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 EUR/SGD: 1.5335 Bullish; target a move to 1.5400. As dipping to a low of 1.5100 last week, EUR rebounded strongly to take out the major 1.5305 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 1.5400. A clear break above this level could lead to acceleration higher towards the next resistance at 1.5465. Support is at 1.5280 but only a break above 1.5240 would indicate that our bullish view is wrong. 1 P a g e
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
15-Sep-16 Summary of Views FX Pairs Spot Outlook Since/ Rate Target Trailing-Stop Support Resistance USD/SGD 1.3670 Bullish 1.3670 1.3745 1.3550 S1: 1.3600 S2: 1.3550 R1: 1.3700 R2: 1.3745 EUR/SGD 1.5335 Bullish 1.5335 1.5400 1.5240 S1: 1.5280 S2: 1.5240 R1: 1.5365 R2: 1.5400 GBP/SGD 1.8080 Neutral 09 Sep 16 1.7975 - - S1: 1.7980 S2: 1.7880 R1: 1.8130 R2: 1.8180 AUD/SGD 1.0200 Bearish 1.0210 1.0120 1.0300 S1: 1.0160 S2: 1.0120 R1: 1.0250 R2: 1.0300 JPY/SGD 1.3300 Neutral 07 Sep 16 1.3245 - - S1: 1.3260 S2: 1.3230 R1: 1.3350 R2: 1.3400 USD/MYR 4.1280 Bullish 4.1250 4.1720 4.0800 S1: 4.1000 S2: 4.0800 R1: 4.1400 R2: 4.1720 USD/THB 34.86 Bullish 13 Sep 16 34.85 35.00 34.80 34.72 S1: 34.86 S2: 34.80 R1: 35.00 R2: 35.11 USD/CNH 6.6715 Neutral 07 Sep 16 6.6790 - - S1: 6.6635 S2: 6.6480 R1: 6.6800 R2: 6.6850 CNH/SGD 0.2045 Bullish 0.2045 0.2053 0.2030 S1: 0.2035 S2: 0.2030 R1: 0.2049 R2: 0.2053 EUR/USD 1.1245 Neutral 05 Sep 16 1.1155 - - S1: 1.1200 S2: 1.1150 R1: 1.1300 R2: 1.1330 GBP/USD 1.3255 Bearish 1.3195 1.3060 1.3340 S1: 1.3140 S2: 1.3060 R1: 1.3300 R2: 1.3340 AUD/USD 0.7470 Bearish 0.7470 0.7420 0.7560 S1: 0.7445 S2: 0.7420 R1: 0.7510 R2: 0.7560 NZD/USD 0.7275 Bearish USD/JPY 102.40 Neutral * Shift in outlook. 0.7255 07 Sep 16 101.55 0.7200 0.7340 - - S1: 0.7245 S2: 0.7200 S1: 102.00 S2: 101.30 R1: 0.7305 R2: 0.7340 R1: 102.95 R2: 103.30 FX Pairs Ranges for 14-Sep-16 Performance* Open High Low Close 1-day 1-week 1-month YTD** USD/SGD 1.3671 1.3682 1.3620 1.3636-0.23% +1.25% +1.50% -3.85% EUR/SGD 1.5322 1.5362 1.5302 1.5336 +0.06% +1.35% +2.15% -0.51% GBP/SGD 1.8019 1.8069 1.7935 1.8041 +0.08% +0.46% +4.34% -13.5% AUD/SGD 1.0192 1.0236 1.0166 1.0178-0.18% -1.41% -1.18% -1.23% JPY/SGD 1.3320 1.3340 1.3207 1.3307-0.10% +0.58% +0.37% +12.9% USD/MYR 4.1100 4.1355 4.1100 4.1210 +0.38% +1.62% +2.89% -3.93% USD/THB 34.93 34.98 34.84 34.86-0.22% +0.69% +0.78% -3.16% USD/CNH 6.6915 6.6928 6.6642 6.6672-0.33% -0.04% +0.28% +1.53% EUR/USD 1.1215 1.1273 1.1207 1.1249 +0.28% +0.10% +0.59% +3.48% GBP/USD 1.3190 1.3240 1.3139 1.3239 +0.37% -0.77% +2.75% -10.0% AUD/USD 0.7466 0.7496 0.7451 0.7466 +0.02% -2.71% -2.72% +2.62% NZD/USD 0.7254 0.7313 0.7238 0.7281 +0.35% -2.28% +0.94% +6.60% USD/JPY 102.54 103.34 102.22 102.40-0.12% +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-15. 3 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. 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 1.3618 before settling for a 0.2% loss at 1.3635 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 1.3660, with initial target 1.3745 and stop 1.3550, which is consistent with our view of 1.38 for USD/SGD at end-2016 and 1.41 by mid-2017. 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 0.0-0.5% above the midpoint should suffice for now. This implies USD/SGD range of 1.3674-1.3606 for now. Singapore retail sales for July are on tap at 1pm today. 1.3630: Instead of extending higher as expected, USD slipped below the strong 1.3630 support to touch an overnight low of 1.3620. 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 1.3600 and 1.3660. Bullish: Target a move to 1.3745/50. 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 1.3745/50 and 1.3550 respectively. 4 P a g e
