quek ser leang global economics & markets research ...fx insights monday, 08 may 2017 5 | p a g...

FX Insights Monday, 08 May 2017 1 | P a g e

Quek Ser Leang [email protected] Lee Sue Ann [email protected] Global Economics & Markets Research

Email: [email protected] URL: www.uob.com.sg/research

Monday, 08 May 2017 FX Insights

Chart Of The Day GBP/SGD: 1.8220 Anticipating a bullish extension to 1.8500.

The expected break above the key 1.8150 resistance bodes well for current bullish phase in GBP (see Chart of the Day update

on 19 Apr, spot at 1.7925). After the sharp ‘Brexit collapse’ in June last year, there are hardly any significant resistances until

1.8955, the minor low seen in April last year (see weekly chart above). That said, it does not mean that it is going to be a ‘one

way street’ for GBP. For now, we are anticipating a bullish extension to 1.8500. Stop-loss is adjusted higher to 1.8060 from

1.7980.

mailto:[email protected]



http://www.uobgroup.com/assets/pdfs/research/FXI_170419.pdf


OVERVIEW

The key concern of markets came to pass on early morning today, when political newcomer, Emmanuel Macron won the 2nd

round of French presidential elections on Sunday (7 May) over his far-right opponent, Marine Le Pen by a more decisive margin

than some pollsters had earlier forecast. According to official Interior Ministry figures, with more than 44 million of 47 million

votes counted, Macron has been elected as President with 64.4% of the vote versus Le Pen’s 35.6%. There were a few points

of concern such as the low turnout (which was the lowest since 1969), abstention vote was 24.3% while blank votes 6.71%, and

perhaps most importantly, even though Le Pen lost, her defeat was significantly narrower than the last time a National Front

candidate made it to the runoff for president.

The greenback barely budged as April’s US employment report showed payrolls growth that topped consensus forecasts and a

jobless rate that unexpectedly fell to the lowest in a decade. This week’s economic data highlights include the PPI and CPI

measures of inflation, retail sales statistics, and the May edition of the University of Michigan consumer confidence survey.

Meanwhile, we will have several senior Fed officials speaking in public forums the week and attention will be on the FOMC

voters lake Kashkari (9 May), Kaplan (9 May), Dudley (11 May) and Evans (12 May).

Latest Flash Note: 04 May 17

US May FOMC: Rates Held, Recent Soft Data Likely “Transitory” https://goo.gl/ktHV3W

https://goo.gl/ktHV3W


* Shift in outlook.

* 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-16.

