FX Insights. Chart Of The Day EUR/SGD: Bullish; target a move to Thursday, 15 September 2016

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Leon Ramsey
6 years ago
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1 Quek Ser Leang Lee Sue Ann Global Economics & Markets Research URL: Chart Of The Day EUR/SGD: Bullish; target a move to As dipping to a low of last week, EUR rebounded strongly to take out the major resistance. Upward momentum has picked up strongly and this coupled with daily MACD crossing into positive territory suggests that the current EUR strength has room to extend further in the coming days. The immediate target is at the falling trend-line resistance which is currently at A clear break above this level could lead to acceleration higher towards the next resistance at Support is at but only a break above would indicate that our bullish view is wrong. 1 P a g e

2 OVERVIEW The major US equity indexes ended mostly lower with energy weighing, as oil prices fell sharply despite bullish inventories data. US Treasuries rebounded the 2-year yield pushed lower to 0.76% alongside milder action in the 10-year yield, now holding at the 1.70%-mark. The US dollar eased from an eight-day high against the JPY after skepticism grew that the BoJ would intensify its policies next week, whilst uncertainty about the Fed pressured the greenback. Markets now look ahead to a slew of US data releases on Thursday, highlighted by retail sales, producer prices, Empire manufacturing, Philadelphia Fed manufacturing, business inventories, current account, industrial production/capacity utilization and jobless claims. 2 P a g e

3 15-Sep-16 Summary of Views FX Pairs Spot Outlook Since/ Rate Target Trailing-Stop Support Resistance USD/SGD Bullish S1: S2: R1: R2: EUR/SGD Bullish S1: S2: R1: R2: GBP/SGD Neutral 09 Sep S1: S2: R1: R2: AUD/SGD Bearish S1: S2: R1: R2: JPY/SGD Neutral 07 Sep S1: S2: R1: R2: USD/MYR Bullish S1: S2: R1: R2: USD/THB Bullish 13 Sep S1: S2: R1: R2: USD/CNH Neutral 07 Sep S1: S2: R1: R2: CNH/SGD Bullish S1: S2: R1: R2: EUR/USD Neutral 05 Sep S1: S2: R1: R2: GBP/USD Bearish S1: S2: R1: R2: AUD/USD Bearish S1: S2: R1: R2: NZD/USD Bearish USD/JPY Neutral * Shift in outlook Sep S1: S2: S1: S2: R1: R2: R1: R2: FX Pairs Ranges for 14-Sep-16 Performance* Open High Low Close 1-day 1-week 1-month YTD** USD/SGD % +1.25% +1.50% -3.85% EUR/SGD % +1.35% +2.15% -0.51% GBP/SGD % +0.46% +4.34% -13.5% AUD/SGD % -1.41% -1.18% -1.23% JPY/SGD % +0.58% +0.37% +12.9% USD/MYR % +1.62% +2.89% -3.93% USD/THB % +0.69% +0.78% -3.16% USD/CNH % -0.04% +0.28% +1.53% EUR/USD % +0.10% +0.59% +3.48% GBP/USD % -0.77% +2.75% -10.0% AUD/USD % -2.71% -2.72% +2.62% NZD/USD % -2.28% +0.94% +6.60% USD/JPY % +0.67% +1.14% -14.8% * 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: 1.3630 USD/SGD retreated on Wednesday, after the sharp run up on Tuesday that peaked at 1.3686.

4 USD/SGD: USD/SGD retreated on Wednesday, after the sharp run up on Tuesday that peaked at Following the lead of Japanese and weaker USD on the back of uncertainty over central bank policy ahead, the USD/SGD pair hit intraday low before settling for a 0.2% loss at in NY session. Nevertheless, against a backdrop of a firmer USD as a result of the recent sovereign bond selloff and a recovery from Brainard s dovish comments made on Monday, as well as bullish technical set up for an early stage of uptrend, we yesterday initiated a LONG USD/SGD position at , with initial target and stop , which is consistent with our view of 1.38 for USD/SGD at end-2016 and 1.41 by mid For more details, please refer to the two reports published on Wednesday (14 September). The SGD NEER index stabilized this morning at 0.3% above the midpoint, and the % above the midpoint should suffice for now. This implies USD/SGD range of for now. Singapore retail sales for July are on tap at 1pm today : Instead of extending higher as expected, USD slipped below the strong support to touch an overnight low of Upward pressure has eased and the current movement is likely the early stages of a consolidation phase. In other words, sideway trading is expected for today, likely between and Bullish: Target a move to /50. We turned bullish USD yesterday and there is no change to the view (see Chart of the Day update on 14/9/16). The immediate target and stop-loss remains unchanged at /50 and respectively. 4 P a g e

