FX Insights. Chart Of The Day USD/SGD: target is met, next level to aim for is at

Transcription

1 Global Economics & Markets Research Quek Ser Leang Lee Sue Ann Monday, 05 October Chart Of The Day USD/SGD: target is met, next level to aim for is at FX Insights The target that was first indicated slightly more than a week ago (see Chart of the Day update on 25/09/15, spot: ) was met last Friday with a high of While the outlook remains bullish, upward momentum appears to be slowing down and any further up-move is likely at a slower pace. The next level to aim for is at followed by the major resistance at We have moved the stop-loss further up to from previously.

2 Monday, 05 October 2015 Page 2 OVERVIEW The U.S. dollar closed broadly lower by 0.37% against G-10 currencies after U.S September s non-farm payrolls came in below expectations of 201k, to rise only by 142k. August s figures were also revised sharply lower to 136k from 173k, marking the smallest two-month gain in employment in over a year. Bond traders now push out the first rate hike to next March and the following one not until early 2017, a stark contrast to the dot plot published just over two weeks ago in which FOMC members think that the benchmark rate would be at 1.375% by the end of U.S. major equities benchmarks closed more than 1% higher on Friday and also for the week, recovering from intra-day declines of more than 1.5% after the poor payrolls to mark the biggest intra-day reversal in 4 years for Dow and S&P. Dow Jones finished at 200 points higher after falling as much as 258 points earlier in the session. Fed Funds Rate: % Last Change: -0.75% in Dec 08 Next FOMC Meeting: 28-Oct-15 GDP QoQ: +0.6% in 1Q % in 2Q15 2Q15 Release first estimate): 29-Oct-15 PCE Price Index YoY: +0.3% in Jun +0.3% in Jul Jul Release: 28-Sep-15 Core PCE Price Index YoY: +1.3% in Jun +1.2% in Jul Jul Release: 28-Sep-15 Unemployment: +5.1% in Aug +5.1% in Sep Oct Release: 06-Nov-15 Nonfarm payroll: +136k in Aug +142k in Sep Oct Release: 06-Nov-15 Retail Sales: +0.7% in Jul +0.2% in Aug Sep Release: 14-Oct-15 Retail Sales ex autos: +0.6% in Jul +0.1% in Aug Sep Release: 14-Oct-15 Durable Goods: +1.9% in Jul -2.0% in Aug Aug Release: 27-Oct-15 Durable Goods ex autos: +0.4% in Jul +0.0% in Aug Aug Release: 27-Oct-15 Housing Starts: +1161k in Jul +1126k in Aug Sep Release: 20-Oct-15 Case Shiller 20-City Index: +5.0% in Jun +5.0% in Jul Aug Release: 27-Oct-15 UoM Consumer Confidence: 91.9 in Aug 85.7 in Sep Oct Release: 16-Oct-15 UOB Fed Funds Rate Forecast: end 4Q15: 0.50% end 1Q16: 0.75% end 2Q16: 1.00% end 3Q16: 1.25%

3 Monday, 05 October 2015 Page 3 USD/SGD: The USD/SGD saw dips below bought into after the poor non-farm payrolls to trade mainly the /60 range for the most part of the U.S session. Market now eyes the release of the MAS monetary policy next week, from October. While USD exceeded the target last Friday with a high of , the subsequent sharp drop to and the equally sharp recovery was unexpected. The current price action suggests that USD is likely trying to find a short-term top for a deeper correction. From here, allow for a move to but is expected to cap for another attempt to move below Bullish: target is met, next level to aim for is at [See Chart of the Day on page 1] 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 Jul -0.8% in Aug Sep Release: 24-Oct-15 NODX: -0.7% in Jul -8.4% in Jul Sep Release: 16-Oct-15 Industrial Production: -6.4% in Jul -7.0% in Aug Sep Release: 24-Oct-15 UOB FX Forecast: end 4Q15: 1.43 end 1Q16: 1.45 end 2Q16: 1.46 end 3Q16: 1.44 UOB 3M SIBOR Forecast: end 4Q15: 1.15% end 1Q16: 1.20% end 2Q16: 1.25% end 3Q16: 1.35% UOB 3M SOR Forecast: end 4Q15: 1.25% end 1Q16: 1.35% end 2Q16: 1.35% end 3Q16: 1.45%