EUR/SGD: 1.5335 EUR attempted but failed to move above the Tuesday s peak of 1.5365 (overnight high of 1.5362). Upward pressure has eased and the current movement is likely the early parts of a consolidation phase. Expected range for today, 1.5300/1.5360. Bullish: Target a move to 1.5400. [See Chart of the Day on page 1] GBP/SGD: 1.8080 GBP dropped to a low of 1.7935 during NY hours but rebounded rapidly and sharply to touch 1.8099 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 1.8130 resistance. Support is at 1.8030 followed by 1.7980. Neutral: In a 1.7880/1.8180 range. After touching a high of 1.8136 on Tuesday, GBP dropped sharply to a low of 1.7935 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 1.7880/1.8180 range. AUD/SGD: 1.0200 The 1.0160 target indicated was not met as AUD recovered quickly after touching a low of 1.0166. The undertone is slightly negative and a retest of 1.0160/65 would not be surprising but a clear break below this level appears unlikely for now. Resistance is at 1.0230 ahead of the stronger level at 1.0250. JPY/SGD: 1.3300 The anticipated extension lower in JPY easily took out the target indicated at 1.3265/70 yesterday (low of 1.3207). 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 1.3260 and 1.3350. Bearish: Immediate target of 1.0120. We shifted to a bearish AUD stance yesterday and there is no change to the view. The sharp decline from the high of 1.0407 last week appears incomplete and extension towards 1.0120 is expected (next support is at 1.0065/70). Strong resistance is at 1.0250 but only a move above 1.0300 would indicate that our bearish expectation is wrong. Neutral: Room for rebound to extend further to 1.3400. [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 1.3400, the sharp pull-back in overnight trading from a high of 1.3375/80 suggests that the recent build-up in upward momentum is waning. That said, only a move below 1.3230 would indicate that the immediate upward pressure has eased. 5 P a g e
USD/MYR: 4.1280 MYR fell 0.4% to 4.1240/USD late Asian session versus 4.1080 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 http://bit.ly/2cq9bni Neutral: Bullish. Target 4.1720. The bullish phase that started yesterday is still intact. The immediate target and stop-loss remains unchanged at 4.1720 and 4.0800 respectively. USD/THB: 34.86 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 http://bit.ly/2coqtzf Bullish: Immediate target of 35.00. USD touched a high of 34.98, just shy of our immediate target of 35.00. The rapid pull-back from the high has dented the upward momentum but as long as the stop-loss at 34.80 is intact, another attempt to 35.00 cannot be ruled out just yet (even though the odds for such a move have diminished). USD/CNH: 6.6715 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 6.6730/USD. Similarly, offshore CNH also strengthened with the lead from onshore and tightened CNH liquidity, gaining 0.24% at 6.6747/USD. Markets are closed Thursday and Friday for the Mid-Autumn Festival. Neutral: Bearish if daily closing below 6.6630. USD dropped to a low of 6.6642 yesterday, just above last week s low of 6.6638. These levels are also very close to the rising trend-line on the daily chart connecting 6.6740 (low on 3/5/16) and 6.6237 (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 6.6635/40 before shifting to a bearish stance (with an immediate target of 6.6480). Overall, the near term pressure is expected to continue to grow unless USD can move and stay above 6.6850 in the next few days. CNH/SGD: 0.2045 Bullish: Over-extended but room for extension to 0.2053. 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 0.2053. The support at 0.2035 is likely strong enough to hold any short-term pull-back but only a move below the stop-loss at 0.2030 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%. 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 1.1200 support remains intact as EUR rose to a high of 1.1273 before easing off. Despite the pull-back from the high, the undertone is still slightly positive and a retest of 1.1275 would not be surprising even though a move beyond the strong 1.1300 resistance seems unlikely. On the downside, 1.1200 continues to act as a strong support. Neutral: In a 1.1150/1.1330 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 1.1150/1.1330 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. 