FX Insights. Chart Of The Day JPY/SGD: Improving upward momentum but bullish only if above Wednesday, 31 May 2017

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1 Quek Ser Leang Lee Sue Ann Global Economics & Markets Research URL: Chart Of The Day JPY/SGD: Improving upward momentum but bullish only if above JPY touched a high of yesterday and the key resistance was unthreatened. As noted yesterday, upward momentum has improved considerably but JPY has to break above to indicate that it has moved into a bullish phase (with an immediate target of ). This scenario would not be surprising as long as the key short-term support at is not taken out. 1 P a g e

2 OVERVIEW Whilst price action was maybe a little more interesting on Tuesday there was no major change overall. Wall Street saw a modestly risk-off tone, with bond yields slightly lower, and the JPY a tad firmer. The decline in Treasury yields (10-year notes down 4bps to 2.21%) came as Fed Governor Lael Brainard said that she expected a further Fed rate hike soon, but stated that If the soft inflation data persist, that would be concerning and, ultimately, could lead me to reassess the appropriate path of policy. The US will see the release of pending home sales for April and the Chicago PMI for May, together with the Fed Beige Book of economics anecdotes. Fed's Kaplan is due to speak in New York at 8pm SGT tonight. Latest Flash Note: 25 May 17 FOMC Minutes: Points To June Rate Hike, Some Details On A Gradual Balance Sheet Reduction Plan 2 P a g e

3 31-May-17 Summary of Views FX Pairs Spot Outlook Since/ Rate Target Trailing-Stop Support Resistance USD/SGD Bearish 18 May S1: S2: R1: R2: EUR/SGD Neutral 29 May S1: S2: R1: R2: GBP/SGD Bearish 26 May S1: S2: R1: R2: AUD/SGD Neutral 02 May S1: S2: R1: R2: JPY/SGD Neutral 22 May S1: S2: R1: R2: USD/MYR Bearish 26 Apr S1: S2: R1: R2: USD/THB Bearish 16 May S1: S2: R1: R2: USD/CNH Bearish 17 May S1: S2: R1: R2: CNH/SGD Neutral 26 May S1: S2: R1: R2: EUR/USD Neutral 29 May S1: S2: R1: R2: GBP/USD Bearish 25 May S1: S2: R1: R2: AUD/USD Neutral 26 May S1: S2: R1: R2: NZD/USD Bullish 23 May S1: S2: R1: R2: USD/JPY Neutral * Shift in outlook. 24 May S1: S2: R1: R2: FX Pairs Ranges for 30-May-17 Performance* Open High Low Close 1-day 1-week 1-month YTD** USD/SGD % -0.41% -0.88% -4.45% EUR/SGD % -0.44% +1.66% +2.05% GBP/SGD % -1.24% -1.14% -0.36% AUD/SGD % -0.58% -1.72% -0.75% JPY/SGD % +0.37% -0.04% +1.36% USD/MYR % -0.25% -1.33% -4.53% USD/THB % -0.92% -1.38% -4.72% USD/CNH % -0.81% -1.07% -2.16% EUR/USD % +0.00% +2.61% +6.82% GBP/USD % -0.76% -0.18% +4.27% AUD/USD % -0.16% -0.81% +3.81% NZD/USD % +1.18% +2.72% +2.26% USD/JPY % -0.84% -0.90% -5.73% * 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: 1.3860 USD/SGD turned lower after recording a session high of 1.3884 to settle at 1.3844 (-0.14%). This morning, the SGD NEER is trading at around 0.7% above the mid-point with 0.5-1.

4 USD/SGD: USD/SGD turned lower after recording a session high of to settle at (-0.14%). This morning, the SGD NEER is trading at around 0.7% above the mid-point with % range implying USD/SGD within based on current FX levels. Later at 10am, we will receive bank lending and monetary aggregates for April. Latest Flash Note: 25 May 17 Tradeable Sectors Continue To Boost Economic Growth in 1Q The critical resistance indicated at yesterday was unthreatened as USD eased off quickly after touching a high of The current movement is viewed as part of consolidation phase and sideway trading is expected for today, likely within a / range. Bearish: Diminished odds for further USD weakness. USD hit a high of yesterday, holding just below the trailing stop-loss for our bearish view at As indicated yesterday, the odds for further USD weakness have diminished but only a break above would indicate that the bearish phase that started on 18 May (spot at ) has ended. The downside risk would continue to decrease unless USD can move and stay below soon. A clear break below would greatly increase the prospect of an extension to *Took partial profit at P a g e