4 Monday, 05 October 2015 Page 4 EUR/SGD: EUR surged to a 5-week high of /40 but the upmove was quickly reversed. The sharp drop suggests that a short-term top is likely in place and /40 is unlikely to come into play today. From here, allow for a rebound to but is expected to cap for a deeper pull-back to Neutral: Expect choppy sideway trading from here. While EUR broke above the strong resistance, the sharp reversal coupled with the weak daily closing last Friday suggests that this pair is not ready for a sustained up-move just yet. However, the undertone is positive and is likely strong enough to hold any short-term pullback. On the upside, only a daily closing above would indicate the start of bullish phase. GBP/SGD: Against our expectations, GBP easily took out the resistance to touch a high of /40. The sharp pullback from the high is likely the early stages of a corrective pull-back. From here, allow for a move to but is expected to cap for a move to Neutral: Positive undertone but too early to expect a sustained up-move. GBP tested the major last Friday (high of /40) but failed to break through. Despite improving momentum, it is too early to expect a sustained up-move. Only a clear break above would indicate a move towards and beyond has started. In the meanwhile, the outlook for this pair is viewed as neutral albeit with a bias on the upside. AUD/SGD: The break above the /15 resistance was shortlived as AUD reversed quickly from the high of /30. However, the undertone is still positive and as long as the major support at continues to hold, another leg higher to is likely. Bullish: Anticipating a break above /15. There is no change in the bullish view as highlighted in the Chart of the Day last Friday. While the move above the major /15 was short-lived (high of /30), it bodes well for our bullish view and we continue to target a move to Stop-loss has been moved higher to from JPY/SGD: The support indicated last Friday held as expected (low of ) as JPY surged to test the major mid-term resistance at with a high of /73. The sharp drop from the peak has dented the upward momentum and the current movement is likely part of a broader consolidation phase. Expect sideway trading for today, likely within a broad range of / Bullish: target is met; outlook still bullish but momentum dented with sharp drop from the top. The target that was first indicated in the Chart of the Day update last Tuesday was met with a high of /73 on Friday. The outlook remains bullish but upward momentum is clearly dented with the sharp drop from the peak. The next level is at , the high back in August. This is a key level and will not be easy to break. Stop-loss is unchanged at for now.

5 Monday, 05 October 2015 Page 5 USD/MYR: Dimmer Fed rate hike outlook and the recent rally in palm oil prices could offer some relief for MYR. This week we have Malaysia s trade data for August and foreign reserves as at end-september on tap. The trade surplus is expected to widen in August (Bloomberg consensus: MYR4.9bn; UOB: MYR3.6bn). Neutral: Down-move is viewed as corrective but incomplete. We continue to view the down-move from the high as a corrective pull-back. The down-move appears incomplete and could extend lower to test the support before further USD strength can be expected further out. In other words, we are looking for a deeper correction before anticipating resumption on the main bullish USD trend. Overnight Policy Rate: 3.25% Last Change: +0.25% in Jul 2014 Next BNM Meeting: 05-Nov-15 GDP YoY: +5.6% in 1Q % in 2Q15 3Q15 Release: 12-Nov-15 CPI YoY: +3.3% in Jul +3.1% in Aug Sep Release: 21-Oct-15 Trade Balance: +7.98b in Jun +2.38b in Jul Aug Release: 07-Oct-15 Export: +5.0% in Jun +3.5% in Jul Aug Release: 07-Oct-15 Import: -1.5% in Jun -0.8% in Jul Aug Release: 07-Oct-15 Industrial Production: +4.3% in Jun +6.1% in Jul Aug Release: 12-Oct-15 UOB FX Forecast: end 4Q15: 4.40 end 1Q16: 4.18 end 2Q16: 4.15 end 3Q16: 4.06 UOB Overnight Policy Rate Forecast: end 4Q15: 3.25% end 1Q16: 3.25% end 2Q16: 3.25% end 3Q16: 3.25% USD/THB: Nopporn Thepsithar, chairman of the Thai National Shippers' Council (TNSC), expected shipments to slip into a full-year contraction of 5% or more as the pace of global economic recovery remains slow while foreign exchange becomes more volatile. He said that in the fourth quarter, exports are estimated to contract by 5.2% on average. In a bid to overcome the poor export outlook, the Commerce Ministry recently came up with a new export promotion plan focusing on 50 promising cities with strong growth including New York, Tokyo, London, Beijing and Shanghai. Under the new promotion plan, the ministry has assigned the International Trade Promotion Department to conduct a thorough study in each market about their consumer demand, consumption behaviours, incomes and lifestyles. Bullish: target met with a high of 36.68; diminishing odds for further USD strength from here. USD exceeded the target last Friday by surging to a high of While the outlook is still viewed as bullish, the sharp reversal from the high suggests diminishing odds for further USD strength. However, only a move below the stoploss at would indicate that a short-term top is in place. 1-Day Repo Rate: 1.50% Last Change: -0.25% in Apr 2015 Next BOT Meeting: 04-Nov-15 GDP YoY: +3.0% in 1Q % in 2Q15 3Q15 Release: 17-Nov-15 CPI YoY: -1.19% in Aug -1.07% in Sep Oct Release: 03-Nov-15 UOB FX Forecast: end 4Q15: 35.5 end 1Q16: 35.8 end 2Q16: 36.0 end 3Q16: 36.0 UOB 1-Day Repo Rate Forecast: end 4Q15: 1.50% end 1Q16: 1.50% end 2Q16: 1.75% end 3Q16: 2.00%