08-May-17 Summary of Views

FX Pairs Spot Outlook Since/ Rate

Target Trailing-Stop Support Resistance

USD/SGD 1.4055 Bullish 05 May 17

1.4005 1.4080

1.3990 1.3945

S1: 1.4025 S2: 1.3990

R1: 1.4080 R2: 1.4140

EUR/SGD 1.5445 Bullish 26 Apr 17

1.5235 1.5500 1.5300

1.5320 1.5280

S1: 1.5360 S2: 1.5320

R1: 1.5500 R2: 1.5600

GBP/SGD 1.8220 Bullish 19 Apr 17

1.7925 1.8300 1.8150

1.8060 1.7980

S1: 1.8140 S2: 1.8060

R1: 1.8300 R2: 1.8500

AUD/SGD 1.0415 Neutral 02 May 17

1.0515 - -

S1: 1.0365 S2: 1.0325

R1: 1.0455 R2: 1.0480

JPY/SGD 1.2470 Neutral 05 May 17

1.2445 - -

S1: 1.2420 S2: 1.2350

R1: 1.2520 R2: 1.2550

USD/MYR 4.3355 Bearish 26 Apr 17

4.3660 4.2750 4.3420

4.3560 4.3660

S1: 4.3100 S2: 4.2750

R1: 4.3450 R2: 4.3560

USD/THB 34.67 Bullish 28 Apr 17

34.63 34.83

34.50 34.40

S1: 34.57 S2: 34.53

R1: 34.75 R2: 34.83

USD/CNH 6.9040 Neutral 11 Apr 17

6.9045 - -

S1: 6.8980 S2: 6.8920

R1: 6.9080 R2: 6.9145

CNH/SGD 0.2036 Bullish 05 May 17

0.2031 0.2038

0.2027 0.2024

S1: 0.2031 S2: 0.2027

R1: 0.2038 R2: 0.2045

EUR/USD 1.0985 Bullish 26 Apr 17

1.0930 1.1050 1.1000

1.0900 1.0850

S1: 1.0930 S2: 1.0900

R1: 1.1050 R2: 1.1120

GBP/USD 1.2965 Neutral 04 May 17

1.2875 - -

S1: 1.2910 S2: 1.2880

R1: 1.3025 R2: 1.3060

AUD/USD 0.7410 Bearish 04 May 17

0.7430 0.7330 0.7370

0.7470 0.7485

S1: 0.7370 S2: 0.7330

R1: 0.7445 R2: 0.7470

NZD/USD 0.6905 Neutral 02 May 17

0.6905 - -

S1: 0.6880 S2: 0.6840

R1: 0.6830 R2: 0.6955

USD/JPY 112.80 *Neutral 08 May 17

112.50 - -

S1: 112.45 S2: 111.80

R1: 113.10 R2: 113.50

FX Pairs Ranges for 05-May-17 Performance*

Open High Low Close 1-day 1-week 1-month YTD**

USD/SGD 1.4004 1.4065 1.4002 1.4048 +0.32% +0.54% +0.27% -3.15%

EUR/SGD 1.5380 1.5457 1.5358 1.5441 +0.37% +1.48% +3.38% +1.79%

GBP/SGD 1.8092 1.8245 1.8053 1.8228 +0.72% +0.82% +4.28% +2.37%

AUD/SGD 1.0368 1.0434 1.0322 1.0418 +0.41% -0.31% -1.68% +0.01%

JPY/SGD 1.2451 1.2522 1.2424 1.2457 +0.04% -0.48% -1.51% +0.94%

USD/MYR 4.3300 4.3370 4.3300 4.3350 +0.20% -0.09% -2.13% -3.33%

USD/THB 34.61 34.74 34.55 34.66 +0.14% +0.23% +0.37% -3.18%

USD/CNH 6.8925 6.9070 6.8920 6.9031 +0.13% +0.05% +0.30% -1.02%

EUR/USD 1.0988 1.1000 1.0948 1.0995 +0.10% +0.91% +3.12% +5.14%

GBP/USD 1.2924 1.2984 1.2902 1.2984 +0.49% +0.27% +4.02% +5.74%

AUD/USD 0.7410 0.7428 0.7368 0.7415 +0.06% -0.98% -2.03% +3.18%

NZD/USD 0.6870 0.6930 0.6863 0.6920 +0.72% +0.74% -0.61% -0.15%

USD/JPY 112.44 112.81 112.06 112.71 +0.23% +1.05% +1.83% -4.08%


USD/SGD: 1.4055

USD/SGD traded at a higher range of 1.3992–1.4063 and closed at 1.4049/USD during Asian hours last Friday. This

morning, the SGD NEER is trading at 0.18% above the midpoint. We expect the SGD NEER to trade between the midpoint

and 0.5% above the midpoint, implying a USD/SGD range of 1.4080 – 1.4010 based on current FX levels. The week ahead

is a very quiet one for Singapore with just April reserves due on Monday, followed by March retail sales on Friday. It will

again be a short week for Singapore markets as it celebrates Vesak Day holiday mid-week (10 May).

Latest Flash Note: 26 Apr 17

Strong Electronics Output Powers March Manufacturing https://goo.gl/gb43Xk

24-HOUR VIEW: 1-3 WEEKS VIEW:

The anticipated USD strength exceeded our expectation by

easily taking out the 1.4045 resistance to hit a high of

1.4065. While further USD is still expected in the days

ahead, the current short-term strength appears to be running

ahead of itself and further sustained up-move seems unlikely

for today. This pair is more likely to trade sideways at these

higher levels, expected to be within a 1.4025/1.4075 range.

