FX Insights. Chart Of The Day AUD/SGD: In the last stages of bearish phase. Friday, 27 May 2016

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1 Quek Ser Leang Lee Sue Ann Global Economics & Markets Research URL: Chart Of The Day AUD/SGD: In the last stages of bearish phase. The bearish phase that started late last month when AUD plunged from a high of appears to be in its last legs. Rapidly waning downward momentum coupled with severely oversold conditions suggests that further sustained AUD weakness is unlikely. That said, another test towards the strong support will not be surprising but at this stage, the mid-february low of is not expected to come into the picture, at least not for the next couple of weeks. On the upside, a daily closing above is enough to indicate that the bearish phase has ended (and the start of corrective recovery towards /1.0105). 1 P a g e

2 OVERVIEW Following two sessions of solid gains, US equities went into consolidation mode on Thursday. This is probably not surprising given that we have a long weekend looming in the US and UK, a big week of US economic data ahead highlighted by next Friday s employment report, and all eyes on a forthcoming speech by Fed Chair Yellen on 6 June. US Treasuries saw renewed buying following the release of April durable goods orders data that exceeded expectations at the headline level. The support also came from the back of speeches from Federal Reserve officials. The latest round of Fed speakers included two voters St. Louis Fed President James Bullard and Fed Governor Jerome Powell. Powell said in a speech that an interest rate hike could be appropriate fairly soon, adding that he supports gradual hikes if data underpin forecasts of an improving economy. Bullard who was speaking in Singapore, said separately that US labor markets are relatively tight and may put upward pressure on inflation, adding there was a divergence between the financial market's expectations for US interest rate rises and the median projections among Fed policymakers. Today, the main release of interest in the US will be the second estimate of Q1 GDP. Markets are expecting a 0.4pp upward revision to the advance reading to lift growth to a still very sluggish 0.9% saar. We will also receive the final University of Michigan survey for May. The Fedspeak includes Fed Chair Yellen who will be interviewed at a Harvard event by economist Gregory Mankiw. However, we think that this event seems unlikely to be as important as her 6 June speech, which will follow the May employment report. Do note that both the US and UK have market holidays coming Monday (30 May). 2 P a g e

3 27-May-16 Summary of Views FX Pairs Spot Outlook Since/ Rate Target Trailing-Stop Support Resistance USD/SGD *Neutral 27 May S1: S2: R1: R2: EUR/SGD Bearish 25 May S1: S2: R1: R2: GBP/SGD Bullish 19 May S1: S2: R1: R2: AUD/SGD Bearish 28 Apr S1: S2: R1: R2: JPY/SGD Neutral 10 May S1: S2: R1: R2: USD/MYR *Neutral 27 May S1: S2: R1: R2: USD/THB *Neutral 27 May S1: S2: R1: R2: USD/CNH Bullish 05 May S1: S2: R1: R2: CNH/SGD *Neutral 19 May S1: S2: R1: R2: EUR/USD Bearish 16 May S1: S2: R1: R2: GBP/USD Bullish 26 May S1: S2: R1: R2: AUD/USD Neutral 18 May S1: S2: R1: R2: NZD/USD Neutral USD/JPY Neutral * Shift in outlook. 18 May May S1: S2: S1: S2: R1: R2: R1: R2: FX Pairs Ranges for 26-May-16 Performance* Open High Low Close 1-day 1-week 1-month YTD** USD/SGD % -0.48% +1.62% -3.12% EUR/SGD % -0.63% +0.68% -0.18% GBP/SGD % -0.12% +2.26% -3.62% AUD/SGD % -0.54% -5.19% -3.83% JPY/SGD % -0.36% +3.08% +6.25% USD/MYR % 0% +4.03% -4.94% USD/THB % -0.22% +1.39% -1.24% USD/CNH % -0.03% +0.87% -0.11% EUR/USD % -0.08% -0.93% +3.05% GBP/USD % +0.37% +0.56% -0.43% AUD/USD % -0.01% -6.74% -0.85% NZD/USD % -0.04% -2.31% -1.08% USD/JPY % -0.18% -1.39% -8.81% * Percentage difference between the closing price and the last price 1-period ago. ** Percentage difference between the closing price and the last price on 31-Dec P a g e

USD/SGD: 1.3735 USD/SGD traded at a lower range of 1.3750 1.3802 and closed at 1.3756/USD yesterday during Asian hours. This morning, the SGD NEER is trading at 0.2% below the midpoint.

