FX Insights. Chart Of The Day GBP/USD: Early indication of an imminent break higher.

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Ezra Morton
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1 Global Economics & Markets Research Quek Ser Leang Lee Sue Ann Thursday, 20 August 2015 FX Insights Chart Of The Day GBP/USD: Early indication of an imminent break higher. While the daily closing yesterday was not strong enough to suggest the start of a sustained up-move, there are other indications that an imminent break higher is imminent. GBP has been trading within a range of less than 300 points since middle of July and such a prolonged consolidation phase normally resulted in a violent move. In other words, a clear move above the recent high near /20 could lead to a rapid rise to where a break would open up the way for extension higher towards the year s peak near Overall, the outlook is positive but we prefer to wait for additional confirmation before turning bullish. Strong short-term support is at ahead of

2 Thursday, 20 August 2015 Page 2 OVERVIEW The dollar retreated as the keenly-awaited minutes from the July meeting of the FOMC implied that rate hikes are on the horizon, but lacked a smoking gun that points to a rate hike in September specifically. The key line that markets seized on was that "most judged that the conditions for policy firming had not yet been achieved...". The minutes do note that "...conditions were approaching that point". The Treasury market rallied, essentially shrugging off inflation numbers that were quite near expectations, with the 10- year yield rallying 7bps and the 2-year 6bps. Scheduled Fed communications between now and the September FOMC will be crucial and include speeches by Williams (voting), Lockhart (voting), Rosengren (alternate) and Kocherlakota (nonvoting) plus the Jackson Hole symposium on August at which the detailed agenda will only be released on the evening of its commencement but the broad theme is focused upon inflation. Fed Funds Rate: % Last Change: -0.75% in Dec 08 Next FOMC Meeting: 17-Sep-15 GDP QoQ: +0.6% in 1Q % in 2Q15 2Q15 Release (2nd estimate): 27-Aug-15 PCE Price Index YoY: +0.2% in May +0.3% in Jun Jul Release: 28-Aug-15 Core PCE Price Index YoY: +1.2% in May +1.3% in Jun Jul Release: 28-Aug-15 Unemployment: +5.3% in Jun +5.3% in Jul Aug Release: 04-Sep-15 Nonfarm payroll: +231k in Jun +215k in Jul Aug Release: 04-Sep-15 Retail Sales: +0.0% in Jun +0.6% in Jul Aug Release: 11-Sep-15 Retail Sales ex autos: +0.4% in Jun +0.4% in Jul Aug Release: 11-Sep-15 Durable Goods: -2.1% in May +3.4% in Jun Jul Release: 26-Aug-15 Durable Goods ex autos: -0.1% in May +0.8% in Jun Jul Release: 26-Aug-15 Housing Starts: +1204k in Jun +1206k in Jul Aug Release: 17-Sep-15 Case Shiller 20-City Index: +5.0% in Apr +4.9% in May Jun Release: 25-Aug-15 UoM Consumer Confidence: 93.1 in Jul 92.9 in Aug Sep Release: 11-Sep-15 UOB Fed Funds Rate Forecast: end 3Q15: 0.50% end 4Q15: 0.75% end 1Q16: 1.00% end 2Q16: 1.25%