Bullish: Immediate target of 1.4080/85.

We just shifted to a bullish USD stance last Friday (see

Chart of Day update on Friday, spot at 1.4005) and there is

no change to the view. The pace of the up-move is more

rapid than expected and the immediate target at 1.4080/85

appears to within reach soon. A move above this level

would shift the focus to 1.4140 as there are no significant

resistances between these two levels. Stop-loss is adjusted

higher to 1.3990 from 1.3945 last Friday.

https://goo.gl/gb43Xk



EUR/SGD: 1.5445


EUR hit a high of 1.5480 early this morning before easing off

quickly. Indicators are severely overstretched after the strong

rally over the past few days and further sustained up-move is

not expected. That said, in view of the strong up-move, it is

too early to expect a significant pull-back. This pair is more

likely to trade sideways for now, likely between 1.5400 and

1.5480.

Bullish: Anticipating bullish extension above 1.5500.

EUR broke above the strong 1.5400 resistance with ease

and surged to a high of 1.5480 earlier this morning. The

bullish phase that started on 26 May (spot at 1.5235) is still

clearly intact. From here, we are anticipating a break above

1.5500 which would shift the focus to 1.5645/50 as there are

hardly any significant resistances in between. Stop-loss is

adjusted higher to 1.5320 from 1.5280 even though 1.5380 is

already a rather strong shorter-term support.

*Took partial profit at 1.5300.

GBP/SGD: 1.8220


The anticipated GBP strength exceeded our expectation by

easily taking out the major 1.8150 resistance to hit a high of

1.8245 last Friday. The up-move appears to have scope to

extend higher but 1.8290 is another strong level and is

expected to offer strong resistance. On the downside,

support is at 1.8180 but the stronger level is closer to 1.8140.

Bullish: Anticipating bullish extension to 1.8500.

[See Chart of the Day on page1]

*Took partial profit at 1.7990.

AUD/SGD: 1.0420


AUD dipped to a low of 1.0322 before rebounding strongly to

hit a high of 1.0434 during late NY hours on Friday. While

over-extended, the up-move appears to have scope to

extend higher but a clear break above the strong 1.0455

resistance is not expected. Support is at 1.0390 but only a

move below 1.0365 would indicate that the immediate

upward pressure has eased.

Neutral: AUD trying to form a short-term base.

We indicated that last Friday that “unless AUD can reclaim

1.0455, another attempt towards 1.0325/30 is not ruled out”.

AUD dipped briefly to hit a low of 1.0322 before rebounding

strongly. Despite the robust recovery, it is too early to

expect a sustained rebound even though the price action

over the past few days suggests that this pair is trying to

form a short-term base. All in, AUD has to move and stay

above 1.0455 to indicate that the immediate downward

pressure has eased. Until then, further attempt to move

towards the major 1.0320/30 support is not ruled out but the

odds for such a move have diminished.

JPY/SGD: 1.2470


JPY exceeded the target indicated at 1.2490 last Friday with

a high of 1.2522. However, the subsequent sharp drop (low

of 1.2415) and the swing higher from the low early this

morning was unexpected. The choppy movement has

resulted in a mixed outlook and further choppy trading

seems likely. Expected range for today, 1.2420/1.2520.

Neutral: In a 1.2350/1.2550 range.

We shifted from a bearish to a neutral JPY stance last Friday

and there is no change to the view. The current movement is

viewed as a part of a consolidation phase and is expected to

trade sideways between 1.2350 and 1.2550 for now.



USD/MYR: 4.3355

This Friday, it will be the Malaysian central bank’s turn to hold their monetary policy meeting and market is expecting BNM to

keep its overnight policy rate unchanged at 3.0%. Before that, Malaysia will release March industrial production data on

Thursday.


Ringgit Plays Catch-up; Revising USD/MYR Outlook https://goo.gl/4mXnDa

1-3 WEEKS VIEW:

Bearish: Diminished odds for extension to 4.2750.

