FX Insights. Chart Of The Day JPY/SGD: Early signs of topping, confirmation upon breach of Thursday, 25 February 2016

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1 Quek Ser Leang Lee Sue Ann Global Economics & Markets Research URL: Chart Of The Day JPY/SGD: Early signs of topping, confirmation upon breach of Despite exceeding the strong resistance yesterday, the bullish JPY phase that started earlier this month are showing early signs of topping. From here, a sustained move above the high appears unlikely but confirmation of a short-term top is only upon a break below Having said that, a move below would indicate the start of a correction/consolidation phase and not a bearish reversal. 1 P a g e

2 OVERVIEW Oil rallied after weekly EIA data were somewhat better than expected, resulting in a +3.6% up day for the front month Brent crude contract and a +1% net daily move for WTI. The enthusiasm in the oil market propelled US equities. Bond yields also were up, if not by much, with the curve steepening by around half a basis point as the 2-year yield increased by 2.5bps and the 30-year by 3bps.The 10-year yield was as low as 1.65% and as high as 1.75% at the close. Volatility was also evident within the FX space. For the DXY, a push to the upside in the Europe session met stiff resistance at which sparked a sharp decline to before recovering slightly to close flat at On the Fed front, Richmond Fed President Lacker said that there is still a case for further rate hikes based on the natural real rate of interest (as it as at or just above zero). However, this contrasts the more cautious overtures laid out by FOMC leadership in recent weeks. Markets now look ahead to durable goods orders data for January, expected to show a rebound from the soft reading in December. The weekly jobless claims report will also be released and will be of interest after last week's surprisingly low reading. Meanwhile, San Francisco Fed President John Williams will be speaking in New York. Before that, Atlanta Fed President Dennis Lockhart will be giving opening remarks at a banking conference. All eyes will also be on the G20 Finance Ministers meeting that starts in Shanghai on Friday. 25-Feb-16 Summary of Views FX Pairs Spot Outlook Since/ Rate Target Trailing-Stop Support Resistance USD/SGD Neutral 17 Feb S1: S2: R1: R2: EUR/SGD Bearish 23 Feb S1: S2: R1: R2: GBP/SGD Bearish 23 Feb S1: S2: R1: R2: AUD/SGD Bullish 18 Feb S1: S2: R1: R2: JPY/SGD Bullish 09 Feb S1: S2: R1: R2: USD/MYR Bullish 18 Feb S1: S2: R1: R2: USD/THB Neutral 15 Feb S1: S2: R1: R2: USD/CNH Neutral 24 Feb S1: S2: R1: R2: EUR/USD Neutral 16 Feb S1: S2: R1: R2: GBP/USD Bearish 17 Feb S1: S2: R1: R2: AUD/USD Bullish 23 Feb S1: S2: R1: R2: NZD/USD Neutral 23 Feb S1: S2: R1: R2: USD/JPY Neutral * Shift in outlook. 16 Feb S1: S2: R1: R2: FX Pairs Ranges for 24-Feb-16 Performance* Open High Low Close 1-day 1-week 1-month YTD** USD/SGD % +0.14% -1.74% -0.88% EUR/SGD % -0.91% -0.25% +0.49% GBP/SGD % -2.44% -3.94% -6.34% AUD/SGD % +0.31% +1.67% -1.95% JPY/SGD % +1.84% +3.61% +6.30% USD/MYR % +0.05% -1.83% -1.74% USD/THB % +0.16% -0.66% -0.99% USD/CNH % +0.11% -1.14% -0.53% EUR/USD % -1.04% +1.51% +1.39% GBP/USD % -2.57% -2.28% -5.47% AUD/USD % +0.18% +3.45% -1.22% NZD/USD % +0.45% +3.22% -2.43% USD/JPY % -1.67% -5.16% -6.75% * 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: 1.4045 SGD saw a rather choppy session Wednesday, after firming early in Asia following the release of the 4Q15 GDP report, to 1.