6 Monday, 05 October 2015 Page 6 USD/CNH: USD/CNH traded mostly one direction in NY session from to close almost 200 pips lower at China remained closed for holiday until till mid-week and will only reopen on 8 Oct. Yi Gang, deputy governor PBoC, suggested in an article that China should consider imposing a so-called Tobin tax, a tax on spot-currency transactions, to curb short-term speculative capital flows and is studying plans to curb currency speculation even as it seeks to quicken the process of making the RMB trade freely. However, such a tax could ultimately be futile as FX transactions may just move elsewhere to avoid the tax. While the drop from the high of appears incomplete, any further weakness is likely limited to On the upside, only a move back above would indicate that the downward pressure has eased. Neutral: Short-term low in place, in a broad consolidation now. The break back above the stop-loss at last Friday suggests that the bearish phase has ended and the recent low of is likely a short-term bottom. The current movement is likely the early stages of a consolidation phase. Expect broad sideway trading for the next couple of weeks, likely between and Benchmark Deposit Rate: 1.75% Last Change: -0.25% in Aug 2015 Benchmark Lending Rate: 4.60% Last Change: -0.25% in Aug 2015 Reserve Requirement Ratio: 18.0% Last Change: -0.50% in Aug 2015 GDP YoY: +7.0% in 1Q % in 2Q15 3Q15 Release: 19-Oct-15 Caixin Manufacturing PMI: 47.0 in Aug 47.2 in Sep Oct Release: 02-Nov-15 NBS Manufacturing PMI: 49.7 in Aug 49.8 in Sep Oct Release: 01-Nov-15 PPI YoY: -5.4% in Jul -5.9% in Aug Sep Release: 14-Oct-15 CPI YoY: +1.6% in Jul +2.0% in Aug Sep Release: 14-Oct-15 Trade Balance: in Jul +60.2b in Aug Sep Release: 13-Oct-15 Export: -8.3% in Jul -5.5% in Aug Sep Release: 13-Oct-15 Import: -8.1% in Jul -13.8% in Aug Sep Release: 13-Oct-15 UOB FX (USD/CNY) Forecast: end 4Q15: 6.50 end 1Q16: 6.55 end 2Q16: 6.60 end 3Q16: 6.58 UOB Benchmark Lending Rate Forecast: end 4Q15: 4.35% end 1Q16: 4.35% end 2Q16: 4.35% end 3Q16: 4.35%

7 Monday, 05 October 2015 Page 7 EUR/USD: After U.S payrolls, Euro surged briefly above versus the greenback before paring back to by NY close. Earlier, August s Eurozone producer prices fell by 2.6% y/y, exceeding expectations of a decline of 2.1% y/y. Greece's re-elected PM Alexis Tsipras said on Saturday that he wanted to complete the first review of a 86 billion euro bailout agreed in August as soon as possible so as to unlock the next tranche of aid. Greece currently has till 15 Nov to effect a list of reforms on taxation, pensions, healthcare, the financial sector and public services. Portuguese voters head to the polls on Sunday in the first general election since 2011, with surveys conducted over the past week indicating that the government that led the nation out of an international bailout may be re-elected. EUR spiked to a high /20 but reversed sharply and rapidly from the top. It is likely that a temporary top is in place but the down-move from the high is viewed as part of a consolidation and not the start of a sustained downmove. Expect sideway trading for today, likely between and Neutral: Key resistance is at now. While EUR broke above last Friday, it failed to move above the next key level at From here, only a clear break above this level will shift the current neutral outlook to bearish. In the meanwhile, this pair is expected to trade in choppy manner, likely within and for another week or so. INDICATORS Refinancing Rate: 0.05% Last Change: -0.10% in Sep 2014 Next ECB Meeting: 22-Oct-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: +0.5% in 1Q % in 2Q15 3Q15 Release: 13-Nov-15 CPI YoY: +0.1% in Aug -0.1% in Sep Oct Release: 30-Oct-15 Unemployment: 11.1% in Aug 11.0% in Sep Oct Release: 30-Oct-15 UOB FX Forecast: end 4Q15: 1.12 end 1Q16: 1.13 end 2Q16: 1.13 end 3Q16: 1.14 UOB Refinancing Rate Forecast: end 4Q15: 0.05% end 1Q16: 0.05% end 2Q16: 0.05% end 3Q16: 0.05%