3 Thursday, 20 August 2015 Page 3 USD/SGD: SGD moved in a choppy session but ended the session largely flat at /USD late Wed, from on Tue, with the USD/SGD pair hitting low of in response to the US Fed FOMC minutes, the lowest since last Fri, from high of before the minutes release. This morning, the SGD NEER index moved higher at -0.53% from -0.63% below the midpoint, and the -0.5% to -1.5% range below the midpoint looks to remain for now, for an implied USD/SGD range of to USD unexpectedly dipped below /05 and tested the major support at The subsequent swift recovery from the low has resulted in a mixed outlook for today. Expect further choppy trading but a break out of yesterday range of / appears unlikely. Neutral: Weakening momentum suggests that USD could stage a deeper pull-back. USD touched a high of before dropping quickly to test the strong support indicated at yesterday (exact overnight low of ). While we continue to hold a neutral view, weakening momentum suggests that USD could stage a deeper pull-back in the coming days. Barring a move above the strong /10 resistance zone, a break below could lead to further selling towards the next support near /20. At this stage, a sustained break below this level appears unlikely. S$NEER Last Change: Reduced the slope of the policy band (Jan 2015) Next MAS Meeting: Oct 15 (date yet to be announced) GDP YoY: +2.8% in 1Q % in 2Q15 3Q15 Release: 14-Oct-15 CPI YoY: -0.4% in May -0.3% in Jun Jul Release: 25-Aug-15 NODX: +4.5% in Jun -0.8% in Jul Aug Release: 17-Sep-15 Industrial Production: -1.7% in May -4.4% in Jun Jun Release: 26-Aug-15 UOB FX Forecast: end 3Q15: 1.45 end 4Q15: 1.43 end 1Q16: 1.45 end 2Q16: 1.46 UOB 3M SIBOR Forecast: end 3Q15: 1.25% end 4Q15: 1.15% end 1Q16: 1.22% end 2Q16: 1.27% UOB 3M SOR Forecast: end 3Q15: 1.35% end 4Q15: 1.25% end 1Q16: 1.30% end 2Q16: 1.35%

4 Thursday, 20 August 2015 Page 4 EUR/SGD: The strong support highlighted yesterday held as EUR surged to a high of /28. While upward momentum is not very strong, the current up-move could extend higher to Only a move back below would indicate that the immediate upward pressure has eased. Bullish: EUR has to reclaimed before further sustained gains can be expected. While the stop-loss for our bullish view at remains intact, the rebound from the low is lacking in momentum and for further sustained gains, EUR has to break above the strong resistance ahead of the recent high near That said, only a break back below would indicate that the bullish phase has ended. GBP/SGD: The outlook for this pair still appears mixed. Expect further sideway trading, likely between and Bullish: Only a break above /97 would indicate the next leg higher has started. The short-term consolidation appears incomplete and only a break above the recent high near /97 would indicate that the next bullish leg higher has started (towards our target at ). We have moved the stoploss level higher to from previously. AUD/SGD: The strong rebound from the /60 support suggests that the immediate downward pressure has eased. Most indicators are neutral and range trading is expected for today, likely between and Neutral: Expect sideway trading between and for another week or so. There is no change our neutral view as indicated in the Chart of the Day update yesterday. We continue to expect this pair to trade sideways for another week or so, likely between and JPY/SGD: JPY traded in a volatile manner yesterday; swinging between and The outlook is mixed for now but at this stage, a break above the /50 high appears unlikely. That said, any down-move is expected to encounter solid support at Bullish: Break of is enough to indicate a short-term top is in place. Despite overall positive undertone, JPY has failed to make much headway over the last few days. While further JPY strength is not ruled out, a break below is enough to indicate that we have seen a short-term top. In other words, a break of would suggest last week s peak of is the extent of the current rally.

