FX Insights. Chart Of The Day GBP/SGD: Next significant resistance above is at Friday, 13 May 2016

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Avice Richards
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1 Quek Ser Leang Lee Sue Ann Global Economics & Markets Research URL: Chart Of The Day GBP/SGD: Next significant resistance above is at The bullish phase in GBP against SGD that started late last month is still clearly intact (see Chart of the Day update on 27/4). This pair is probing the major resistance and a clear break above this level could lead to upward acceleration as the next significant resistance is another 240 pips higher at (high in late February as well as the 38.2% retracement of the drop from to ). Barring an unexpected weak close by end of NY session today, weekly MACD would have crossed into positive territory and this obviously bodes well for further GBP strength. However, as mentioned yesterday, is a very strong resistance and those who are long from last month should look to take partial profit at (overnight high of ). From here, is acting as a key support now and only a break below this level would indicate that an interim top is in place. 1 P a g e

2 OVERVIEW US equities went nowhere, closing a mixed bag, weighed by declines in health care and technology stocks, as market participants eyed oil prices and awaited the retail sales report due Friday. US Treasuries pushed lower, the 2-year yield now at 0.75% and the 10-year yield at 1.75%. Oil prices stabilized, though futures remained under pressure on signs of another storage build at the hub for US crude futures. Within the FX space, the US dollar has recovered Wednesday s losses. The movers on the day were EUR/USD, which saw a renewed gravitational pull below the mark, and USD/JPY, which traded up to 109. The data surprise today came in the form of a softer-than-expected print on initial jobless claims in the US. The number for the week ending 7 May increased +20k to 294k, versus the unrevised 274k reading seen in the week prior, well above expectations for a 267k result. The 4-week average was reported at 268.3k, from the unrevised 258.0k reading seen in the week prior. Meanwhile, continuing claims for week ending 30 April increased to 2.161mln, versus the revised 2.124mln reading seen prior. The insured unemployment rate held unchanged at 1.6%. We will receive the main interest of the week, which is the US retail sales for April the report will shed light into the early Q2 GDP picture. Markets are looking for a 0.8% rebound at the headline, 0.5% ex auto, and 0.3% ex auto and gas. The US PPI should reveal an energy-related lift in April. The March business inventories report and the preliminary May University of Michigan consumer survey will round out the US data diary. San Francisco Fed s John Williams will speak in Sacramento. 2 P a g e

3 13-May-16 Summary of Views FX Pairs Spot Outlook Since/ Rate Target Trailing-Stop Support Resistance USD/SGD Bullish 05 May S1: S2: R1: R2: EUR/SGD Bullish 02 May S1: S2: R1: R2: GBP/SGD Bullish 25 Apr S1: S2: R1: R2: AUD/SGD Bearish 28 Apr S1: S2: R1: R2: JPY/SGD Neutral 10 May S1: S2: R1: R2: USD/MYR Bullish 04 May S1: S2: R1: R2: USD/THB Bullish 10 May S1: S2: R1: R2: USD/CNH Bullish 05 May S1: S2: R1: R2: CNH/SGD Bullish 06 May S1: S2: R1: R2: EUR/USD Neutral 06 May S1: S2: R1: R2: GBP/USD Neutral 04 May S1: S2: R1: R2: AUD/USD Bearish 04 May S1: S2: R1: R2: NZD/USD Bearish USD/JPY Bullish * Shift in outlook. 10 May May S1: S2: S1: S2: R1: R2: R1: R2: FX Pairs Ranges for 12-May-16 Performance* Open High Low Close 1-day 1-week 1-month YTD** USD/SGD % +1.09% +2.18% -3.15% EUR/SGD % +0.74% +2.09% +1.44% GBP/SGD % +0.75% +3.41% -5.09% AUD/SGD % -0.87% -2.56% -2.57% JPY/SGD % -0.63% +1.72% +6.91% USD/MYR % +0.37% +3.58% -6.36% USD/THB % +0.45% +0.97% -1.97% USD/CNH % +0.44% +1.17% -0.27% EUR/USD % -0.25% -0.07% +4.74% GBP/USD % -0.21% +1.23% -1.92% AUD/USD % -1.90% -4.63% +0.43% NZD/USD % -0.91% -1.50% -0.01% USD/JPY % +1.65% +0.44% -9.41% * 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: 1.3730 USD/SGD rebounded strongly above the 1.3730 peak seen earlier this week, touching a session high of 1.3734 from 1.3712 high on Wednesday. The pair ended up 0.5% at 1.3730. The trade-weighted SGD NEER is around -0.

