DAILY FX OUTLOOK FX Themes/Strategy/Trading Ideas Thursday, May 10, 2018 Despite the 10y UST yield breaching and holding above 3.00%, outright USD strength stalled on Wednesday although the DXY still managed to hold above 93.00. USD-CAD crashed below 1.2850 partially on crude gaining above 7 and despite ongoing Nafta uncertainty. Meanwhile, NZD-USD was pummeled as the RBNZ left its benchmark OCR unchanged at 1.75% as expected but Governor Orr came across as neutral, as opposed to being neutral/hawkish. Going ahead, aggregated rate differentials arguably remain supportive of the broad dollar (watch US April CPI at 1230 GMT) and investors will likely look to pounce on any perceived dovishness from the other core central banks. On this front, the BOE MPC (1100 GMT), and Carney s press conference (1130 GMT), and Inflation Report, will be closely watched for any lack of urgency with respect to a potential rate hike. On the Asian calendar, look also to China s April CPI/PPI data points, with BNM expected to remain static at 0700 GMT today. Meanwhile, investors are on the lookout for a policy tightening from the BSP today. Positive global equities/commodities managed to stave off a further deterioration of global risk appetite levels and the FXSI (FX Sentiment Index) managed to slip within Risk-Neutral territory. Treasury Research & Strategy Emmanuel Ng +65 6530 4073 ngcyemmanuel@ocbc.com Terence Wu +65 6530 4367 TerenceWu@ocbc.com
10-May-16 10-Jul-16 10-Sep-16 10-Nov-16 10-10-Mar-17 10-May-17 10-10-Sep-17 10-Nov-17 10-10-Mar-18 10-May-18 10-May-16 10-Jul-16 10-Sep-16 10-Nov-16 10-10-Mar-17 10-May-17 10-10-Sep-17 10-Nov-17 10-10-Mar-18 10-May-18 10-May-16 10-Jul-16 10-Sep-16 10-Nov-16 10-10-Mar-17 10-May-17 10-10-Sep-17 10-Nov-17 10-10-Mar-18 10-May-18 10 May 2018 Daily FX Outlook G7 1.23 EUR-USD EUR-USD Investors may continue to fade rallies and the 1.1800 support is still expected to be vulnerable despite short term implied valuations attempting to stabilize. 1.18 1.13 1.08 1.03 Actual Fitted 118 113 108 USD-JPY USD-JPY USD-JPY finally responded higher and barring a further deterioration of global risk appetite levels, the riskreward may continue to favor a test towards the 200-day MA (110.20). Note that short term implied valuations for the pair have also ticked higher. 103 98 Actual Fitted 0.80 0.78 AUD-USD AUD-USD Expect some consolidative price action within 0.7400-0.7500, with short term implied valuations still looking top heavy. Next probable support beyond 0.7400 is expected towards 0.7380. 0.76 0.74 0.72 0.70 Actual Fitted Treasury & Strategy Research 2