5 Thursday, 20 August 2015 Page 5 USD/MYR: MYR fell 0.2% to /USD after Malaysia s CPI rose the fastest since August Headline inflation stepped up to 3.3% y/y in July (2.5% in June), above our and market estimates of 2.9%. On a m/m basis, CPI gained 0.8% (+0.6% in June). Year-to-date inflation averaged 1.7% y/y in January to July. We expect moderate inflation pressure for the rest of the year despite the weaker MYR amid falling commodity prices, receding spillover effects from GST, and weaker domestic demand. We forecast average inflation at 2.1% in 2015 and 2.7% in 2016 (vs. 3.1% in 2014). Separately, Malaysia reported total approved investments in the first half of 2015 at MYR113.5bn from MYR112bn in the same period in 2014, of which 81.1% was contributed by domestic investors. Bullish: Upward momentum beginning to show signs of slowing. The recent strong upward momentum is beginning to show signs of slowing down. However, only a break below would indicate that a short-term top in place. Otherwise, another leg higher to cannot be ruled out just yet even though the odds for such a move have decreased. Overnight Policy Rate: 3.25% Last Change: +0.25% in Jul 2014 Next BNM Meeting: 03-Sep-15 GDP YoY: +5.6% in 1Q % in 2Q15 3Q15 Release: 12-Nov-15 CPI YoY: +2.5% in Jun +3.3% in Jul Aug Release: 23-Sep-15 Trade Balance: +5.5b in May +7.98b in Jun Jul Release: 04-Sep-15 Export: -6.7% in May +5.0% in Jun Jul Release: 04-Sep-15 Import: -7.2% in May -1.5% in Jun Jul Release: 04-Sep-15 Industrial Production: +4.5% in May +4.3% in Jun Jul Release: 10-Sep-15 UOB FX Forecast: end 3Q15: 3.90 end 4Q15: 3.93 end 1Q16: 3.93 end 2Q16: 3.92 UOB Overnight Policy Rate Forecast: end 3Q15: 3.25% end 4Q15: 3.25% end 1Q16: 3.25% end 2Q16: 3.25% USD/THB: THB moderated its decline to 0.1% to /USD on Wednesday, after hitting earlier, the weakest since April 2009 as BoT Assistant Governor Mathee Supapongse said Thai tourism usually recovers quickly from incidents such as this week s deadly bombing in Bangkok, though the attack will have a short-term impact on the economy. Bullish: In a short-term consolidation phase now before moving higher at a later stage. USD tested the resistance yesterday before pulling back quickly. The current movement is likely part of a shortterm consolidation phase that may last for a few days. As long as is intact, we remain bullish USD and expect an eventual move higher to Day Repo Rate: 1.50% Last Change: -0.25% in Apr 2015 Next BOT Meeting: 16-Sep-15 GDP YoY: +3.0% in 1Q % in 2Q15 3Q15 Release: 17-Nov-15 CPI YoY: -1.07% in Jun -1.05% in Jul May Release: 01-Sep-15 UOB FX Forecast: end 3Q15: 35.5 end 4Q15: 35.5 end 1Q16: 35.8 end 2Q16: 36.0 UOB 1-Day Repo Rate Forecast: end 3Q15: 1.50% end 4Q15: 1.50% end 1Q16: 1.75% end 2Q16: 2.00%

6 Thursday, 20 August 2015 Page 6 USD/CNH: Onshore RMB fell a marginal 0.03% to close at /USD on Wednesday, as the onshore exchange rates appeared to have stabilized after a tumultuous week. However, uncertainty over the possibility of further depreciation could see volatility remaining elevated in the FX market, which is also weighed down by the whipsaw in the equity market that saw the Shanghai Composite index falling as much as 5.1% on Wednesday before closing 1.2% higher on suspected buying from state funds. Offshore CNH was flat at /USD late Wednesday, after rising 1.3% over the past four sessions. PBoC stepped up its liquidity injection with RMB110bn MLF on Wednesday, which was in addition to the large RMB120bn 7-day reverse repo on Tuesday, that could set the stage for a RRR cut ahead. After trading quietly for a few days, USD marched to an overnight high of While further up-move is not ruled out, patchy momentum suggests limited upside risk for now. From here, allow for a dip to but is expected to hold for a move to Bullish: Upward momentum is waning rapidly. Upward momentum is waning rapidly with the quick drop in the recent high volatility. However, the outlook still appears to be positive but the recent high near is clearly a high hurdle and this level would not be easy to break. On the downside, only a move back below would indicate that a temporary top is in place. Benchmark Deposit Rate: 2.00% Last Change: -0.25% in Jun 2015 Benchmark Lending Rate: 4.85% Last Change: -0.25% in Jun 2015 Reserve Requirement Ratio: 18.5% Last Change: -1.00% in Apr 2015 GDP YoY: +7.0% in 1Q % in 2Q15 3Q15 Release: 19-Oct-15 Caixin Manufacturing PMI: 49.4 in Jun 47.8 in Jul Aug Release: 21-Aug-15 exp: 47.7 NBS Manufacturing PMI: 50.2 in Jun 50.0 in Jul Jul Release: 01-Sep-15 PPI YoY: -4.8% in Jun -5.4% in Jul Aug Release: 09-Sep-15 CPI YoY: +1.4% in Jun +1.6% in Jul Aug Release: 09-Sep-15 Trade Balance: in Jun +43.0b in Jul Aug Release: 08-Sep-15 Export: +2.8% in Jun -8.3% in Jul Aug Release: 08-Sep-15 Import: -6.1% in Jun -8.1% in Jul Aug Release: 08-Sep-15 UOB FX (USD/CNY) Forecast: end 3Q15: 6.40 end 4Q15: 6.45 end 1Q16: 6.48 end 2Q16: 6.53 UOB Benchmark Lending Rate Forecast: end 3Q15: 4.60% end 4Q15: 4.60% end 1Q16: 4.60% end 2Q16: 4.60%