While USD continues to recover, it is not enough to shift the current bearish phase that started on 26 Apr (spot at 4.3660) to

neutral. Only a move back above 4.3560 would indicate that the 4.3100 low seen last week is a short-term base. Until then,

another push lower towards 4.2750 is not ruled out even though the odds for such a move have diminished.

USD/THB: 34.67

THB is slightly supported this morning around the 34.65 region. The week ahead is a very quiet one for Thailand, with only

foreign reserves for the week ending 5 May, due on Friday.

1-3 WEEKS VIEW:

Bullish: To take partial profit at 34.83.

We indicated last Friday that we are “anticipating a break above 34.70 for a move to 34.83”. USD hit a high of 34.75 but has

since eased off. However, as long as the stop-loss at 34.53 (adjusted from 34.50) is intact, we continue to anticipate a move to

34.83. This is a rather strong resistance and those who are long since the bullish phase started on 28 April (see Chart of the

Day update, spot at 34.63) should look to take some partial profit.

USD/CNH: 6.9040

The CNY extended losses against the USD for the third consecutive week in the offshore market, although it has not yet

broken the key resistance level of 6.8980. Today, all eyes will be on China’s April trade data, where imports and exports wil l

likely clock another month of double-digit growth. In USD terms, exports are expected to gain 11.3% y/y, from 16.4% y/y in

March; while imports are expected to grow 18.0% y/y, from 20.3% y/y a month ago. With that, market is expecting a higher

trade balance of US$35.2b, from US$23.92b previously. Then on Wednesday, China’s CPI (exp: 1.1% y/y, prev: 0.9% y/y)

and PPI (exp: 6.7% y/y, prev: 7.6% y/y) are due.

1-3 WEEKS VIEW:

Neutral: Recovery has scope to extend to 6.9145.

USD closed just above our expected sideway consolidation range of 6.8750/6.9030 on Friday. The solid bounce came as a

surprise but we are not ready to shift to a bullish stance just yet. That said, the outlook from here is clearly positive and the

current recovery has scope to extend to 6.9145, the high in April. At this stage, a sustained move above this level seems

unlikely. On the downside, only a move back below 6.8920 would indicate that the positive undertone has eased.

CNH/SGD: 0.2036

1-3 WEEKS VIEW:

Bullish: Immediate target of 0.2038.

We just turned bullish CNH last Friday (spot at 0.2031) and the immediate target of 0.2038 was almost met (high of 0.2037). A

clear break above 0.2038 would shift the focus to 0.2045. Stop-loss is adjusted higher to 0.2027 from 0.2024.

https://goo.gl/4mXnDa






EUR/USD: 1.0985 EUR/USD traded in a range for most of last week, but still managed to post a fourth consecutive weekly gain. With the French

Presidential Elections out of the way, focus will turn back to data. This week, the docket kicks off starts with German factory

orders on Monday, followed by production data on Tuesday when we will also see April business confidence from France.

French industrial production is due on Wednesday. On Friday we expect final April inflation data from Germany to match the

flash release, both CPI and HICP at 0.0% m/m, +2.0% y/y. Eurozone industrial production is also due.


EUR hit a high of 1.1023 early this morning after Macron won

the French presidential election. The up-move was however

short-lived and the rapid pull-back from the high suggests

that the recent strong upward pressure has eased. However,

it is still too early to expect a significant pull-back. This pair is

more likely to consolidate its gains and trade sideways even

though the immediate bias is for a probe lower towards the

bottom of the expected 1.0965/1.1030 consolidation range.

Bullish: Next target at 1.1050 followed by 1.1120.

While EUR finally broke above 1.1100 (target first indicated

on 26 Apr), the lack of acceleration higher after the breach

came as a surprise (high of 1.1022 early this morning). This

level is a declining trend-line on the weekly chart and a break

has a rather bullish connotation. For now, we will continue to

hold a bullish stance until the trailing stop-loss at 1.0900

(unchanged) is taken out. Target is at 1.1050 followed by

1.1120.