4 USD/SGD: USD/SGD rebounded strongly above the peak seen earlier this week, touching a session high of from high on Wednesday. The pair ended up 0.5% at The trade-weighted SGD NEER is around -0.8% from the mid-point this morning with mid-point to -1.0% corresponding to USD/SGD range of based on current FX levels. Later today at 1pm, Singapore s March retail sales will be released, expected to rebound to 3.6% y/y growth from -3.2% in February mainly driven by car sales. Nonetheless ex-auto sales should also improve to -3.9% y/y from -9.6% in February. USD rebounded directly without testing the support. While downward pressure has clearly eased, upward momentum is not very strong at this stage and this pair has to stay above before further sustained up-move can be expected. Overall, the undertone for USD is positive with strong support at but only a move back below would indicate that a short-term top is in place. The next resistance above is at Bullish: To take partial profit at /55. As highlighted yesterday, the bullish USD view is intact and there is a good chance that we will see a move above (high of at the time of writing). The next level to focus on is at , the high seen in March just before FOMC announcement. This is a major resistance and those who are long should look to take partial profit. Stop-loss is adjusted higher to from P a g e

5 EUR/SGD: EUR just edged above the strong /30 resistance and momentum is picking up rapidly. Barring a move back below , there is a good chance that the current movement is the early stages of a rally that could extend to Bullish: To take profit at EUR just moved above the strong /25 resistance and as indicated in recent updates, a break above this level would indicate the start of the next leg higher. The next resistance is at followed by Those who are long from last week should look to take partial profit at Stop-loss is adjusted higher to from GBP/SGD: The strong support was unthreatened as GBP rallied strongly from a low of Despite the quick pull-back from a high of , the outlook for this pair is still positive and a move above /00 could lead to a quick rise to Support is at and the low is unlikely to come under threat for now. Bullish: Next significant resistance above is at [See Chart of the Day on page 1] *Took partial profit at AUD/SGD: The outlook for this pair is rather mixed and range trading is expected, likely between and (this range has been in place for several days now). Bearish: Increasing risk of a short-term low. [No change in view, see previous update below] As indicated in recent updates, waning downward momentum suggests limited odds for the current AUD weakness to extend lower to In other words, the bearish phase that started two weeks ago is close to ending but confirmation is only upon break of *Took partial profit at JPY/SGD: As mentioned yesterday, the major /05 support is not expected to come under threat (JPY rebounded strongly from a low of ). The subsequent choppy movement has resulted in a mixed outlook and further whippy trading appears likely. Expected range; / Neutral: In a broad / range for now. There is no change to our neutral view and we continue to expect this pair to trade between and for the next several days. 5 P a g e