4 USD/SGD: USD/SGD traded at a lower range of and closed at /USD yesterday during Asian hours. This morning, the SGD NEER is trading at 0.2% below the midpoint. We expect the SGD NEER to trade between the midpoint and 0.5% below the midpoint today, implying the USD/SGD range of based on current FX levels. Singapore s industrial production (IP) for April expanded 2.9% y/y, surprising the relatively pessimistic market expectations of a 0.2% y/y (+1.6% m/m SA) decline. The key driver for April s manufacturing activity was again due to a strong uptick in the output from the biomedical manufacturing cluster. Indeed, excluding the contributions of the biomedical manufacturing cluster, IP fell 0.1% y/y. The two clusters that expanded at a double-digit pace were the biomedical manufacturing and electronics cluster. Of note, the electronics cluster also experienced a 10.9% y/y growth, supported by a 24.2% y/y increase in the output of semiconductors. We believe that the expansion seen in the output of semiconductors will likely continue until the end of this year due to the recent strength observed in the US SEMI Book-to-Bill ratio, as well as the low base in That said, the manufacturing sector is not fully out of the pithole as several other clusters remain in a contraction mode. For instance, the transport engineering cluster fell 12.0% y/y in April, contracting for 11 out of the past 12 months. The better-than-expected April IP numbers may point to green shoots for Singapore s manufacturers in the coming months, and reverse the contractionary trend seen over the past 18 months. Going forward, the low base effects from a weak IP last year, together with expectations of the continued economic recovery in the US may provide a boost to the on-year manufacturing growth numbers. We maintain our 2016 industrial production forecast of a 2.5% growth on the back of the reasons above. USD weakness exceeded our expectation by easily taking out the strong support (overnight low of ). The weak closing suggests further downward pressure towards /95. Only a move back above would indicate that the downward pressure has eased. Shift from bullish to neutral: Corrective pull-back has scope to extend lower to /70. While the stop-loss for the bullish USD phase that started earlier this month (see Chart of the Day on 5/5/16) is still intact with an overnight low of , the weak daily closing is enough to indicate that a short-term top is in place. The current movement is viewed as the start of a corrective pull-back which has scope to extend lower to /70. Overall, only a move back above would indicate that the current mild downward pressure has eased. 4 P a g e

5 EUR/SGD: EUR traded mostly sideways yesterday but the undertone is negative and from here, the bias is for a more definitive test of the support. Only a move back above would indicate that a temporary low is in place. Bearish: Weakness to extend further to [No change in view, see previous update below] We shifted from neutral to bearish EUR stance yesterday and there is no change to the view. The immediate objective is for a move to the major support. Stop-loss remains unchanged at for now even though is already a strong resistance. GBP/SGD: The recent strong upward momentum fizzled out quickly as GBP failed to move beyond the /10 resistance. The quick pull-back suggests that a temporary top is in place and the current movement is viewed as part of a consolidation phase. Expected range for today; / Bullish: On track for a move to the major / resistance zone. [No change in view, see Chart of Day update from yesterday] AUD/SGD: The strong support indicated at /55 was not threatened as AUD rebounded quickly from a low of The outlook is mixed from here but the current movement appears to be the early stages of a basing process. For today, this pair is expected to within a / range. Bearish: In the last stages of bearish phase. [See Chart of the Day update on page 1] *Took partial profit at JPY/SGD: The initial spike in JPY early yesterday fizzled out quickly after failing to move beyond the resistance (high of ). The subsequent sideway trading appears incomplete and this pair is expected to continue to range trade from here. Likely range for today; / Neutral: In a / range. [No change in view, see previous update below] The neutral phase in JPY that started more than 2 weeks ago is still intact. Short-term movement has been rather choppy but overall, at this stage, there are no early indications that this pair is ready to break out the / range. 5 P a g e