3 USD/SGD: SGD saw a rather choppy session Wednesday, after firming early in Asia following the release of the 4Q15 GDP report, to /USD, then weakened sharply along with falling crude oil prices, to /USD in the evening, before wrapping up the session for a 0.2% gain to /USD late Wednesday. Singapore 4Q15 GDP grew 1.8% y/y in 4Q 2015, slightly lower than the 2.0% y/y advance estimates, as the manufacturing sector continued to be hampered by the slowdown in global demand. For 2015, Singapore s economy expanded 2.0% y/y, a slight downward revision from the 2.1% y/y advance estimates and far slower than the 3.3% pace in 2014, for the slowest pace since the recession in Singapore s growth prospects remain challenging in 2016, particularly in the first half of the year. However, we remain optimistic of some pickup in external sectors in 2H2016 as the economic conditions in the US continue on an improving path, in addition to favourable base effect due to the low base in We do not think that the recent releases of weak economic numbers warrant an easing in MAS monetary policy in April and we are also not of the view of an impending economic recession. We maintain our projection for 2016 GDP of 2.7%, at the top end of government s 1-3% growth forecast. This morning SGD NEER index pedaled back to -1% below the midpoint, after having risen to as much as 0.5% early Wednesday following the 4Q GDP report. For now, the -0.5% to -1.0% range looks reasonable, and that implies USD/SGD range of In line with expectation, USD extended its up-move but struggled to move above the /15 high seen last week. The rapid and sharp pull-back from the overnight high of suggests that a short-term top is in place. The current weakness appears to have scope to extend lower but at this stage, a move below is unlikely. Resistance is at ahead of Neutral: Caught in a range for now. There is no much to add as USD retested the recent high of /15 before easing off quickly. We continue to hold a neutral view and expect this pair to trade sideways for at least another few days more. The key levels are at and P a g e

4 EUR/SGD: The short-term outlook for this pair appears mixed and further sideway trading is expected for today. Solid support remains at while any up-move is expected to struggle near the stiff resistance at Bearish: Extension to cannot be ruled out just yet. As long as this pair continues to stay below , another leg lower to cannot be ruled out just yet. The current movement is likely a short-term consolidation phase that should lead to an eventual move lower. That said, /00 is a solid support and this level has to break before further down-move can be expected. GBP/SGD: The anticipated GBP weakness exceeded our target by a wide margin. However, the current weakness is showing some early signs of stabilization and further sharp drop is not expected for today. From here, allow for a retest of the /05 support but is expected to hold for a rebound to Bearish: Take partial profit at The low of was just a few pips shy of our target at While the outlook for GBP is still clearly bearish, a sustained move below appears unlikely for now. Those who are shorts should consider taking partial profit at Overall, only a move back above the stop-loss at (adjusted from ) would indicate that the current bearish phase has ended. The next significant support below is at AUD/SGD: AUD traded sideways as expected albeit at a lower range than anticipated. The outlook remains mixed and further range trading is likely for today, likely between and Bullish: target met, focus on next. We continue to view the current movement as a short-term consolidation phase that is expected to lead to an eventual move higher. The recent high of exceeded our initial target of and is acting as a very strong resistance now but a break above this level could lead to a quick rise towards the revised target at Stop-loss remains unchanged at JPY/SGD: The initial dip in JPY held above the support before rallying strongly to exceed the target with a high of However, the up-move was quickly reversed and the sharp drop from the high suggests that a short-term top is in place. The current pull-back has scope to extend lower but any down-move is likely limited to Resistance is at and the high of is unlikely to come under threat for now. Bullish: Early signs of topping. [See Chart of the Day on page 1] 4 P a g e

