=0D-0A-0D=0ACJ=2EP=2E Morgan Logo]=0D-0A-0D=0AGlobal FX Strategy=0D-0A-OD=

=0D-0A-0D=0ACJ=2EP=2E Morgan Logo]=0D-0A-0D=0AGlobal FX Strategy=0D-0A-OD= =OA =0D-0AGlobal FX Strategy 2012: Currencie= s during European recession & global stagnation=0D-0A-0D=0AClick here<https- ://mm=2Ejpmorgan=2Ecom/stp/t/c=2Edo?i=3D4E9D8-20D8&u=3Da_p*d_730472=2Epdf*h= _-1hc7311%0d%0a> for the full Note and disclosures-2E-0D-0A-0D-0A-0D-0A-0D- =0A2012 Outlook: Currencies during European recession & global stagnation (— John Normand)=0D-0A2012 presents a unique tension between an unprecedented = macro environment and very defensive investor positioning=2E The next 100 d= ays will be critical in avoiding a sovereign credit event and global recess= ion=2E Averting disaster and achieving stagnation should be sufficient to e= ase the dollar lower next year, but expect only a 2% trade-weighted decline= and another year of above-average volatility (12%-15% on VXY)=2E Global re= cession would probably deliver 8% strength in USD, so less than Lehman give= n existing USD longs-2E-0D-0A-0D-0AFive global macro themes and top trades = (Paul Meggyesi, John Normand, Matthias Bouquet)=0D-0ATop five trading theme= s and recommendations: (1) implementation risks around Europe are huge (EUR= /JPY put spreads , bullish USD/SEK fly); (2) desperate times demand despera— te action (short USD/JPY 1x2 put spreads, short GBP/JPY through seagulls, s= hort 6-mo EUR/CHF puts; (3) no winners in European cage match (3-mo range b- inaries in EUR/GBP and EUR/NOK); (4) some safe havens are safer than others= (long NOK/SEK); and (5) valuation re-asserts itself (short NZD/CAD)=2E—0D- =0A=0D=0APost-mortem on 2011 forecasts and trade recommendations (John Norm= and, Sunil Kavuri)=0D=0AForecast accuracy was better than the consensus for= Q1 to Q3, but was poor in Q4 when the dollar turned=2E On trade recommenda= tions, returns and success rates on options trades were the highest in four= years, whereas those on cash trades were average-2E-0D-0A-0D-0AFX Volatili= ty: Here to stay (Arindam Sandilya, Matthias Bouquet)-0D=0AEuropean recessi= on and G4 deficit consolidation will keep volatility and the vol-of-vol hig= h again in 2012 (12%-15% on VXY Global)=2E Systematic short gamma strategie- s should prove ineffective; overlay long vega hedges through calendar sprea= ds=2E Risk reversals in high-beta currencies should outperform straddles as= defensive plays-2E Optionalised carry should provide positive but noisy re= turns-2E-0D-0A-0D-0ALong-term Technical Strategy: Is resistance futile? (Ni= all O'Connor, Thomas Anthonj)-0D-0AThe USD rally should continue into Ql fo= llowing reversal from key supports=2E Key resistance on DXY is 80=2E00/81= =2E44=2E EUR/USD has downside but could stabilize in 1-2E26/1=2E28 region= =2E Yen enters another solid year even with momentum slowing=2E Commodity c= urrencies still look range-bound=2E Chart patterns for CEEMEA currencies ar= e dire, whereas Latam and EM Asia should recover in Q2-2E-0D-0A-0D-0AFeatur- e: ECB debt monetization-correcting a historic anomaly would lift euro (Ken= Landon)=0D-0AThe ECB's prohibition against debt monetisation is a historic= al anomaly=2E Allowing Fed/Bank of England-like activity would strengthen t= he euro by reducing sovereign default risk-2E-0D-0A-0D-0AYen: USD/JPY to co= ntinue its downtrend, with risk of breaking 70 (Tohru Sasaki, Junya Tanase,= Anna Hibino)=0D-0AEven at all-time highs, the yen should benefit from a ye= ar of low global rates, sovereign stress and reserve diversification=2E The= Bank of Japan cannot floor USD/JPY as the SNB did with the Swiss franc=2E= -0D-0A=0D=0AEuro: the make-or-breakup year (John Normand)=0D=0A2012 will te= st what remains of euro resilience=2E The pivotal issue isn't Europe's rece= ssion, which