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 1.3120 target indicated yesterday was not met as GBP rebounded strongly after touching a low of 1.3139. While the current rebound could extend further to 1.3300, a sustained move above this level is not expected. Support is at 1.3220 ahead of 1.3180. The 1.3139 low is unlikely to come into the picture, at least not for today. Bearish: Target a move to 1.3060. While the recent strong downward momentum is dented with the strong rebound from a low of 1.3139 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 1.3060 and 1.3340 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. 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 http://bit.ly/2cqz1uy After the sharp drop in recent days, the down-move appears to have stabilized as AUD traded in a narrow 0.7451/0.7496 range yesterday. The consolidation phase appears incomplete and further sideway trading is expected for today, likely within a 0.7450/0.7510 range. Bearish: Decline over-extended but room for further extension to 0.7420. As highlighted yesterday, despite the over-extended downmove, the current weakness in AUD has room to extend further to 0.7420 (the next support is close-by at 0.7390). Stop-loss remains unchanged at 0.7560 for now even though on a shorter-term note, 0.7510 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. 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 0.7200 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 0.7245 and 0.7305. Bearish: Downside likely limited to 0.7200. While we turned bearish NZD yesterday, we were of the view that the downside potential is likely limited to 0.7200 (low in late August). On the upside, 0.7305 is a strong resistance ahead of the stop-loss at 0.7340. 10 P a g e
USD/JPY: 102.40 USD/JPY was initially pulled above the 103.00-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 20-21 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 http://bit.ly/2chfbrr The anticipated USD strength exceeded our expectation by easily moving above the 103.05 resistance (high of 103.34). 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 102.00 support seems unlikely. Resistance is at 102.95 and the 103.34 high is unlikely to be challenged for now. Neutral: In a 101.20/103.30 range. As highlighted yesterday, despite the positive undertone, USD has to close above the 103.30 resistance before further up-move can be expected. The build-up in momentum fizzled out quickly with the sharp drop from the high of 103.34. The outlook from here is still viewed as neutral but USD has likely moved back into a broad sideway trading range of 101.20/103.30. 11 P a g e
UOB FX & Interest Rate Outlook FX Outlook 3Q16 4Q16 1Q17 2Q17 Rates Outlook 3Q16 4Q16 1Q17 2Q17 EUR/USD 1.09 1.07 1.06 1.05 EU 0.00% 0.00% 0.00% 0.00% GBP/USD 1.28 1.24 1.20 1.16 UK 0.25% 0.10% 0.10% 0.10% AUD/USD 0.75 0.76 0.78 0.80 AU* 1.50% 1.50% 1.50% 1.50% NZD/USD 0.72 0.73 0.75 0.75 NZ** 1.75% 1.75% 1.50% 1.50% USD/JPY 105 106 109 110 JP -0.20% -0.20% -0.30% -0.30% USD/SGD 1.37 1.38 1.41 1.42 SG 0.90% 1.10% 1.35% 1.50% USD/MYR 4.15 4.15 4.10 4.08 MY 3.00% 3.00% 3.00% 3.00% USD/THB 36.0 36.5 37.0 37.0 TH 1.50% 1.50% 1.75% 2.00% USD/CNY 6.70 6.60 6.59 6.62 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 47.0 46.0 45.0 43.0 PH 3.00% 3.00% 3.25% 3.25% USD/INR 70.0 71.1 72.2 71.1 IN 6.50% 6.50% 6.75% 6.75% USD/TWD 32.7 32.4 32.1 31.8 TW 1.38% 1.38% 1.38% 1.38% USD/HKD 7.80 7.80 7.80 7.80 HK 0.75% 1.00% 1.00% 1.25% USD/KRW 1190 1200 1220 1230 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 2016 http://bit.ly/2aotsdh * Central Bank Meetings 2016 Central Bank Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Federal Reserve (FOMC) 27-16 27-27 - 21-02 14 European Central Bank (ECB) 21-10 21-02 21-08 20-08 Bank of England (BOE) 14 04 17 14 12 16 14 04 15 13 03 15 Reserve Bank of Australia (RBA) - 02 01 05 03 07 05 02 06 04 01 06 Reserve Bank of New Zealand (RBNZ) 28-10 28-09 - 11 22-10 - Bank of Japan (BOJ) 29-15 28-16 29-21 - 1 Bank Negara Malaysia (BNM) 21-09 - 19-13 - 07-23 - Bank of Thailand (BOT) - 03 23-11 22-03 14-09 21 Monetary Authority of Singapore (MAS) - - - 14 - - - - 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. 193500026Z 12 P a g e