6 USD/MYR: Malaysia s Industrial production index rose 2.8% y/y in March (+3.9% in February) tad lower than market consensus (3.0%) but better than our estimates (2.0%). Broad sectors that expanded included manufacturing (4.4%) and electricity (7.7%). Mining sector reversed to contract 2.5%.Based on data including 1Q16 industrial output data (3.3%), we estimate 1Q16 real GDP growth of 4.0% y/y. Actual numbers will be released at noon today. The data focus today is 1Q16 GDP data (Bloomberg: 4.0% y/y; 4Q15: 4.5%). Malaysia s 1Q16 current account will also be out at 12 pm today together with the GDP data and consensus is for the surplus to narrow to MYR6.8bn from MYR11.4bn in 4Q15. Bullish: To take partial profit at The bullish view is still intact and we continue to target a move to (see Chart of the Day from yesterday). As indicated, this is a strong resistance and those who are long from last week should look to take partial profit here. Stop-loss remains unchanged at USD/THB: Director-general of the Finance Ministry s State Enterprise Policy office said the Thailand Future Fund will launch this year. The target for the fund is 100 billion baht, but the first phase may be between billion baht. Motorways 7 and 9 will be the first projects to raise capital from the fund. The guaranteed return on investment is under study, but it should be at least 3%. Thailand s foreign reserves will be released this afternoon at 3.30pm Singapore time. Bullish: Target a move to We turned bullish on Tuesday and USD is finally stirring to life. The immediate target of is likely within reach soon and a break above this level would open the way for extension to Stop-loss for the bullish view is adjusted higher to from previously. USD/CNH: CNY and CNH closed lower against USD even though the PBoC set the CNY central parity 0.38% firmer than the previous fix on Thursday. CNY and offshore CNH fell 0.3% to /USD and /USD respectively. Upcoming April loans data as well as industrial production, retail sales and fixed assets investment on Saturday will provide further direction for the currency. Bullish: To take partial profit at The partial profit taking level of indicated in recent updates appears to be within reach. This is a strong resistance but a clear break of this level could lead a rapid rise as the next significant resistance is closer to Overall, we will continue to adopt a bullish USD stance unless the stop-loss at is breached (adjusted higher from ). CNH/SGD: Bullish: Bullish view on track, above shift focus to There is no change to our current bullish CNH view. The next objective is at and a break above this level would shift the focus to Stop-loss is adjusted higher to from previously. 6 P a g e

EUR/USD: 1.1375 EUR/USD has experienced a renewed gravitational pull below the 1.1400-mark.Today, the first Q1 GDP reports are released in Germany and Italy.

7 EUR/USD: EUR/USD has experienced a renewed gravitational pull below the mark.Today, the first Q1 GDP reports are released in Germany and Italy. Following the release of the German report we will get a second reading on GDP for the euro area in aggregate. Final April CPI reports in Germany and Spain will also be released. Expectation for further up-move was wrong as EUR retreated quickly after touching a high of While downward momentum is picking up, only a clear break below would lead to extension lower to the next support at Resistance is at ahead of the stronger level at Neutral: In a / range now. There is not much to add as EUR eased of quickly from a high of On balance, the bias appears to be tilted on the downside but even if EUR were to move below the strong support, the next level of would not be easy to crack. On the upside, strong resistance is at ahead of P a g e

GBP/USD: 1.4440 GBP ended up getting a brief lift from the BoE minutes as well as Inflation Report, despite the outcome being broadly as expected.

8 GBP/USD: GBP ended up getting a brief lift from the BoE minutes as well as Inflation Report, despite the outcome being broadly as expected. This month's UK BoE MPC meeting has ended in a unanimous decision to maintain the official Bank Rate at 0.5% and keep the programme of asset purchases paused at GBP375bn, as widely expected. The uncertainty ahead of the Brexit referendum on 23 June is now clearly having an impact and the inflation report lowered the expected growth trajectory even though it is based on the assumption that the UK will remain in the EU. At the same time, the MPC stated very clearly that a vote to leave the EU would lead to lower growth and higher inflation. The implication for the monetary policy outlook in such a scenario may be ambiguous, but the comments very clearly provide further ammunition to the "remain" camp in the run-up to the referendum. The support indicated yesterday held as GBP rebounded strongly from a low of (overnight high of ). The subsequent rapid pull-back from the top has resulted in a mixed outlook. Expect sideway trading for today, likely between and Neutral: In a / range. As mentioned in recent updates, the current movement is viewed as the early stages of a consolidation phase. The choppy trading yesterday reinforces our view and we continue to expect sideway trading within a broad / range for now. 8 P a g e

AUD/USD: 0.7300 AUD/USD found a base at.7310 but has not managed much of a bounce.