5 EUR/SGD: EUR attempted but failed to move above the Tuesday s peak of (overnight high of ). Upward pressure has eased and the current movement is likely the early parts of a consolidation phase. Expected range for today, / Bullish: Target a move to [See Chart of the Day on page 1] GBP/SGD: GBP dropped to a low of during NY hours but rebounded rapidly and sharply to touch during Sydney hours. While the choppy swing has resulted in a mixed outlook, the positive undertone could lead to extension higher even though at this stage, any up-move is not expected to move significantly above the major resistance. Support is at followed by Neutral: In a / range. After touching a high of on Tuesday, GBP dropped sharply to a low of during overnight trading before swinging higher to current level. The volatile price action has resulted in a mixed outlook and from here, GBP is expected to trade choppily, likely within a broad / range. AUD/SGD: The target indicated was not met as AUD recovered quickly after touching a low of The undertone is slightly negative and a retest of /65 would not be surprising but a clear break below this level appears unlikely for now. Resistance is at ahead of the stronger level at JPY/SGD: The anticipated extension lower in JPY easily took out the target indicated at /70 yesterday (low of ). The subsequent strong rebound from the low was unexpected and indicates that a temporary low is likely in place. The current movement is likely part of consolidation phase and JPY is expected to trade sideways for today, likely between and Bearish: Immediate target of We shifted to a bearish AUD stance yesterday and there is no change to the view. The sharp decline from the high of last week appears incomplete and extension towards is expected (next support is at /70). Strong resistance is at but only a move above would indicate that our bearish expectation is wrong. Neutral: Room for rebound to extend further to [No change in view, see previous update below] There is no change to the neutral outlook for JPY. While the current corrective rebound could extend further to , the sharp pull-back in overnight trading from a high of /80 suggests that the recent build-up in upward momentum is waning. That said, only a move below would indicate that the immediate upward pressure has eased. 5 P a g e

6 USD/MYR: MYR fell 0.4% to /USD late Asian session versus late Tuesday following weak crude oil prices. In news, Malaysian democracy group Bersih said on Wednesday it would hold a protest rally on 19 November calling for the immediate resignation of PM Najib to allow an independent investigation into the financial scandal at 1Malaysia Development Berhad (1MDB). A similar rally held by Bersih in Aug 2015 saw more than 200k people marched through the streets. Latest Flash Note: 07 Sep 16 BNM Keeps Rates On Hold Neutral: Bullish. Target The bullish phase that started yesterday is still intact. The immediate target and stop-loss remains unchanged at and respectively. USD/THB: As widely expected, the BoT kept the policy rate at 1.50%, with unanimous vote by the MPC. BoT stated that the Thai economy recorded higher-than-expected growth in 2Q16 and is projected to recover at a gradual pace. We expect the Thai economy in 2H16 to receive some support from robust growth in tourism and accelerated disbursement of public expenditure and maintain our 2016 economic growth projection of 3.2%, similar to BoT s forecast. The next MPC meeting is scheduled on 9 November. We expect the central bank will keep the benchmark rate unchanged at 1.50% since medium-term inflation expectations remain well-anchored around the inflation target. The MPC was also concerned about the THB appreciation against some major currencies over some recent periods. For now, we expect THB to weaken against USD towards 36.5 at end-4q16 from around the 35.0 level currently. Today, BoT Santiprabhob is scheduled to speak at a BKK event. Latest Flash Note: BoT Stays On Hold Bullish: Immediate target of USD touched a high of 34.98, just shy of our immediate target of The rapid pull-back from the high has dented the upward momentum but as long as the stop-loss at is intact, another attempt to cannot be ruled out just yet (even though the odds for such a move have diminished). USD/CNH: Ahead of its 2-day holiday, the RMB on Wednesday bucked the strong USD momentum, with reports of onshore dollar selling to support the local unit as well as better-than-expected credit and monetary data for August. Onshore RMB gained as much as 0.17% intraday but settled just marginally firmer at 0.1% to /USD. Similarly, offshore CNH also strengthened with the lead from onshore and tightened CNH liquidity, gaining 0.24% at /USD. Markets are closed Thursday and Friday for the Mid-Autumn Festival. Neutral: Bearish if daily closing below USD dropped to a low of yesterday, just above last week s low of These levels are also very close to the rising trend-line on the daily chart connecting (low on 3/5/16) and (low on 18/8/16). While downward momentum has improved considerably and the risk of a sustained decline continues to increase, we prefer to wait for a daily closing below /40 before shifting to a bearish stance (with an immediate target of ). Overall, the near term pressure is expected to continue to grow unless USD can move and stay above in the next few days. CNH/SGD: Bullish: Over-extended but room for extension to We just turned bullish CNH yesterday and there is no change to the view. Despite the strong rally for the past several days, the current CNH strength appears to have room to extend further to The support at is likely strong enough to hold any short-term pull-back but only a move below the stop-loss at would indicate that our bullish view is wrong. 6 P a g e