10-May-16 10-Jul-16 10-Sep-16 10-Nov-16 10-10-Mar-17 10-May-17 10-10-Sep-17 10-Nov-17 10-10-Mar-18 10-May-18 10-May-16 10-Jul-16 10-Sep-16 10-Nov-16 10-10-Mar-17 10-May-17 10-10-Sep-17 10-Nov-17 10-10-Mar-18 10-May-18 10 May 2018 Daily FX Outlook 1.47 1.42 1.37 GBP-USD GBP-USD Potential near term watershed for the GBP-USD today pending the BOE MPC. In the interim, the pair is expected to cling onto its 200-day MA (1.3547), with short term implied valuations still oriented south. 1.32 1.27 1.22 1.17 Actual Fitted 1.39 1.37 1.35 1.33 1.31 1.29 USD-CAD USD-CAD Implicit support still resides at the 55-day MA (1.2830), and another breach may point towards 1.2780. Preference to stay top heavy on the pair at this juncture, especially with the oil complex lending implicit support for the loonie. 1.27 1.25 1.23 1.21 1.19 Actual Fitted Asian FX In line with the cyclicals from overnight, expect Asian currencies to receive a respite from a stronger dollar during the Asian session. As such, the ACI (Asian Currency Index) may stall on the upside in the interim, although elevated crude prices may temper any Asian resilience. From a flow perspective, net inflows for South Korea continue to moderate, while net outflows for Taiwan are persisting. Net outflows for Thailand, India and Indonesia remain on a deepening trend, and as stated previously, the compression of net outflows for the Philippines has stalled. Indonesia: BI reiterated again that it is preparing further measures to stabilize the FX and bond markets. Expect further intervention to support the IDR, and purchases on the secondary market to support bonds. An adjustment of the policy rate is also being considered. SGD NEER: The SGD NEER softened further to sub-parity levels and is currently at around -0.07% below its perceived parity (1.3443). Note that an early Thursday low of around -0.28% was printed. NEER-implied USD-SGD Treasury & Strategy Research 3
Mar-14 Jul-14 Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Nov-16 Mar-17 Nov-17 Mar-18 10 May 2018 Daily FX Outlook thresholds are a touch softer on the day and expect a -0.30% (1.3484) to +0.10% (1.3429) is expected intra-day. CFETS RMB Index: This morning, the USD-CNY mid-point printed at a largely expected 6.3768 from 6.3733 on Wednesday. This resulted in the CFETS RMB Index strengthening further to 97.67 from 97.63. CFETS NEER vs. USD-CNY mid-point 7.00 120 Asian Currency Index 105 6.90 118 100 95 90 85 80 75 1/1/10 1/1/11 1/1/12 1/1/13 1/1/14 1/1/15 1/1/16 1/1/17 1/1/18 6.80 6.70 6.60 6.50 6.40 6.30 6.20 6.10 116 114 112 110 108 106 104 102 100 CFETS RMB Index USD-CNY Fix, Bloomberg Treasury & Strategy Research 4
10 May 2018 Daily FX Outlook Currency Bias Rationale Short term Asian FX views USD-CNH RRR cut, relative stability of RMB Index, RMB to shoulder potential volatility instead, watch US-Sino tensions USD-KRW Easing tensions with the North, net portfolio inflow momentum recovering, inflation/current account surplus projection downgraded, BOK expected to remain neutral USD-TWD Net equity outflows attempting to compress, new CBC govenor non-hawkish USD-INR RBI minutes more hawkish than expected, India placed on US Treasury s watchlist, net portfolio outflows stabilizing, less aggressive fiscal borrowing plans, wider than expected March