day change = +50], resistance 6673, 6708, support 6579, 6562, 6533.

FUNDAMENTALS–BULLISH: Worries about the possible end of the current U.S. non-inflation have strengthened the U.S. interest rates since the beginning of August. The problems of the European Union seem closer to being solved. Possible solutions are underway to specific areas of concern to Germany and Switzerland–Germany's unemployment and involvement of the Swiss banking community with WW II Nazi Germany.

BEARISH: The positive talk about solutions Germany's and Swiss problems, at this point is just “talk.” The Swiss National Bank is expected to continue its long-term support of a weaker SF to stimulate Switzerland's economic growth.

RECOMMENDATIONS–POSITION RECAP: Sort multiple positions of DM and SF.

NEW: Sell DMU and SFU at market. Exit at first signal (trailing stop, parabolic or Exit Rule #2).

Ernest Margraf

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