5 USD/MYR: Malaysia CPI in January rose 3.5%y/y, from 2.7% in December 2015, the largest annual increase since March We maintain our near term inflation and interest rate outlook for Malaysia. Inflation is expected to accelerate in 1Q16 owing to the sharply lower base effect and higher cost related adjustments. The upside pressures are partly offset by petrol price cuts which may help to cap inflation below 4% in 1Q06, and thereafter moderate further in subsequent months. We project a higher average inflation of 3.2% in 2016 albeit subject to downward revision if oil price weakness persists and domestic demand moderates further. Growth risks continue to outweigh inflation risks thus we anticipate Bank Negara Malaysia (BNM) to maintain its overnight policy rate (OPR) at 3.25%. Bullish: Target at exceeded, short-term top appears imminent. We turned bullish USD last Thursday, 18 February when spot was at with a target of Over the last couple of days, we have highlighted that the upward momentum is not as impulsive as we would like and suggested that those who are holding long positions should book some profit near The high has been yesterday and the sharply lower opening this morning suggests that a short-term top is close-by. However, only a break below would indicate the start of a corrective pull-back. In the meanwhile, is acting as a very strong resistance and only a break above this level would lead to another leg higher to USD/THB: THB edged higher by 0.1% to /USD on Wednesday, though the pair is seen a tad lower today. In News, the Excise Department was told to submit plans to broaden its tax base in the next two months in a bid to make its 800-billion-baht tax revenue target over five years achievable. Finance permanent secretary Somchai Sujjapongse said apart from being a source of government income, an excise tax could be used to discourage actions or behaviour that is harmful to health or the environment. For instance, an excise tax should be imposed to curb consumption if a study finds beverages with high sugar content are harmful to health, he added without elaborating on products. Neutral: Odds for a move above have diminished considerably. Over the past few days, we have highlighted that despite the generally positive undertone for USD, only a daily closing above would indicate the start of a bullish phase. However, the odds for such a move have diminished considerably with the weak closing yesterday. To put it another way; the current outlook is still considered as neutral and we expect this pair to trade between and for at least several more days. USD/CNH: Onshore RMB fell 0.1% to /USD, and has accumulated a 4-day loss of 0.24% against USD, after another weak central parity on Wednesday. Offshore CNH declined 0.04% to /USD but otherwise the onshore offshore remains relatively tight. This suggests that speculative activities are still being sidelined at the moment. The central parity was lowered by 0.04% to /USD on Wednesday, following a 0.17% drop on Tuesday, showing again that the G20 finance ministers meeting that is scheduled for Friday and Saturday in Shanghai has so far done little to provide support for the RMB. US Treasury Sec Jack Lew late Wed downplayed the prospects of crisis response to the market turbulence from the G20 meeting. In addition, the announcement from PBoC on Wednesday to open up domestic interbank bond market to foreign institutions suggests that the authorities are not concerned about capital outflows, even as foreign reserves fell by more than US$510bn in Neutral: In a broad sideway range now. We just turned neutral yesterday and there is no change to the current view. We continue to expect USD to trade in a broad sideway range, likely between and P a g e

EUR/USD: 1.1015 Eurozone data was limited on Wednesday. In France, consumer confidence nudged lower in February but jobseeker numbers fell an unexpectedly large 27.9k in January.

6 EUR/USD: Eurozone data was limited on Wednesday. In France, consumer confidence nudged lower in February but jobseeker numbers fell an unexpectedly large 27.9k in January. Today, Germany's Gfk consumer confidence survey will be released, together with consumer and business confidence readings in Italy. In addition, the ECB will release its money and credit aggregates for January. The most recent ECB Bank Lending Survey pointed to continued growth in demand for credit and expectations that growth will continue. EUR dipped below the major support but as expected, held above The recent downward pressure has eased somewhat with the solid rebound from the low of but it is still too early to expect a robust recovery. From here, allow for a dip to but will likely continue to hold for a move higher to /60. Neutral: Daily closing below would shift outlook to bearish. While EUR touched a low of , it rebounded quickly to close almost unchanged for the day. As highlighted in recent updates, despite the generally negative undertone, we prefer to wait for a daily closing below before turning bearish. From here, a move back above is enough to suggest that the short-term downward pressure has eased. 6 P a g e

GBP/USD: 1.3925 GBP/USD plummeted to new 7-year-lows of 1.3878 on Brexit fears before a slight recovery was seen.

7 GBP/USD: GBP/USD plummeted to new 7-year-lows of on Brexit fears before a slight recovery was seen. Notably, a new Comres/Daily Mail UK public opinion poll shows 51% in favour of remaining in the EU and 39% for leaving (Brexit). This 12% pro-eu balance is wider than the 8% balance the organisation found last week but narrower than the 18% margin it found in January. Data wise, the CBI s Distributive Trades Survey for February pointed to a slightly less upbeat retail picture, with the reported sales balance dropping further to 10, from 16 in January, and versus12 expected by the market. All eyes on today s second estimate of UK s economic growth for the final quarter of last year, likely to come out weaker than first announced, although expectations point to no headline figure changes. The first estimate showed the economy grew at the rate of 0.5%, one percentage point up from the first quarter. GBP continues with its decline to touch a fresh low of The current weakness is severely oversold now and with early signs of momentum slowing down, further sharp drop is unlikely for today. That said, it is premature to expect a sustained recovery and it is more likely that this pair will consolidate its recent loss at these lower levels. In other words, expect range trading, likely between and Bearish: Partial profit taken at , extension to not ruled out but odds are not high. The low of yesterday exceeded our partial profit-take level of While the outlook is still bearish, severely oversold conditions coupled with early signs of momentum slowing down suggests low odds of extension lower to the next support at That said, confirmation that the bearish phase has ended is only upon a move back above (adjusted from ). 7 P a g e