GBP/USD: 1.2965

The BoE’s interest rate decision this Thursday takes center stage as the central bank also presents its updated quarterly

inflation report. The growth and inflation forecasts will give important clues to likely policy over the next few months. Also,

there will be focus on whether Forbes votes again for an increase or whether other members also vote for an increase. That

said, the fact that the UK will be in the middle of an election campaign ahead of the 8 June election will have a significant

impact on this meeting. Meanwhile, it is a quiet week for data with the March trade balance and NIESR's stab at April GDP

due on Thursday.


We underestimated GBP strength as the strong 1.2965 level

did not pose much of a resistance (GBP hit a high of 1.2984

last Friday). The strong daily closing suggests further upward

pressure but while a move above 1.3000 would not be

surprising, a sustained up-move seems unlikely (next

resistance at 1.3025). Support is at 1.2945 but only a move

below 1.2910 would indicate that the immediate upward

pressure has eased.

Neutral: Bullish again if daily closing above 1.3000.

The rapid swing higher from last Thursday (04 May) low of

1.2831 came as a surprise. While the pressure has quickly

shifted to the upside, only a daily closing above 1.3000 would

indicate that GBP has moved into a bullish phase again. In

the meanwhile, this pair is expected to stay underpinned with

solid support at 1.2880.


AUD/USD: 0.7410

AUD/USD struggled in the past week despite some pretty good domestic data. We see risks that the pair remains bearish,

especially amid the slew of Chinese data this week. Domestically, we will be getting a look at Australian retail sales and

consumer confidence data on Tuesday.

Latest Flash Note: 02 May 17

RBA Leaves Cash Rate On Hold https://goo.gl/kF5F8Q


AUD dipped to a “fresh low” of 0.7368 before rebounding

quickly. The strong recovery suggests that a short-term low

is in place. That said, it is too early to expect a sustained

reversal and AUD is more likely to trade sideways at these

lower levels. Expected range for the day, 0.7385/0.7445.

Bearish: To take partial profit at 0.7335/40.

The 0.7370 target was exceeded as AUD hit a low of

0.7368 last Friday. Despite the strong rebound from the low,

the bearish phase that started last Thursday (see Chart of

the Day update on 04 May, spot at 0.7430) is still intact.

That said, a combination a waning momentum and oversold

conditions suggest that any further downside may have

difficulty in breaking below the next support at 0.7330.

Those who are short should look to book partial profit at

0.7335/40, ahead of 0.7330. Stop-loss is adjusted lower to

0.7470 from 0.7485.

https://goo.gl/kF5F8Q




NZD/USD: 0.6905

After hitting a 10-month low on 28 April, the NZD enjoyed a recovery this week, first on the better-than-expected jobs report,

then on news that inflation expectations had risen. Still, it will take more than these few data points to shift the RBNZ off its

highly accommodative stance. We see the central bank keepings its official cash rate on hold at 1.75% coming Thursday,

though it may adjust its OCR forecasts in the accompanying Monetary Policy Statement.


0.6905: NZD rebounded directly without retesting the 0.6840

support first (low of 0.6863). The recovery appears to be

running ahead of itself and any further extension is unlikely to

move significantly above 0.6940 (high of 0.6930 in late NY

on Friday). That said, only a move back below 0.6880 would

indicate that the short-term upward pressure has eased.

Neutral: In a 0.6840/0.6955 range.

NZD closed on a strong note last Friday and the recent

downward pressure has eased. This pair has likely moved

into a sideway consolidation phase and is expected to trade

sideways between 0.6840 and 0.6955 for now.


USD/JPY: 112.80

JPY weakness was a pervasive theme in the past week, as the currency dropped every day against the EUR and four out of

five sessions against both the GBP and the USD. This week, Japan returns from the Golden Week holidays, but the economic

docket brings no high-impact releases. The BoJ’s Summary of Opinions at 26-27 April meeting due on Wednesday may hold

some interest though.