is guaranteed and discounted=2E The question is whether 2012 d= elivers a Lehman-like sovereign event-2E ECB and IMF funding will be requir= ed to prevent this outcome=2E If combined with structural reform, EUR/USD c= an remain in a 1=2E30s range, even during a European recession-2E-0D-0A-0D- =0ASterling: Still dodging the limelight (Paul Meggyesi)=0D=0A2012 should m= ark the fourth consecutive year of sterling consolidation, as the UK's slow= -burning economic malaise cannot compete for attention with the Euro area's= rapidly-evolving fiscal and political drama-2E-0D-0A-0D-0ASwiss franc: Che= ck the dam for cracks (Paul Meggyesi)—0D=0AThe fundamental forces which dro- ve record appreciation in 2011 - sizable current account surplus, strong ec= onomy, massive overseas borrowing in CHF - are still intact=2E The SNB has = infinite capacity to peg EUR/CHF, but the cost in terms of inflation and ex= cess credit growth will become more apparent next year=2E Expect the floor = to hold at 1=2E20 before yielding in 2013 2E OD OA OD 0ASwedish and Norwegi= EFTA01171835 an kronas: Falling short of safe-haven status (Paul Meggyesi)=0D=0AAn asser= tive SNB and BoJ are sending investors towards other, potential safe havens= =2E NOK and SEK satisfy only about half the criteria for safe harbors, with= NOK preferred due to the Norwegian economy's lower correlation to global g- rowth-2E-0D-0A-0D-0ACommodity currencies: Risks loom large for Ql (Kevin He= bner)=0D=0AStronger fiscal positions, soaring terms of trade and ongoing re= serve diversification are no insulation from Europe=2E NZD/USD is the most = vulnerable given its internal and external imbalances-2E-0D-0A-0D-0ALong-te- rm valuation: USD fiscal premium is modest (Justin Kariya)=0D=OAFundamental= fair value models suggest that the most expensive currencies are JPY, NZD = and BRL while the cheapest are TRY, MXN and PLN=2E The dollar is about 5% u- ndervalued-2E-0D-0A-0D-0AModel-driven strategies in 2012 (Sunil Kavuri)=0D= =0ACarry and price momentum will struggle again in 2011 if markets remain t= rendless but volatile=2E Shorter-term rate momentum strategies like forward= carry have the highest odds of delivering positive returns-2E-0D-0A-0D-0AG= lobal FX carry trade monitor (Anna Hibino)=0D=0ACurrency managers and globa= 1 macro funds hold above-average shorts in G-10 and EM carry=2E Japanese re= tail holds an estimated =A55=2E1 trillion ($66bn) in yen shorts, mostly ver= sus USD ($24bn) and AUD (A$32bn)-2E-0D-0A-0D-0AJ=2EP=2E Morgan FX forecasts= vs=2E forwards & consensus=0D=0AQ1 should see USD strength followed by a r= e-weakening=2E Baseline targets by Q4 on the benchmarks are DXY 76, JPMQUSD= 80, USD/JPY 72, EUR/USD 1=2E38, GBP/USD 1=2E58 and AUD/USD 1=2E04=2E=0D=0A= =0D=0ARisk scenarios to accompany 2012 FX forecasts=0D=OARisks around the b= aseline are asymmetric for some currencies=2E This section highlights biase— s, targets under alternative scenarios and trigger events for a change in v- iew-2E-0D-0A-0D-0A-0D-0A-0D-0AJohn Normand (AC)<http://www=2Emor anmarkets= =2Ecom/analyst/U070901>=0D=0A(44-20) 7325-5222=0D=0Ajohn =2Ecom<mailto:john= =2Ecom>=0D=0AJ=2EP=2E Morgan SecurItie- s Ltd-2E-0D-0A-0D-0A-0D-0APaul Meggyesi<http://www=2Emor anmarkets=2Ecom/an— alyst/U432125>=0D=0A(44-20) 7859-6714=0D=0Apaul= 2Ecom<m= ailto:pauliMMENIIIIIIIIIIIIIMB=2Ecom>=0D=0AJ=2EP=2E Morgan Securities Ltd= - -0D-0A-0D-0A-0D-0AThomas Anthonj<http://www=2Emor anmarkets=2Ecom/analys— t/V240409>=0D=0A(4 =0Athomas=2Ee 2Ecom<= mailto:thomas=2Ee =2Ecom>=0D=0AJ=2EP=2E Morgan Securities= Ltd 2E-0D-0A-0D-0A OD 0AMatthias Bouquet<http://www=2Emor anmarkets=2Ecom/— analyst/D354531>=0D=0A(44-20) 7777 5276=0D=0Amatthias= =2E= com<mailto:matthias= =2Ecom>=0D=0AJ=2EP=2E Morgan Securiti= es Ltd-2E-0D-0A-0D-0A-0D-0AKenneth