6 USD/MYR: USD/MYR moved lower on higher oil and supported risk sentiment. In news, the current interest rate is appropriate and conducive says Bank Negara Governor Datuk Muhammad Ibrahim. "It is very important that the banking industry remains liquid in order to finance the economy," he said. Meanwhile, the outlook for Malaysia's (A3 stable) banking system remains stable, driven by the banks' strong capital, stable funding levels and continued high degree of government support, says Moody's Investors Service. These factors offset a moderate deterioration in the banks' operating environment and consequently their asset quality and profitability profiles, it said. Shift from bullish to neutral: Pull-back has scope to extend lower to While we were mindful of an imminent short-term top, the sharp and rapid drop upon opening this morning was unexpected. The breach of suggests that the bullish phase that started earlier this month has ended. The current movement is viewed as the start of a consolidation/correction phase. Near-term, the current pull-back appears to have scope to extend lower to On the upside, resistance is at ahead of the recent high of which is acting as a key resistance. USD/THB: Currently seen hovering around the region, USD/THB continues to slip lower. The Commerce Ministry said that export growth this year would fall short of the 5-per-cent target after export value in the first four months declined by 1.2 per cent, and signs of a recovery during the rest of 2016 remain unclear. Nevertheless, exports will not be worse than last year, when they were down by 5.7 per cent. The country could achieve about 2.5-per-cent growth in the best-case scenario, or at worst face flat growth or only a slight decline. Shift from bullish to neutral: Pull-back has scope to extend lower to We highlighted several times the low odds for USD to extend its recent gains to and the break of the stop-loss confirms that the bullish phase has ended. The down-move from the recent high of is viewed as a corrective pull-back which has scope to extend lower to Only a move back above would indicate that the prevailing mild downward pressure has eased. The high is acting as a very strong resistance now. USD/CNH: After falling to a 3-month low against the greenback on Wednesday, the RMB closed flat on Thursday even as the PBoC set the reference rate stronger at /USD. This morning, the Chinese central bank set the midpoint at /USD. On the data front, China s industrial profits rolled in at 4.2% for April, much lower than the previous reading of 11.1%. Bullish: Increasing risk of a short-term top. [No change in view, see previous update below] USD traded in a narrow range yesterday and the consolidation has resulted in further loss of momentum and this has increased the risk of a short-term top. To put it another way, USD has to break and stay above the recent peak or the risk of a short-term top will increase rapidly. However, confirmation of a short-term is only upon a break of the stop-loss at *Took partial profit at CNH/SGD: Shift from bullish to neutral: Immediate weakness but unlikely to move clearly below The break of indicates that the bullish phase in CNH that started late last week has ended. The recent high of is the extent of the bullish phase and the revised target was not met. From here, the immediate pressure is on the downside but at this stage, any CNH weakness is not expected to move significantly below Resistance is at and the recent high is unlikely to come under threat for now. 6 P a g e

EUR/USD: 1.1190 EUR/USD bounced above the 1.12-figure briefly but reversed gains thereafter on positive US economic data overnight. Domestically, Italy s retail sales were up 2.