8 Monday, 05 October 2015 Page 8 GBP/USD: The Sterling Pound mirrored moves in the Euro in response to the weak U.S payrolls, initially higher in a knee-jerk move to before easing off subsequently to close the week at The Bank of England meets this week on Thursday with rates and QE target expected to keep on hold. The major support continues to hold as GBP surged to a high of last Friday. Despite the sharp pull-back from the top, the risks remain on the upside. From here, allow for a dip to but is expected to hold for a retest of the /40 high. Neutral: Short-term low in place, corrective rebound has scope to extend higher to As highlighted in the Chart of the Day update last Wednesday, the bearish phase in GBP was close to completion and the break back above last Friday confirms that a short-term low is in place. The outlook is viewed as neutral and the current movement is likely a corrective rebound with scope to extend higher to (too early to expect a bullish reversal). Strong support is at ahead of the major key level at Bank Rate: 0.50% Last Change: -0.50% in Mar 2009 Next BOE Meeting: 08-Oct-15 no change in policy expected. GDP QoQ: +0.4% in 1Q % in 2Q15 2Q15 Release (final estimate): 08-Oct-15 CPI YoY: +0.1% in Jul 0.0% in Jul Aug Release: 13-Oct-15 Unemployment: 5.6% in Jun 5.5% in Jul Aug Release: 14-Oct-15 Services PMI: 57.4 in Jul 55.6 in Aug Sep Release: 05-Oct-15 exp: 56.0 UOB FX Forecast: end 4Q15: 1.58 end 1Q16: 1.60 end 2Q16: 1.61 end 3Q16: 1.62 UOB Bank Rate Forecast: end 4Q15: 0.5% end 1Q16: 0.75% end 2Q16: 0.75% end 3Q16: 0.75%

9 Monday, 05 October 2015 Page 9 AUD/USD: The Aussie was higher by 0.21% higher to on Friday as a late stock rally helped to sustain the pair above the level. Today morning, Australia released a better than expected TD securities inflation at 1.9% y/y. Tomorrow, we have RBA monetary policy due where rates are expected to be held at 2.00% : In line with expectations, AUD traded sideways last Friday. However, improving upward momentum suggests upside risk for today but any up-move is expected to encounter stiff resistance near /00. Strong support is at Cash Rate: 2.00% Last Change: -0.25% in May 2015 Next RBA Meeting: 06-Oct-15 no change in rates expected -0.25% in Feb 2015 Next RBA Meeting (minutes): 20-Oct-15 GDP QoQ: +0.9% in 1Q % in 2Q15 3Q15 Release: 02-Dec-15 CPI YoY: +1.3% in 1Q % in 2Q15 2Q15 Release: 28-Oct-15 Unemployment: 6.3% in Jul 6.2% in Aug Sep Release: 09-Oct-15 Trade Balance: -3050m in Jun -2460m in Jul Aug Release: 06-Oct-15 Capex: -4.7% 1Q15-4.0% 2Q15 3Q15 Release: 26-Nov-15 UOB FX Forecast: end 4Q15: 0.71 end 1Q16: 0.71 end 2Q16: 0.70 end 3Q16: 0.69 UOB Cash Rate Forecast: end 4Q15: 2.00% end 1Q16: 2.00% end 2Q16: 2.00% end 3Q16: 2.00% Neutral: Improving upward momentum but too early to expect a sustained up-move. As pointed out last Friday, while short-term upward momentum is improving rapidly, it is too early to expect a sustained up-move. However, the recent low at is acting as a solid support now and this level is unlikely to come under threat any time soon. On the upside, a clear break above (say a daily close above this level) would indicate the start of a bullish phase. NZD/USD: The New Zealand dollar ended 0.50% higher on Friday to for the highest close since 28 Aug as risk sentiment improved on a back drop of stable milk prices. Similar to AUD, improving upward momentum suggests immediate upward pressure but any up-move is likely limited to Strong support is at Bullish: Outlook shifted to bullish but up-move will likely be slow and grinding. As pointed out last Friday, a daily closing above would shift the neutral outlook to bullish. However, upward momentum is not strong at this stage and any up-move will likely be slow and grinding. The immediate target is at followed by Stop-loss is at but is already a strong support. Official Cash Rate: 2.75% Last Change: -0.25% in Aug 2015 Next RBNZ Meeting: 30-Oct % in Jul % in Jun 2015 GDP QoQ: +0.2% in 1Q % in 2Q15 3Q15 Release: 17-Dec-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 4Q15: 0.62 end 1Q16: 0.61 end 2Q16: 0.60 end 3Q16: 0.60 UOB Official Cash Rate Forecast: end 4Q15: 2.50% end 1Q16: 2.50% end 2Q16: 2.50% end 3Q16: 2.50%