Landon<http://www=2Emor anmarkets=2Ecom/— analyst/U355989>=0D=0A 1-212 834-2391=0D=0Akenneth =2Ecom= <mailto:kenneth 2Ecom>=0D=0AJPMorgan C ase Banc NA=0D=0A= =0D=0A=0D=0AArindam Sandilya<http://www=2Emorganmarkets=2Ecom/analyst/D1134— 07>=0D=0A(1-212 834-2304=0D=0Aarindam=2Ex= =2Ecom<mailto— :arindam-2Ex= 2Ecom>=0D=0AJPMorgan Chase Bank NA=0D-0A= =0D=0A=0D=0AKevin Hebner<http://www=2Emor anmarkets=2Ecom/analyst/I404916>= =0D=0A 1-212 834-4254=0D=0Akevin-2Ej =2Ecom<mailto:kevin= =2Ej= 2Ecom>=0D=0AJ=2EP=2E Morgan Securities Ltd=2E=0D=0A= =0D=0A= D=0ANiall O'Connor<http://www-2Emor anmarkets=2Ecom/analyst/U030639- >=0D=0A(1-212) 834-5108=0D=0Aniall= =2Ecom<mailto:niall=2E— oconnor@jpmorgan=2Ecom>=0D=0AJPMorgan C ase Ban NA- D-0A-0D-0A-00-0ATohru = Sasaki<http://www=2Emor anmarkets=2Ecom/analyst/U748718>=0D=0A 81-3 6736-7= 717=0D=0Atohru =2Ecom<mailto:tohru =2Ecom= >=0D=0AJPMorgan Chase Bank NA-0D-0A-0D-0A-0D-0AJunya Tanase<http://www=2Emo— rganmarkets=2Ecom/analyst/U633591>=0D=0A(81-3) 6736-7718=0D=0Ajunya= IMMIMEMIEW2Ecomcmailto:junyallIIIIIIIIIIIIIII=2Ecom>=0D=0AJmorgan Chase = Bank NA-0D-0A-0D-0A-0D-0A-0D-0AIf you no longer wish to receive these e-mai- ls then click here to unsubscribe<https://mm=2Ejpmorgan=2Ecom/stp/t/c=2Edo?— i=3D4E9D8-20D8&u=3Da_u*d_730472=2Epdf*h_-92qj72m%0d%0a>-0D-0A-0D-0A-0D-0Aww- w=2Emorganmarkets=2Ecom<http://www=2Emorganmarkets=2Ecom>-0D-0A-0D-0A-0D-0A- =0D=0AAnalyst certification: I certify that— : (1) all of the views expressed in this research accurately reflect my per= sonal views about any and all of the subject securities or issuers; and (2)= no part of my compensation was, is, or will be directly or indirectly rela= ted to the specific recommendations or views expressed herein=2E Important = EFTA01171836 disclosures, including price charts, related to the companies recommended i= n this report are available in the PDF attachment, through the search funct= ion on J=2EP=2E Morgan's website https://mm=2E' mor an=2Ecom/disclosures=2E= jsp , or by calling this toll free number )-2E-0D-0A-0D-0AJ- =2EP=2E Morgan does and seeks to do busines es covered in its = research reports=2E As a result, investors should be aware that the firm ma= y have a conflict of interest that could affect the objectivity of this rep= ort=2E Investors should consider this report as only a single factor in mak= ing their investment decision-2E-0D-0A-0D-0AConfidentiality and Security No= tice: This transmission may contain information that is privileged, confide= ntial, legally privileged, and/or exempt from disclosure under applicable 1= aw=2E If you are not the intended recipient, you are hereby notified that a= ny disclosure, copying, distribution, or use of the information contained h= erein (including any reliance thereon) is STRICTLY PROHIBITED=2E Although t= his transmission and any attachments are believed to be free of any virus o= r other defect that might affect any computer system into which it is recei= ved and opened, it is the responsibility of the recipient to ensure that it= is virus free and no responsibility is accepted by JPMorgan Chase & Co=2E,= its subsidiaries and affiliates, as applicable, for any loss or damage ari= sing in any way from its use=2E If you received this transmission in error,= please immediately contact the sender and destroy the material in its enti= rety, whether in electronic or hard copy format-2E-0D-0A-0D-0A 0D-0A-0D-0A-0D-0A-0D-0A-0D-0A-0D-0A-0D-0AThis email is = confidential and subject to important disclaimers and-0D=0Aconditions inclu= ding on offers for the purchase or sale of=0D-0Asecurities, accuracy and co= mpleteness of information, viruses,=0D=0Aconfidentiality, legal privilege, = and legal entity disclaimers,=0D-0Aavailable at http://www=2Ejpmorgan=2Ecom— /pages/disclosures/email=2E EFTA01171837