5 EUR/SGD: The strong support continues to hold as EUR rebounded quickly after hitting a low of The sharp swing up to a high of appears to be running ahead of itself and any further strength is unlikely to move clearly beyond the strong resistance at Support is at ahead of the low near (which is not expected to be challenged). Neutral: Immediate downward pressure towards EUR rebounded strongly to hit a high of yesterday, holding below the key short-term resistance at As long as is intact, another push lower towards is not ruled out just. At this stage, a sustained move below this level is not expected. A move back above would indicate that the current negative undertone has eased and the start of a consolidation phase. GBP/SGD: We suggested yesterday that allow for a bounce to /05 but is expected to cap for a move lower to The high of was just a couple of pips below and GBP dropped sharply after NY close to hit a low of The decline appears to be running ahead of itself but another push towards /00 seems likely even though last Friday s low at is likely out of reach for now. Resistance is at followed by the still very strong level at Bearish: Stop-loss lowered to GBP rebounded strongly to hit a high of yesterday but critically held below the stop-loss for our bearish view at The sharp drop after NY close bodes well for our bearish expectation but last week s low near is acting as a rather strong support now and it may take several days before a break of this level can be seen. A move below this level would shift the focus to On the upside, only a break above (stop-loss unchanged) would indicate that the bearish phase that started last Friday (see Chart of the Day update, spot at ) has ended. *Took partial profit at AUD/SGD: Instead of trading sideways as expected, AUD rose strongly to hit an overnight high of before extending its gain earlier this morning. The up-move appears to have scope to extend further to /70 but the major is unlikely to be challenged, at least not for today. Support is at and the low seen yesterday is likely strong enough to hold any intraday pull-back. JPY/SGD: The anticipated JPY strength exceeded our expectation by taking out the resistance (high of ). However, upward momentum has been dented with the subsequent strong pull-back from the high even though it is premature to expect a significant pull-back. JPY is more likely to trade sideways from here but the immediate bias is for a probe towards the top of the expected / consolidation range. Neutral: Likely in early stages of a basing process. We indicated in recent updates that despite the break of the strong support at (that resulted in a fresh year-todate low of ); we are not convinced that the price action is the start of a bearish phase. Nevertheless, we allowed for a dip to However, the strong surge yesterday suggests that the current price action is likely the early stages of a basing process. Upward momentum is not strong at this stage but would continue to improve as long as is intact. On the upside, AUD has to register a NY close above to indicate the start of a bullish phase. Neutral: Improving upward momentum but bullish only if above JPY touched a high of yesterday and the key resistance was unthreatened. As noted yesterday, upward momentum has improved but JPY has to break above to indicate that it has moved into a bullish phase (with an immediate target of ). This scenario would not be surprising as long as the key short-term support at is not taken out. 5 P a g e

6 USD/MYR: MYR has strengthened, set to complete a third straight month of gains, the longest such winning run since This is largely on the back of stable energy prices and global funds boosting holdings of Malaysian equities. April money supply data will be released at 3pm SGT later today. Bearish: Took partial profit at Next target at [No change in view (see update below) except stop-loss is lowered to from ] USD edged lower to touch a fresh year-to-date low of last Friday. While downward momentum is beginning to show signs of waning, it is premature to expect an end to the current bearish phase that started more than a month ago (see Chart of the Day update on 26 Apr, spot at ). As there is hardly any significant support until , we continue to anticipate a move towards this level even though momentum indicators are not as impulsive as preferred. We have suggested taking partial profit previously at and those with remaining shorts should continue to maintain a stop-loss at *Took partial profit at USD/THB: THB is seen rising this morning, poised for its fourth monthly advance this year, amid inflows into Thai bonds and equities. April current account data is scheduled at 3.30pm SGT today. Surplus may have narrowed to $1.02bn from $2.58bn in March, according to median estimates. Elsewhere, Mathee Supapongse, the deputy governor overseeing monetary stability, said the BoT will continue to closely monitor capital inflows, especially short-term funds that could be highly volatile and cause the baht to fluctuate accordingly. Bearish: Next significant support is at There is not much to add as USD traded quietly over the past couple of days. The bearish phase that started 2 weeks ago (see Chart of the Day on 16 May, spot at 34.49) is still deemed as intact until the stop-loss at is taken out (adjusted lower from previously). That said, the recent low near is acting as a strong support and this level may continue to hold for a couple more days. A clear break below this level would shift the focus to *Took partial profit at USD/CNH: Chinese markets reopen today after two days of holidays. China s economic expansion maintained a steady pace this month, with broad measures of manufacturing and services activity pointing to sustained growth. The official manufacturing PMI held steady at 51.2 in May. A separate gauge of the nation s services sector expanded at a faster pace after slowing from multiyear highs the previous month. The official non-manufacturing PMI strengthened to 54.5 in May from 54.0 the month before. Later this week, Caixin China will release a private manufacturing PMI report, which focuses on small- and medium-sized enterprises. Caixin will follow that up with its services PMI report next week. Latest Flash Note: 24 May 17 Moody s Sovereign Rating Downgrade And Our Initial Assessment Bearish: To take partial profit at [No change in view, see update from yesterday below] While USD hit a fresh low of yesterday, it rebounded swiftly and sharply to end the day on a strong note at Downward momentum is beginning to slow but the bearish phase that started on 17 May (spot at ) is considered as intact until the stop-loss at is taken out. That said, those who are short should look to take partial profit upon any weakness towards (above the February s low of ). CNH/SGD: Neutral: Bullish if NY closing above [No change in view, see update from yesterday below] The recovery target of that was first indicated last Friday, 26 May was met as CNH touched an exact high of yesterday. Upward momentum has improved considerably with the strong daily close and from here, a NY closing above would indicate that CNH has moved into a bullish phase with an immediate target of This scenario seems likely as long as the key short-term support at is intact. 6 P a g e