7 Thursday, 20 August 2015 Page 7 EUR/USD: EUR initially fell ahead of the FOMC, but reversed to spike up to highs of The pair continues to climb this morning, reaching The European Stability Mechanism (ESM) s on late Wednesday officially approved the third bailout package for Greece and announced it had decided to unlock a part of the first aid tranche for the country. All European parliaments have now given the green light to the new, three-year programme of financial assistance for Greece, of up to EUR86bn, in time to meet the EUR3.2bn payment to the ECB on 20 August. But many elements of the agreement remain uncertain, and will have to be resolved before first programme review in the autumn can be completed. These include pension reform, bank recapitalization, privatizations and further debt relief to enable the IMF to take part in the programme. EUR rebounding from a higher level than expected and the current up-move appears to have scope to extend higher. From here, allow for a dip to /85 but is expected to hold for a move to Neutral: Despite strong rebound, only break above would indicate the start of a fresh bullish phase. EUR rebounded strongly overnight but the up-move appears to be part of a broader consolidation phase. In other words, there is no change to our current neutral view and only a break above would indicate the start of a fresh bullish phase. INDICATORS Refinancing Rate: 0.05% Last Change: -0.10% in Sep 2014 Next ECB Meeting: 03-Sep-15 Deposit Rate: -0.2% Last Change: -0.10% in Sep 2014 Lending Rate: 0.3% Last Change: -0.10% in Sep 2014 GDP QoQ: +0.4% in 1Q % in 2Q15 2Q15 Release (2 nd est): 04-Sep-15 CPI YoY: +0.2% in Jun +0.2% in Jul Aug Release: 31-Aug-15 Unemployment: 11.1% in Jun 11.1% in Jul May Release: 01-Sep-15 UOB FX Forecast: end 3Q15: 1.09 end 4Q15: 1.10 end 1Q16: 1.12 end 2Q16: 1.12 UOB Refinancing Rate Forecast: end 3Q15: 0.05% end 4Q15: 0.05% end 1Q16: 0.05% end 2Q16: 0.05% GBP/USD: A relatively big day for the UK today with the release of retail sales, expected to bounce higher on the back of rising real earnings, increased consumer confidence and an improving labour market. Anything on or above expectations should see the GBP buyers back in again. In line with expectation, GBP dipped to (low of ) but the subsequent rebound fell short of the /20 target. However, the up-move appears incomplete and as long as /40 is not taken out, an attempt to /20 appears likely. Neutral: Early indications of an imminent break higher [See Chart of the Day on page 1] Bank Rate: 0.50% Last Change: -0.50% in Mar 2009 Next BOE Meeting: 06-Aug-15 GDP QoQ: +0.4% in 1Q % in 2Q15 2Q15 Release (2 nd estimate): 28-Aug-15 CPI YoY: +0.0% in Jun 0.1% in Jul Aug Release: 15-Sep-15 Unemployment: 5.6% in May 5.6% in Jun Jul Release: 16-Sep-15 Services PMI: 58.5 in Jun 57.4 in Jul Aug Release: 03-Sep-15 UOB FX Forecast: end 3Q15: 1.60 end 4Q15: 1.62 end 1Q16: 1.64 end 2Q16: 1.67 UOB Bank Rate Forecast: end 3Q15: 0.5% end 4Q15: 0.5% end 1Q16: 0.5% end 2Q16: 0.75%