7 EUR/USD: EUR/USD bounced above the 1.12-figure briefly but reversed gains thereafter on positive US economic data overnight. Domestically, Italy s retail sales were up 2.2% y/y in April, but recent momentum has been soft despite decent levels of consumer confidence. Meanwhile, Spain s Q1 GDP growth was confirmed at 0.8% q/q, 3.4% y/y. Last but not least, Sweden reported weaker business and consumer confidence in May. Today, the European calendar features business and consumer confidence surveys in Italy, consumer confidence in France and retail sales in Spain. The unexpected strong rebound in EUR appears to have to scope to extend higher but at this stage, a sustained move above appears unlikely. Support is at followed by the recent low near /30. Bearish: Diminished odds for further weakness. The strong rebound yesterday has diminished the odds for further EUR weakness. However, confirmation of a shortterm low is only upon a break back above This appears to be a likely scenario unless EUR can move and stay below the recent low of /30 within these 1 to 2 days. 7 P a g e

GBP/USD: 1.4665 Following recent gains, GBP is seen taking a breather, currently below the 1.47-figure. It was confirmed that GDP grew 0.

8 GBP/USD: Following recent gains, GBP is seen taking a breather, currently below the 1.47-figure. It was confirmed that GDP grew 0.4% q/q in Q1, although annual GDP growth was revised down a notch to 2.0% y/y. The detail showed a 0.7% q/q increase in household and total domestic expenditure, but net exports subtracted 0.3pps from growth during the quarter. Separately, the UK s BBA reported a much sharper than expected decline in home loans in April, to the lowest level since March last year. Instead of extending towards the strong resistance, GBP eased off quickly to touch an overnight low of Upward pressure has clearly eased and the current movement is likely the early stages of a consolidation phase. In other words, expect sideway trading for today, albeit with a bias for a probe lower. Expected range; / Bullish: Anticipating a break above We shifted to a bullish stance yesterday and there is no change to the view. The down-move from the high of is viewed as a short-term correction and as long as the stop-loss is intact, we continue to anticipate a break above P a g e

AUD/USD: 0.7225 AUD/USD is now back above the 0.72-figure on the back of the recovery in oil prices. But the pair still remains soft on expectations that the RBA will continue to move rates lower.

9 AUD/USD: AUD/USD is now back above the 0.72-figure on the back of the recovery in oil prices. But the pair still remains soft on expectations that the RBA will continue to move rates lower. Downwards pressure was also due to weak capex figures on Thursday. Recall that private new expenditure dropped 5.2% during the first quarter, missing the expectation of a 3.5% fall, following the revised figure of 1.8% previously. In news, RBA Deputy Governor Guy Debelle launched the Bank for International Settlements global code of conduct for the forex industry in New York. AUD rebounded without testing the recent low near The up-move from the low of appears to have scope to extend higher but a sustained move beyond the strong resistance is not expected, at least not for today. Support is at followed by the low near /65. Neutral: In a lower range of / AUD traded in tight ranges over the last several days and at this stage, we continue to hold a neutral view. On a shorterterm note, the current movement appears to be the early stages of a basing process but a sustained rebound is likely only upon a clear break above P a g e

NZD/USD: 0.6750 NZD/USD traded within the 0.6693-0.6767 range on Thursday. The New Zealand government unveiled Budget 2016.

10 NZD/USD: NZD/USD traded within the range on Thursday. The New Zealand government unveiled Budget A stronger-than-expected economy has seen the Government upgrade its forecasts to show a small fiscal surplus in the current fiscal year (0.3% of GDP) rising to 2.2% of GDP by FY19/20. Gross debt peaks at 36.2% of GDP in FY16/17. We do not see any strong implications for the RBNZ, although a lift in tobacco tax will raise headline inflation. Nonetheless, New Zealand s finance minister told an audience this morning that the economy needs no further stimulus at this point, and this in line with our view. The support is stronger than expected as NZD staged a robust recovery from a low of The recent downward pressure has eased and the current price action suggests sideway consolidation for today. Expected range; / Neutral: In a / range. The recent pick-up in downward momentum fizzled out quickly as NZD rebounded strongly from a low of (just above the strong support). The outlook from here is rather mixed and choppy trading between and is expected from here. 10 P a g e

USD/JPY: 109.80 USD/JPY has dipped back below the 110.00-mark. This morning, Japan released the latest inflation data from April. Annual CPI came in at -0.3% from -0.