EUR/USD: 1.1170 EUR/USD recovered sharply higher after hitting a low of 1.1110 earlier on Tuesday.

7 EUR/USD: EUR/USD recovered sharply higher after hitting a low of earlier on Tuesday. Markets were more sanguine on the threat of Greece not paying up in July (Greek FinMin Tsakalotos said his comments had been distorted ), whilst a source story from Reuters suggesting a shift in bias at next week s ECB also injected a bid tone. On the data front, the European Commission s economic sentiment index fell 0.5pts to in May. More importantly, ahead of today s Euro area-wide reading, flash HICP readings in Germany and Spain both printed slightly below expectations. In Germany, the HICP fell 0.2% m/m in May, with base effects lowering annual inflation to 1.4% y/y. In Spain, a flat HICP in the month also delivered a decline in annual inflation, in this case to 2.0% y/y. Today, we will also receive the flash May HICP in France and Italy. Euro area unemployment for April and the latest retail spending and labour market reports in Germany will also be rolled out. The target indicated at yesterday was not met as EUR rebounded strongly from a low of (high of ). The sharp swing higher was unexpected and downward momentum has eased. The undertone is still positive and while a retest of would not be surprising, a move above is not expected. Support is at followed by the low which is acting as a rather strong support now. Neutral: Immediate downward pressure to In the Chart of the Day update yesterday, we were of the view that EUR is about to stage a deeper pull-back towards the major support at The subsequent rebound from a low of took out the strong resistance but eased off quickly from a high of While downward momentum has clearly been dented, we still detect a weak undertone to the current price action and would continue to hold the same view unless EUR close above by end of today s NY session. All that said, any weakness in the coming days is viewed a corrective pull-back and not the start of a major bearish reversal. 7 P a g e

GBP/USD: 1.2805 GBP did not show much of a reaction to a couple of sentiment surveys as they crossed the wires. The GFK consumer confidence index edged higher to -5 from -7, beating the -8 prediction.

8 GBP/USD: GBP did not show much of a reaction to a couple of sentiment surveys as they crossed the wires. The GFK consumer confidence index edged higher to -5 from -7, beating the -8 prediction. This was also the brightest outcome since January. The better-than-expected reading was accompanied by a drop in the Llyods business barometer which fell to 27 from 47, the lowest reading since September Instead, markets appeared to have their interests on a new poll showing the Conservative Party could lose its overall majority in the UK parliament. The YouGov poll showed that the ruling Conservative party missed a majority by 16 seats. The survey also found that the opposition Labour party won 257 seats, up from 229 in the prior poll. Following the announcement, GBP declined across the board. The sharp drop after NY close appears to be running ahead of itself but with no signs of stabilization yet, further extension towards last Friday s low at would not be surprising. However, the next support at /55 is likely out of reach for now. Resistance is at ahead of the high seen during NY hours. Bearish: To take partial profit at /60. GBP rebounded and hit a high of yesterday, holding below the stop-loss for our bearish view at The subsequent sharp drop post-ny close is encouraging but the decline lacks momentum and the suggested partial profittaking level at /60 could be out of reach within these 1 to 2 days. In the event of a break of /60, the next level to focus on is at , the high back in February. On the upside, a break above (level unchanged) would indicate that the bearish phase that started last Friday 26 May (spot at ) has ended. 8 P a g e

AUD/USD: 0.7460 AUD/USD was initially under pressure following this week s open but the pair found buyer s during the Asian session on Tuesday and has rallied about half a cent since.