8 Thursday, 20 August 2015 Page 8 AUD/USD: AUD touched highs of earlier this morning following the latest FOMC minutes. The next couple of sessions look quiet domestically. Still, against an environment of monetary policy divergence, there is little to be positive in the currency. All eyes are still on Chinese equity markets as well. The support indicated at held as expected as AUD rebounded strongly from a low of While the immediate pressure is still on the upside, the up-move is likely part of a broad consolidation and not the start of a sustained up-move. From here, allow for a dip to but is expected to hold for a move to Neutral: Continue to expect / range for now. There is not much to add as AUD continues to trade mostly sideways for the past few days. In other words, we continue to expect / range for now. Cash Rate: 2.00% Last Change: -0.25% in May 2015 Next RBA Meeting: 01-Sep-15 GDP QoQ: +0.5% in 4Q % in 1Q15 2Q15 Release: 03-Sep-15 CPI YoY: +1.3% in 1Q % in 2Q15 2Q15 Release: 28-Oct-15 Unemployment: 6.1% in Jun 6.3% in Jul Jul Release: 11-Sep-15 Trade Balance: -2750m in May -2933m in Jun Jul Release: 03-Sep-15 Capex: -2.2% 4Q14-4.4% 1Q15 2Q15 Release: 27-Aug-15 UOB FX Forecast: end 3Q15: 0.75 end 4Q15: 0.74 end 1Q16: 0.74 end 2Q16: 0.73 UOB Cash Rate Forecast: end 3Q15: 2.00% end 4Q15: 2.00% end 1Q16: 2.00% end 2Q16: 2.00% NZD/USD: Gains in the NZD have been reversed as consumer confidence in New Zealand continues to wane this month. The ANZ consumer confidence index fell from in July to this month, its weakest level since mid This was not surprising given that unemployment is rising, dairy prices are barely recovering, and the weak NZD is making imported goods more expensive. NZD edged below the strong support at (low of ) before rebounding quickly. The up-move exceeded the recent peaks near and barring an unexpected move back below , the current rally could extend to before a pull-back can be expected. Neutral: Likely in a broad / range for now. The outlook for the next couple of weeks is mixed. We are neutral now and expect a broad / range for now. Official Cash Rate: 3.00% Last Change: -0.25% in Jul 2015 Next RBNZ Meeting: 10-Sep-15 GDP QoQ: +0.8% in 4Q % in 1Q15 2Q15 Release: 17-Sep-15 CPI QoQ: -0.3% in 1Q % in 2Q15 3Q15 Release: 23-Oct-15 Unemployment: 5.8% in 1Q15 5.9% in 2Q15 3Q15 Release: 04-Nov-15 UOB FX Forecast: end 3Q15: 0.66 end 4Q15: 0.64 end 1Q16: 0.63 end 2Q16: 0.62 UOB Official Cash Rate Forecast: end 3Q15: 2.75% end 4Q15: 2.50% end 1Q16: 2.50% end 2Q16: 2.50%