trade deficit, warmer than expected March CPI, higher crude imposing drag on INR and govies USD-SGD NEER hovering around parity; MAS steepns NEER slope in April, pair buffeted by global trade tension headlines, responding to firmer DXY USD-MYR BNM expected to remain static this week; surprise defeat for the ruling BN coalition; neutral to rich valuation compared to peers on foreign reserves and current account measures, note initial market-implied caution towards election results USD-IDR Disappointing GDP numbers, Rating upgrade from Moodys to Baa2, short term vol premium widening, fundamentals intact, net portfolio outflows deepening, carry strategy under reassessment USD-THB BOT remains accommodative, net portfolio outflow balance, inflation inching higher back into BOT s target range. USD-PHP Net equity outflows, BSP expected to hike policy rates this week Treasury & Strategy Research 5
10 May 2018 Daily FX Outlook USD-Asia VS. Net Capital Flows Treasury & Strategy Research 6
10 May 2018 Daily FX Outlook South Korea Taiwan 10000 1045 7000 28.8 8000 6000 4000 2000 0-2000 -4000 1065 1085 1105 1125 1145 1165 1185 1205 1225 5000 3000 1000-1000 -3000-5000 -7000 29.3 29.8 30.3 30.8 31.3 31.8 32.3 32.8 NFB: Bond & Eq 20D RS USD-KRW NFB: 20d RS USD-TWD India Indonesia 63.0 5000 12900 8000 3000-2000 64.0 65.0 66.0 67.0 3000 1000-1000 13100 13300 13500 13700-7000 68.0-3000 13900-12000 69.0-5000 14100 NFB: Bond & Eq RS 20D USD-INR Bond & Equity: 20D RS USD-IDR Philippines Thailand 600 400 46.0 47.0 2500 2000 30.8 31.8 200 0-200 -400 48.0 49.0 50.0 51.0 52.0 1500 1000 500 0-500 -1000-1500 32.8 33.8 34.8 35.8-600 53.0-2000 NFB: RS20 USD-PHP Net bond & equity WTD RS20 USD-THB Malaysia 1200 3.85 1000 800 600 3.95 4.05 400 4.15 200 0 4.25-200 4.35-400 -600 4.45 Source: CEIC, Bloomberg, OCBC Bank ACI VS. Net Capital Flows Equity 20D RS USD-MYR FX Sentiment Index Treasury & Strategy Research 7
Feb-17 Mar-17 May-17 Jun-17 Aug-17 Sep-17 Nov-17 Dec-17 Feb-18 Mar-18 May-18 2-Jan-12 2-Jul-12 2-Jan-13 2-Jul-13 2-Jan-14 2-Jul-14 2-Jan-15 2-Jul-15 2-Jan-16 2-Jul-16 2-2- 2-10 May 2018 Daily FX Outlook 1.5 1.0 0.5 0.0-0.5-1.0 z-score 4wk MA Stronger Asia FX Weaker Asia FX 1m% -4-3 -2-1 0 1 2 2.5 2.0 1.5 1.0 0.5 0.0-0.5-1.0 RISK OFF -1.5 3-1.5-2.0 RISK ON Total Net Flows (20D RS) ACI (RHS) 1M Correlation Matrix DXY USGG10 CNY SPX MSELCAPF CRY JPY CL1 VIX ITRXEX CNH EUR DXY 0 0.764 0.988-0.230 0.196 0.701 0.923 0.753-0.649-0.386 0.975-0.995 CNY 0.988 0.742 0-0.214 0.014 0.662 0.921 0.729-0.616-0.343 0.984-0.984 CHF 0.985 0.813 0.972-0.147 0.134 0.784 0.924 0.787-0.730-0.495 0.959-0.973 CNH 0.975 0.714 0.984-0.224 0.142 0.642 0.897 0.713-0.615-0.357 0-0.981 MYR 0.972 0.738 0.959-0.227-0.021 0.761 0.866 0.777-0.717-0.513 0.941-0.965 SGD 0.971 0.790 0.967-0.185 0.129 0.673 0.921 0.787-0.647-0.353 0.965-0.977 THB 0.967 0.711 0.950-0.064 0.102 0.687 0.866 0.808-0.696-0.408 0.947-0.974 IDR 0.952 0.820 0.931-0.116 0.102 0.717 0.882 