9 AUD/USD: AUD/USD was initially under pressure following this week s open but the pair found buyer s during the Asian session on Tuesday and has rallied about half a cent since. Today s gain sees the pair snapping a prior three-day losing streak. Australian retail sales and private capital expenditure is the next high impacting release pertaining to the pair and will be reported at 9.30am SGT on Thursday. Instead of consolidating, AUD surged to hit an overnight high of The strong daily closing suggests further upward pressure and while a move above the strong resistance would not be surprising, the next resistance at is unlikely to come under serious threat. Support is at but the more significant level is at Neutral: In a / range. AUD is currently approaching the top end of our expected / consolidation range. Short-term momentum looks constructive but at this stage, it is too early to expect a sustained up-move. An intraday move above is not ruled out but for AUD to turn bullish, it has to close above last week s high near /20. In the meanwhile, the positive undertone is expected to improve further especially if AUD can hold above in the next few days. 9 P a g e

10 NZD/USD: In its biannual Financial Stability Report released earlier today, the RBNZ said that an overheated housing market remains one of the key challenges facing New Zealand s financial system. Policymakers did note that levels of housing risk have stabilized on account of government efforts to tighten loan-to-value ratio (LVR) on investment properties. Although LVR policies have helped prevent a housing downturn, low mortgage rates have encouraged an increase in high debt-to-income lending. Early Thursday morning, first quarter trade data will be released. The terms of trade index is projected to rise 3.9% on the quarter, following a 5.7% in increase in October-December. Expectation for a deeper pull-back was proven wrong as NZD continues to march higher and hit a high of The rally appears to be severely over-extended now but with no signs of weakness just yet, another push higher towards is not ruled out. That said, the next resistance at is unlikely to come into the picture, at least not for today. Support is at followed by yesterday s low near (which is likely safe for now). Bullish: Focus at now. Despite weak internal indications, NZD continues with its strong run to hit an overnight high of The bullish phase that started last Tuesday, 23 May (spot at ) has exceeded our expectation by taking out the resistance. The focus has shifted to now, the minor low seen in February. Stop-loss is adjusted higher to from *Took partial profit at P a g e

USD/JPY: 110.85 USD/JPY continues to stretch the downside of the 111/112 range but not by very much.

11 USD/JPY: USD/JPY continues to stretch the downside of the 111/112 range but not by very much. A preliminary estimate from the Ministry of Economy, Trade and Industry showed industrial production rose 4% in April, following a 1.9% decrease in March. Analysts in a median forecast expected a rebound of 4.2%. Compared to the same month a year earlier, industrial production jumped 5.7%. JPY was little changed following the release, with the dollar last seen hovering at yen : We indicated yesterday that USD is expected to drift lower towards the support with next support at USD hit a low of and the subsequent weak recovery suggests further downward pressure to test the support (next support is at ). Resistance is at but only a move back above would indicate that the current mild downward pressure has eased. Neutral: In a / range. There is not much to add as USD edged down to touch a low of yesterday. While downward momentum is ticking higher, at this stage, any weakness is expected to encounter solid support near ahead of the critical month-to-date low of All in, we continue to hold a neutral stance and expect this pair to trade in a broad / range (narrowed from / previously) even though the downside appears to be increasingly vulnerable. 11 P a g e

12 UOB FX & Interest Rate Outlook FX Outlook 2Q17 3Q17 4Q17 1Q18 Rates Outlook 2Q17 3Q17 4Q17 1Q18 EUR/USD EU 0.00% 0.00% 0.00% 0.00% GBP/USD UK 0.25% 0.25% 0.25% 0.25% AUD/USD AU 1.50% 1.50% 1.50% 1.50% NZD/USD NZ 1.75% 1.75% 1.75% 1.75% USD/JPY JP -0.20% -0.20% -0.20% -0.30% USD/SGD SG 1.20% 1.40% 1.45% 1.65% USD/MYR* Updated on 27 Mar 17 *Updated on 27 Apr *Meetings associated with a Summary of Economic Projections and a press conference. # Meetings associated with release of Inflation Report. ^Meetings associated with release of Monetary Policy Statement. **Meetings associated with release of Outlook Report. MY 3.00% 3.00% 3.00% 3.00% USD/THB TH 1.50% 1.50% 1.50% 1.75% USD/CNY CN 4.35% 4.35% 4.35% 4.35% USD/IDR ID 4.75% 4.75% 4.75% 5.00% USD/PHP PH 3.25% 3.50% 3.50% 3.50% USD/INR IN 5.75% 5.50% 5.50% 5.50% USD/TWD TW 1.38% 1.38% 1.38% 1.38% USD/HKD HK 1.50% 1.75% 1.75% 2.00% USD/KRW KR 1.25% 1.25% 1.25% 1.25% Central Bank Meetings 2017 US 1.25% 1.50% 1.50% 1.75% Central Bank Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Federal Reserve (FOMC) * * 26-20* * European Central Bank (ECB) Bank of England (BOE) - 02 # # # # 14 Reserve Bank of Australia (RBA) Reserve Bank of New Zealand (RBNZ) - 09^ 23-11^ 22-10^ 28-09^ Bank of Japan (BOJ) 31** ** ** ** - 20 ** Bank Negara Malaysia (BNM) Bank of Thailand (BOT) Monetary Authority of Singapore (MAS) 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