10 Monday, 05 October 2015 Page 10 USD/JPY: Amongst G-10 currencies, trading was most volatile in the Japanese yen post non-farm payrolls. USD/JPY did a V-shape recovery smashed down to from before recovering to settle around On Wednesday, the Bank of Japan will release the latest monetary policy which is widely anticipated to be unchanged : USD did a bungee jump by dropping to a low of /70 before rocketing higher to close almost unchanged for the day. Outlook for today is clearly mixed but a move back below /70 appears highly unlikely. Expect further choppy trading, likely between and Neutral: Still neutral but key levels are further apart. While USD broke below the strong support last Friday (low of /70), the rapid reversal coupled with the strong daily close suggests that USD is not ready to move lower in a sustained manner. In other words, we continue to hold a neutral view but the key levels are further apart now between and On a shorter-term note, is already a strong resistance. Overnight Call Rate: % Last Change: -0.20% in Dec 2008 Next BOJ Meeting: 07-Oct-15 GDP QoQ Annualized: +4.5% in 1Q15-1.2% in 2Q15 3Q15 Release: 16-Nov-15 CPI Core YoY: +0.0% in Jul -0.1% in Aug Sep Release: 30-Oct-15 Industrial Production MoM: -0.8% in Jul -0.5% in Aug Sep Release: 28-Oct-15 Household Spending: -2.0% in Jun -0.2% in Jul Aug Release: 30-Aug-15 UOB FX forecast: end 4Q15: 124 end 1Q16: 126 end 2Q16: 127 end 3Q16: 128 UOB Overnight Call Rate Forecast: end 4Q15: % end 1Q16: % end 2Q16: % end 3Q16: % UOB FX and Interest Rate Outlook FX Outlook 4Q15 1Q16 2Q16 3Q16 *Last Updated on 28 Sep 15 Rates Outlook 4Q15 1Q16 2Q16 3Q16 EUR/USD EU 0.05% 0.05% 0.05% 0.05% GBP/USD UK 0.5% 0.75% 0.75% 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 0.1% 0.1% 0.1% 0.1% USD/SGD SG 1.15% 1.20% 1.25% 1.35% 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 4.35% 4.35% 4.35% 4.35% 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 1.63% 1.63% 1.63% 1.63% USD/HKD HK 0.75% 1.00% 1.25% 1.50% USD/KRW KR 1.50% 1.50% 1.50% 1.75% US 0.5% 0.75% 1.00% 1.25%

11 Monday, 05 October 2015 Page Oct-15 FX Pairs Spot Outlook USD/SGD Bullish EUR/SGD Neutral GBP/SGD Neutral AUD/SGD Bullish JPY/SGD Bullish USD/MYR Neutral USD/THB Bullish USD/CNH *Neutral EUR/USD Neutral GBP/USD *Neutral AUD/USD Neutral NZD/USD *Bullish USD/JPY Neutral *Change in outlook. Since Rate 25 Sep Oct Oct Oct Sep Oct Sep Oct Sep Oct Oct Oct Aug Summary of Views 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 02-Oct-15 Performance* Open High Low Close 1-day 1-week 1-month YTD** USD/SGD % +0.51% +1.20% +8.04% EUR/SGD % +0.64% +1.10% +0.14% GBP/SGD % +0.51% +0.47% +5.35% AUD/SGD % +0.89% +1.39% -6.77% JPY/SGD % +1.09% +1.61% +7.88% USD/MYR % +0.57% +4.82% +26.1% USD/THB % +0.69% +1.84% +10.6% USD/CNH % -0.66% -1.40% +2.22% EUR/USD % +0.13% -0.15% -7.34% GBP/USD % +0.06% -0.74% -2.50% AUD/USD % +0.36% +0.24% -13.5% NZD/USD % +1.11% +1.65% -17.2% USD/JPY % -0.54% -0.35% +0.17% * 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. 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.