9 AUD/USD: AUD/USD found a base at.7310 but has not managed much of a bounce. Over the past two weeks, Australia s inflation environment has been unraveled, starting with the official March CPI data, which revealed a sharp deterioration in core and headline inflation. A survey of Australian price expectations only added to concerns over the outlook for inflation, helping to drive the currency lower. AUD traded sideways as expected albeit at a narrower range than anticipated. The weak daily closing suggests increasing downward pressure but at this stage, any further weakness is likely limited to /75. Resistance is at ahead of the stronger level of Bearish: Expect drift lower to The strong support at was finally breached at the time of writing (low of ). As indicated previously, downward momentum is not strong and from here, we expect to see a slow drift lower to Only a move back above would indicate that the current bearish phase has ended. *Took partial profit at P a g e

NZD/USD: 0.6815 New Zealand retail sales rose at a healthy pace last quarter, albeit slower that expectations, led by a surge in electronic goods sales as the strong NZD made imports more affordable.

10 NZD/USD: New Zealand retail sales rose at a healthy pace last quarter, albeit slower that expectations, led by a surge in electronic goods sales as the strong NZD made imports more affordable. The volume of New Zealand retail sales rose a seasonally-adjusted 0.8%in the March quarter, following a revised 1.1% increase in the October-December period. This highlights the jovial tone of consumer sentiment amid weak inflationary settings and record-low interest rates. In line with expectation, NZD retested the /50 resistance (high of ) before easing off. Indicators are mostly neutral and this suggests sideway trading for today, albeit the bias is for a probe lower. Expected range; / Bearish: Downside risk has diminished considerably. [No change in view, see previous update below] The sharp rebound from the low of clearly does not bode well for our bearish view. That said, unless the stop-loss is taken out, NZD could still stage another leg lower but the odds for such a move have clearly diminished. 10 P a g e

USD/JPY: 109.00 USD/JPY staged a partial bounce-back on speculation about BoJ easing next month, following comments by BoJ Governor Kuroda as well as a remark by a former Japanese official.

11 USD/JPY: USD/JPY staged a partial bounce-back on speculation about BoJ easing next month, following comments by BoJ Governor Kuroda as well as a remark by a former Japanese official. The BoJ will probably expand its stimulus during this summer, Takatoshi Ito, an academic with close ties to the central bank governor, told Reuters on Thursday, adding that weak firstquarter growth data will give policymakers reason to ease further. He also noted the BoJ will be closely watching the G7 meeting this month, which Japan hosts as it will have to persuade its partners that recent appreciation in the JPY was excessive if it wants to conduct FX intervention. Despite the strong rebound from the low, momentum indicators are struggling. While a break above the overnight high of would not be surprising, a move beyond the major resistance appears unlikely for now. Support is at followed by Bullish: Rebound to extend higher to [No change in view, see previous update below] Despite the sharp pull-back yesterday, there is no change to our bullish USD view (see Chart of the Day update yesterday). Both target and stop-loss remain unchanged at and respectively. jpy= 11 P a g e

12 UOB FX & Interest Rate Outlook FX Outlook 2Q16 3Q16 4Q16 1Q17 Rates Outlook 2Q16 3Q16 4Q16 1Q17 EUR/USD EU 0.00% 0.00% 0.00% 0.00% GBP/USD UK 0.50% 0.50% 0.50% 0.75% AUD/USD AU* 1.75% 1.75% 1.75% 1.75% NZD/USD NZ 2.00% 2.00% 2.00% 2.00% USD/JPY JP -0.10% -0.20% -0.20% -0.30% 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% 1.75% USD/CNY CN 3.85% 3.85% 3.85% 3.85% USD/IDR 13,000 13,100 13,200 13,300 ID 6.75% 6.75% 6.50% 6.50% USD/PHP PH 4.0% 4.0% 4.0% 4.25% USD/INR IN 6.75% 6.75% 6.75% 6.75% USD/TWD TW 1.38% 1.38% 1.38% 1.38% USD/HKD HK 1.00% 1.00% 1.25% 1.50% USD/KRW KR 1.25% 1.25% 1.25% 1.25% Last updated on 22 Mar 16 *Last updated on 29 Apr 16 ** US 0.75% 0.75% 1.00% 1.25% 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

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