9 Thursday, 20 August 2015 Page 9 USD/JPY: Seen around the region, USD/JPY has nose-dived today as Asian markets are seen trading with sizeable losses following the Fed s minutes. For now, we think the JPY is likely to be supported by increased demand for safe-haven an asset as risk off sentiment prevails. The unexpected break below led to a sharp drop to an overnight low of /70. The up-move from the low appears to be a corrective recovery and unless there is a break above /30, another leg lower towards is likely from here. Neutral: Expect / range for the next 1 to 2 weeks. We shifted to a neutral USD stance late last week and at this stage, there is no reason to expect this pair to embark on a strong directional move. Expected range for the next one week or so; / Overnight Call Rate: % Last Change: -0.20% in Dec 2008 Next BOJ Meeting: 15-Sep-15 GDP QoQ Annualized: +4.5% in 1Q15-1.6% in 2Q15 2Q15 Release (2 nd reading): 08-Sep-15 CPI Core YoY: +0.1% in May +0.1% in Jun Jul Release: 29-Aug-15 Industrial Production MoM: -2.1% in May +0.8% in Jun Jul Release: 29-Aug-15 Household Spending: +4.8% in May -2.0% in Jun Jul Release: 29-Aug-15 UOB FX forecast: end 3Q15: 126 end 4Q15: 127 end 1Q16: 129 end 2Q16: 130 UOB Overnight Call Rate Forecast: end 3Q15: % end 4Q15: % end 1Q16: % end 2Q16: % UOB FX and Interest Rate Outlook FX Outlook 3Q15 4Q15 1Q16 2Q16 Last updated: 19 Aug 15 Rates Outlook 3Q15 4Q15 1Q16 2Q16 EUR/USD EU 0.05% 0.05% 0.05% 0.05% GBP/USD UK 0.5% 0.5% 0.5% 0.75% AUD/USD AU 2.0% 2.0% 2.0% 2.0% USD/JPY JP 0.1% 0.1% 0.1% 0.1% USD/SGD SG 1.25% 1.15% 1.22% 1.27% USD/MYR MY 3.25% 3.25% 3.25% 3.25% USD/THB TH 1.50% 1.50% 1.75% 2.00% USD/CNY CN 4.60% 4.6% 4.6% 4.6% USD/IDR ID 7.5% 7.5% 7.5% 7.5% USD/PHP PH 4.0% 4.0% 4.0% 4.0% USD/INR IN 7.25% 7.25% 7.25% 7.25% USD/TWD TW 1.88% 1.88% 1.88% 1.88% USD/HKD HK 0.75% 1.00% 1.25% 1.50% USD/KRW KR 4.85% 4.85% 4.85% 4.85% US 0.5% 0.75% 1.00% 1.25%

10 Thursday, 20 August 2015 Page Aug-15 FX Pairs Spot Outlook USD/SGD Neutral EUR/SGD Bullish GBP/SGD Bullish AUD/SGD Neutral JPY/SGD Bullish USD/MYR Bullish USD/THB Bullish USD/CNH Bullish EUR/USD Neutral GBP/USD Neutral AUD/USD Neutral NZD/USD Neutral USD/JPY Neutral Summary of Views Since Rate 13 Aug Jul Aug Aug Aug Jul Aug Jul Aug Jul Aug Aug Aug Target Trailing-stop Support Resistance S1: S2: S1: S2: S1: S2: S1: S2: S1: S2: S1: S2: S1: S2: S1: S2: S1: S2: S1: S2: S1: S2: S1: S2: S1: S2: R1: R2: R1: R2: R1: R2: R1: R2: R1: R2: R1: R2: R1: R2: R1: R2: R1: R2: R1: R2: R1: R2: R1: R2: R1: R2: FX Pairs Ranges for 19-Aug-15 * 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-14. Performance* Open High Low Close 1-day 1-week 1-month YTD** USD/SGD % +0.32% +2.34% +5.82% EUR/SGD % -0.02% +5.16% -2.71% GBP/SGD % +0.75% +3.16% +6.57% AUD/SGD % -0.07% +2.10% -4.80% JPY/SGD % +0.63% +2.76% +2.33% USD/MYR % +1.65% +7.80% +17.4% USD/THB % +0.68% +3.07% +7.93% USD/CNH % +0.51% +4.00% +3.96% EUR/USD % -0.34% +2.69% -8.10% GBP/USD % +0.42% +0.79% +0.69% AUD/USD % -0.43% -0.31% -9.95% NZD/USD % -0.28% +0.56% -15.3% USD/JPY % -0.33% -0.37% +3.42% 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.

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