0.819-0.647-0.339 0.914-0.950 TWD 0.939 0.845 0.933-0.132-0.066 0.725 0.937 0.762-0.711-0.494 0.918-0.929 JPY 0.923 0.876 0.921-0.358 0.052 0.583 0 0.629-0.532-0.365 0.897-0.901 INR 0.921 0.902 0.913-0.089-0.159 0.758 0.928 0.813-0.687-0.433 0.888-0.895 CAD 0.898 0.917 0.900-0.319 5 0.647 0.926 0.655-0.526-0.320 0.854-0.861 USGG10 0.764 0 0.742-0.190-0.132 0.651 0.876 0.663-0.536-0.354 0.714-0.722 KRW 0.726 0.664 0.769-0.268-0.361 0.375 0.789 0.522-0.376-0.197 0.743-0.734 PHP -0.444 0.142-0.412 0.167-0.467-0.313-0.178-0.235 0.285 0.225-0.422 0.464 NZD -0.966-0.882-0.955 0.277-0.077-0.692-0.967-0.721 0.614 0.417-0.932 0.943 AUD -0.976-0.848-0.968 0.310-0.140-0.630-0.966-0.693 0.574 0.345-0.945 0.961 GBP -0.983-0.746-0.965 0.265-0.248-0.711-0.895-0.734 0.607 0.354-0.955 0.970 EUR -0.995-0.722-0.984 0.207-0.216-0.684-0.901-0.758 0.645 0.365-0.981 0 Source: Bloomberg G10 FX Heat Map AUD NZD EUR GBP JPY CAD USD SGD MYR AUD 2 1 1 2 1 1 9 1 NZD 2 2 1 1 1 1 1 1 EUR 1 2 2 1 1 1 1 1 GBP 1 1 2 1 1 1 1 1 JPY 2 1 1 1 2 2 1 1 CAD 1 1 1 1 2 2 2 2 USD 1 1 1 1 2 2 2 2 SGD 9 1 1 1 1 2 2 9 MYR 1 1 1 1 1 2 2 9 Technical support and resistance levels S2 S1 Current R1 R2 EUR-USD 1.1800 1.1823 1.1865 1.1900 1.2019 GBP-USD 1.3500 1.3547 1.3568 1.3600 1.3953 AUD-USD 0.7400 0.7412 0.7469 0.7500 0.7685 NZD-USD 0.6900 0.6917 0.6923 0.7000 0.7157 USD-CAD 1.2644 1.2800 1.2832 1.2837 1.2900 USD-JPY 107.27 109.00 109.70 11 110.04 USD-SGD 1.3383 1.3400 1.3442 1.3487 1.3490 EUR-SGD 1.5876 1.5900 1.5948 1.6000 1.6079 JPY-SGD 1.2147 1.2200 1.2253 1.2294 1.2295 GBP-SGD 1.8121 1.8200 1.8238 1.8300 1.8399 AUD-SGD 0.9966 00 39 1.0100 1.0134 Gold 1302.30 1304.47 1313.70 1327.51 1354.61 Silver 1 16.40 16.46 16.49 16.50 Crude 71.27 71.70 71.73 71.75 71.80 Asia FX Heat Map USD JPY CNY SGD MYR KRW TWD THB PHP INR IDR USD 2 2 2 2 2 2 2 1 2 2 JPY 2 2 1 1 2 2 9 1 1 1 CNY 2 2 1 1 1 9 2 1 9 1 SGD 2 1 1 9 1 1 2 1 1 1 MYR 2 1 1 9 1 1 2 1 1 1 KRW 2 2 1 1 1 1 1 2 1 9 TWD 2 2 9 1 1 1 2 1 9 1 THB 2 9 2 2 2 1 2 1 1 1 PHP 1 1 1 1 1 2 1 1 2 2 INR 2 1 9 1 1 1 9 1 2 1 IDR 2 1 1 1 1 9 1 1 2 1 Government bond yield changes Treasury & Strategy Research 8
10 May 2018 Daily FX Outlook 5.00 US 1.50 Eurozone 1.50 Japan 0.50 3.00-0.50 0.50 - -1.50 - -0.50 3M 6M 12M 2Y 3Y 5Y 7Y 10Y -2.50 3M 6M 12M 2Y 3Y 5Y 7Y 10Y - 6M 12M 2Y 3Y 5Y 7Y 10Y UK Australia Canada 5.00 3.00 - - - - - -8.00 - - -1 3M 6M 12M 2Y 3Y 5Y 7Y 10Y -8.00 3M 12M 2Y 3Y 5Y 7Y 10Y - 3M 6M 12M 2Y 3Y 5Y 7Y 10Y China Korea Taiwan 8.00 7.00-0.20-0.40 - - - 5.00 3.00-0.60-0.80 - -8.00-1.20-1 -1.40-1 6M 12M 3Y 5Y 10Y 3M 6M 12M 2Y 3Y 5Y 10Y -1.60 2Y 5Y 10Y 25.00 2 15.00 1 India 6 5 4 3 Indonesia 9.00 8.00 7.00 5.00 Singapore 5.00-5.00 3M 6M 12M 2Y 3Y 5Y 10Y 2 1 1Y 2Y 3Y 5Y 7Y 10Y 3.00-3M 6M 12M 2Y 5Y 10Y 1 Thailand Malaysia 8 Philippines 1 6 4 8.00 2 - -2-4 - -6 3M 6M 12M 2Y 3Y 5Y 10Y - 3M 7M 12M 2Y 3Y 5Y 7Y 10Y -8 3M 6M 12M 2Y 3Y 5Y 7Y 10Y Treasury & Strategy Research 9
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