AUD/USD: 0.7190 Australia s private capital expenditure rose 0.8% in the December quarter, with a revised 8.4% decline in the third quarter and against expectations for a fall of 3.0%.

8 AUD/USD: Australia s private capital expenditure rose 0.8% in the December quarter, with a revised 8.4% decline in the third quarter and against expectations for a fall of 3.0%. Total investment spending in the mining sector fell 7.0%, with spending on building and structures down 0.4%, and spending on equipment, plant and machinery down 5.6%. AUD traded sideways as expected albeit at a lower range than anticipated. The price action continues to suggest range trading for today, likely between and Bullish: Immediate target at /30. While the pull-back from the recent high of has been deeper than expected, the stop-loss for our bullish AUD view is still intact at As long as this level is not taken out, we continue to expect a move to /30 even though is acting as a very strong resistance now and this level will not be easy to crack. 8 P a g e

NZD/USD: 0.6660 Snapping the significant jump seen on Monday, NZD turned lower on Tuesday amid the sentiment shift towards safety.

9 NZD/USD: Snapping the significant jump seen on Monday, NZD turned lower on Tuesday amid the sentiment shift towards safety. As we mentioned earlier this week, there is not a huge amount of data until the RBNZ 10 March meeting, so risk-sentiment will continue be the key driver for NZD. NZD dipped below but rebounded quickly from a low of The recovery appears to have scope to extend higher but any further up-move is expected to struggle near the strong resistance at Support is at and the low is unlikely to come under threat today. Neutral: In a broad / range. There is no change to the neutral view and we continue to expect NZD to trade between and in the coming days. 9 P a g e

USD/JPY: 112.00 USD/JPY has dropped below the 112.00 mark, as the rally in risky assets and oil having come off the boil.

10 USD/JPY: USD/JPY has dropped below the mark, as the rally in risky assets and oil having come off the boil. Japan EconMin Ishihara said that Japan is not engaged in competitive currency devaluation and Japan shares the understanding that competitive currency devaluation is not desirable. Separately, Japan vice FinMin Sakai said that they will continue to carefully monitor currencies. Against our expectation, USD moved clearly below the support before recovering to close near the day s high. The recent downward pressure appears to have eased but it is too early to expect a sustained rebound. From here, allow for a dip to but is expected to hold for a move higher to Neutral: Daily closing below would shift outlook to bearish. While USD touched a low of yesterday, it rebounded strongly to close above The undertone is clearly negative but we are not convinced that the current price action is the start of a sustained down-move unless there is a daily closing below That said, this pair is expected to remain under pressure unless it can reclaim the strong resistance. 10 P a g e

11 UOB FX & Interest Rate Outlook FX Outlook 1Q16 2Q16 3Q16 4Q16 Rates Outlook 1Q16 2Q16 3Q16 4Q16 EUR/USD EU 0.05% 0.05% 0.05% 0.05% GBP/USD UK 0.50% 0.50% 0.50% 0.75% AUD/USD AU 2.00% 2.00% 2.00% 2.00% NZD/USD NZ 2.50% 2.50% 2.50% 2.50% USD/JPY JP -0.10% -0.10% -0.20% -0.20% 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% 1.50% USD/CNY CN 4.10% 3.85% 3.85% 3.85% USD/IDR 13,500 13,400 13,300 13,200 ID 7.0% 6.75% 6.75% 6.75% USD/PHP PH 4.0% 4.0% 4.0% 4.0% USD/INR IN 6.75% 6.75% 6.75% 6.75% USD/TWD TW 1.50% 1.38% 1.38% 1.38% USD/HKD HK 0.75% 1.00% 1.00% 1.25% USD/KRW KR 1.25% 1.25% 1.25% 1.25% Last updated on 19 Feb 16 US 0.50% 0.75% 0.75% 1.00% 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) - TBA 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