11 USD/JPY: USD/JPY has dipped back below the mark. This morning, Japan released the latest inflation data from April. Annual CPI came in at -0.3% from -0.1%, dropping for a second month as BoJ Governor Kuroda struggles to spur inflation. The lack of price growth will certainly intensify pressure on the BoJ to consider further monetary stimulus after Kuroda disappointed markets in April by taking no action. This CPI data is the final set of consumer price indicators to be rolled out before the BoJ meets on June. While the strong resistance capped the rebound in USD as expected, the subsequent down-move from the overnight high of lacks momentum and the odds for a sustained down-move are not high. From here, as long as is not taken out, USD is expected to drift lower to test /30 support. Neutral: In a / range. There is no change to the current neutral view on USD. This pair is expected to trade choppily within a broad / range for the next one week or so. Looking further ahead, the current consolidation is likely a prelude for a stronger USD but has to break before a sustained up-move can be expected. jpy= 11 P a g e

12 UOB FX & Interest Rate Outlook FX Outlook 2Q16 3Q16 4Q16 1Q17 Rates Outlook 2Q16 3Q16 4Q16 1Q17 EUR/USD EU 0.00% 0.00% 0.00% 0.00% GBP/USD UK 0.50% 0.50% 0.50% 0.75% AUD/USD AU* 1.75% 1.75% 1.75% 1.75% NZD/USD NZ 2.00% 2.00% 2.00% 2.00% USD/JPY JP -0.10% -0.20% -0.20% -0.30% USD/SGD SG 1.30% 1.50% 1.65% 1.75% USD/MYR MY 3.25% 3.25% 3.25% 3.25% USD/THB TH 1.50% 1.50% 1.50% 1.75% USD/CNY CN 3.85% 3.85% 3.85% 3.85% USD/IDR 13,000 13,100 13,200 13,300 ID 6.75% 6.75% 6.50% 6.50% USD/PHP PH 4.0% 4.0% 4.0% 4.25% USD/INR IN 6.75% 6.75% 6.75% 6.75% USD/TWD TW 1.38% 1.38% 1.38% 1.38% USD/HKD HK 1.00% 1.00% 1.25% 1.50% USD/KRW KR 1.25% 1.25% 1.25% 1.25% Last updated on 22 Mar 16 *Last updated on 29 Apr 16 ** US 0.75% 0.75% 1.00% 1.25% Central Bank Meetings 2016 Central Bank Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Federal Reserve (FOMC) European Central Bank (ECB) Bank of England (BOE) Reserve Bank of Australia (RBA) Reserve Bank of New Zealand (RBNZ) Bank of Japan (BOJ) Bank Negara Malaysia (BNM) Bank of Thailand (BOT) Monetary Authority of Singapore (MAS) - 14 TBA - Disclaimer: This analysis is based on information available to the public. Although the information contained herein is believed to be reliable, UOB Group makes no representation as to the accuracy or completeness. Also, opinions and predictions contained herein reflect our opinion as of date of the analysis and are subject to change without notice. UOB Group may have positions in, and may effect transactions in, currencies and financial products mentioned herein. Prior to entering into any proposed transaction, without reliance upon UOB Group or its affiliates, the reader should determine, the economic risks and merits, as well as the legal, tax and accounting characterizations and consequences, of the transaction and that the reader is able to assume these risks. This document and its contents are proprietary information and products of UOB Group and may not be reproduced or otherwise. Singapore Company Reg No Z

FX Insights. Chart Of The Day USD/JPY: Next significant support at Friday, 29 April 2016

FX Insights. Chart Of The Day USD/JPY: Next significant support at Friday, 29 April 2016 Quek Ser Leang Quek.SerLeang@uobgroup.com Lee Sue Ann Lee.SueAnn@uobgroup.com Global Economics & Markets Research Email: GlobalEcoMktResearch@uobgroup.com URL: www.uob.com.sg/research Chart Of The Day