EUR/USD: 1.1245 EUR/USD saw a run higher to 1.1274 but later fell back towards the 1.1250 region. Industrial production in July declined -1.1% m/m, a little weaker than expectations of -1.0%.

7 EUR/USD: EUR/USD saw a run higher to but later fell back towards the region. Industrial production in July declined -1.1% m/m, a little weaker than expectations of -1.0%. The previous reading was revised up by 0.2% to 0.8% m/m. Today, the final August CPI estimate out of the Euro area will be released. The strong support remains intact as EUR rose to a high of before easing off. Despite the pull-back from the high, the undertone is still slightly positive and a retest of would not be surprising even though a move beyond the strong resistance seems unlikely. On the downside, continues to act as a strong support. Neutral: In a / range. EUR continues to trade listlessly and the neutral phase that started early last week is still intact. We continue to expect EUR to trade sideways from here, likely within a / range. 7 P a g e

GBP/USD: 1.3255 Today, the UK will print August retail sales report, followed by the BoE policy announcement and minutes.

8 GBP/USD: Today, the UK will print August retail sales report, followed by the BoE policy announcement and minutes. We expect the MPC to leave policy settings unchanged, although we are looking for another rate cut by year-end. The BoE has another two meetings for 2016: 3 November, and 15 December. Given the BoE s guidance that further monetary easing action will probably be taken later in the year depending on how economic data pan out, we see a significant risk that the next move could occur in November to coincide with the publication of the next Inflation Report. Separately, the latest UK employment data showed the jobless rate unchanged at 4.9%, in line with consensus as the labour force grew by 174k in the three months through to July. The average weekly earnings rose to 2.3% y/y, whilst excluding bonus rose 2.1% y/y. Meanwhile, the claimant count rate was steady at 2.2% y/y in August and the jobless claims rose 6k to 2.4k in August. The target indicated yesterday was not met as GBP rebounded strongly after touching a low of While the current rebound could extend further to , a sustained move above this level is not expected. Support is at ahead of The low is unlikely to come into the picture, at least not for today. Bearish: Target a move to While the recent strong downward momentum is dented with the strong rebound from a low of yesterday, the outlook for GBP for the next couple of weeks is still deemed as bearish (we just turned bearish yesterday). The immediate target and stop-loss are unchanged at and for now. 8 P a g e

AUD/USD: 0.7475 All eyes will be on the August labour force report due at 9.30am Singapore time.

9 AUD/USD: All eyes will be on the August labour force report due at 9.30am Singapore time. Despite that volatility, the monthly data remains the most watched economic release in Australia each month. Estimates point to a 15k rise in employment and a steady unemployment rate of 5.7%. Latest Flash Note: 07 Sep 16 RBA On Hold After the sharp drop in recent days, the down-move appears to have stabilized as AUD traded in a narrow / range yesterday. The consolidation phase appears incomplete and further sideway trading is expected for today, likely within a / range. Bearish: Decline over-extended but room for further extension to As highlighted yesterday, despite the over-extended downmove, the current weakness in AUD has room to extend further to (the next support is close-by at ). Stop-loss remains unchanged at for now even though on a shorter-term note, is already a strong resistance. 9 P a g e

NZD/USD: 0.7275 NZD declined after 2Q GDP data disappointed relative to expectations. The year-on-year output growth rate registered at 3.6%, in line with expectations.

10 NZD/USD: NZD declined after 2Q GDP data disappointed relative to expectations. The year-on-year output growth rate registered at 3.6%, in line with expectations. However, the quarter-on-quarter gain crossed the wires at 0.9%, slightly lower than the 1.1% expected, and compared to the revised 0.9% gain in the January-March quarter. Household consumption continued to drive gains, rising 1.9%. Investment in fixed assets also rose 3.1%. Exports were up 4% on the quarter, whilst imports rose 2.6%. The increase in GDP marked New Zealand s 23rd consecutive quarter without contraction. Consumer spending was a major driver of the New Zealand economy in the second quarter. NZD rebounded without testing the strong support. The recent downward pressure has eased and the current movement is viewed as part of a consolidation phase. Sideway trading is expected from here, likely between and Bearish: Downside likely limited to While we turned bearish NZD yesterday, we were of the view that the downside potential is likely limited to (low in late August). On the upside, is a strong resistance ahead of the stop-loss at P a g e

USD/JPY: 102.40 USD/JPY was initially pulled above the 103.

11 USD/JPY: USD/JPY was initially pulled above the figure, before falling back on a new press report saying that the BoJ will make negative interest rates the centerpiece of its easing policy at its September meeting, with asset purchases reaching a limit, according to the Nikkei newspaper. The report claims that BoJ Governor Kuroda and his 'deputies' are unanimously in agreement, yet further negative rates will 'require careful consideration' due to limits there too. The board will also discuss cutting purchases of JGBs of over 25 years maturity in order to steepen the yield curve. The central bank will keep its 2% inflation target, but consider abandoning the 2-year time frame. And forward guidance may be strengthened. Latest Flash Note: 08 Sep 16 Japan s 2Q16 GDP: Better 2nd Read But Growth Still Underwhelming The anticipated USD strength exceeded our expectation by easily moving above the resistance (high of ). However, the subsequent sharp and rapid drop from the high was unexpected. Upward momentum has eased and while the current pull-back could extend lower, a move below the major support seems unlikely. Resistance is at and the high is unlikely to be challenged for now. Neutral: In a / range. As highlighted yesterday, despite the positive undertone, USD has to close above the resistance before further up-move can be expected. The build-up in momentum fizzled out quickly with the sharp drop from the high of The outlook from here is still viewed as neutral but USD has likely moved back into a broad sideway trading range of / P a g e

12 UOB FX & Interest Rate Outlook FX Outlook 3Q16 4Q16 1Q17 2Q17 Rates Outlook 3Q16 4Q16 1Q17 2Q17 EUR/USD EU 0.00% 0.00% 0.00% 0.00% GBP/USD UK 0.25% 0.10% 0.10% 0.10% AUD/USD AU* 1.50% 1.50% 1.50% 1.50% NZD/USD NZ** 1.75% 1.75% 1.50% 1.50% USD/JPY JP -0.20% -0.20% -0.30% -0.30% USD/SGD SG 0.90% 1.10% 1.35% 1.50% USD/MYR MY 3.00% 3.00% 3.00% 3.00% USD/THB TH 1.50% 1.50% 1.75% 2.00% USD/CNY CN 4.10% 3.85% 3.85% 3.85% USD/IDR 13,200 13,200 13,300 13,400 ID 5.00% 5.00% 5.00% 5.00% USD/PHP PH 3.00% 3.00% 3.25% 3.25% USD/INR IN 6.50% 6.50% 6.75% 6.75% USD/TWD TW 1.38% 1.38% 1.38% 1.38% USD/HKD HK 0.75% 1.00% 1.00% 1.25% USD/KRW KR 1.00% 1.00% 1.00% 1.00% Last updated on 18 Jul 16 * Last updated on 03 Aug 16 ** Last updated on 11 Aug 16 US 0.50% 0.75% 0.75% 1.00% Quarterly Global Outlook: 3Q * 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 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 12 P a g e

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