Keeping Status Quo But BOJ FY2019 GDP & CPI Forecasts Factors In Consumption Tax Hike In Oct 2019 - https://goo.gl/3lpvg4


USD dipped to a low of 112.06 before reversing quickly to

close at 112.71 last Friday (just below the high of 112.81). It

extended its up-move to a high of 113.10 early this morning

before easing off. The current USD strength appears to be

over-extended and while a move above 113.10 is not ruled

out, a sustained move above this level is not expected (next

resistance at 113.35). Strong support is at 112.45 followed

by Friday’s low near 112.05, which is unlikely to come into

the picture for today.

Shift from bullish to neutral: In a 111.80/113.50

The bullish phase that started on 26 Apr, (spot at 111.20)

has ended when USD moved below the stop-loss at 112.20

last Friday (low of 112.06). Despite moving above 113.00

early this morning (high of 113.10), upward momentum is not

strong and we view the current price action as part of a

111.80/113.50 consolidation range.

https://goo.gl/3lpvg4


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

Updated on 27 Mar 17 *Updated on 27 Apr 17

*Meetings associated with a Summary of Economic Projections and a press conference. #Meetings associated with release of Inflation Report.

^Meetings associated with release of Monetary Policy Statement. **Meetings associated with release of Outlook Report.

UOB FX & Interest Rate Outlook

FX Outlook 2Q17 3Q17 4Q17 1Q18 Rates Outlook 2Q17 3Q17 4Q17 1Q18

EUR/USD 1.06 1.06 1.08 1.09 EU 0.00% 0.00% 0.00% 0.00%

GBP/USD 1.23 1.22 1.21 1.20 UK 0.25% 0.25% 0.25% 0.25%

AUD/USD 0.78 0.79 0.79 0.80 AU 1.50% 1.50% 1.50% 1.50%

NZD/USD 0.70 0.71 0.71 0.72 NZ 1.75% 1.75% 1.75% 1.75%

USD/JPY 115 117 118 119 JP -0.20% -0.20% -0.20% -0.30%

USD/SGD 1.43 1.45 1.46 1.47 SG 1.20% 1.40% 1.45% 1.65%

USD/MYR* 4.35 4.46

4.32 4.48

4.30 4.50

4.28 4.52

MY 3.00% 3.00% 3.00% 3.00%

USD/THB 35.8 36.2 36.5 36.8 TH 1.50% 1.50% 1.50% 1.75%

USD/CNY 7.02 7.09 7.16 7.20 CN 4.35% 4.35% 4.35% 4.35%

USD/IDR 13600 13700 13800 13900 ID 4.75% 4.75% 4.75% 5.00%

USD/PHP 50.2 50.6 50.9 50.9 PH 3.25% 3.50% 3.50% 3.50%

USD/INR 67.9 68.8 69.8 69.8 IN 5.75% 5.50% 5.50% 5.50%

USD/TWD 31.0 31.1 31.4 31.6 TW 1.38% 1.38% 1.38% 1.38%

USD/HKD 7.80 7.80 7.80 7.80 HK 1.50% 1.75% 1.75% 2.00%

USD/KRW 1140 1150 1160 1170 KR 1.25% 1.25% 1.25% 1.25%

US 1.25% 1.50% 1.50% 1.75%

Central Bank Meetings 2017

Central Bank Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Federal Reserve (FOMC) - 01 15* - 03 14* 26 - 20* - 01 14*

European Central Bank (ECB) 19 - 09 27 - 08 20 - 07 26 - 14

Bank of England (BOE) - 02# 16 - 11

# 15 - 03

# 14 - 02

# 14

Reserve Bank of Australia (RBA) - 07 07 04 02 06 04 01 05 03 07 05

Reserve Bank of New Zealand (RBNZ) - 09^ 23 - 11^ 22 - 10

^ 28 - 09

^ -

Bank of Japan (BOJ) 31** - 16 27** - 16 20** - 21 31

** - 20

**

Bank Negara Malaysia (BNM) 19 - 02 - 12 - 13 - 07 - 09 -

Bank of Thailand (BOT) - 08 29 - 24 - 05 16 27 - 08 21

Monetary Authority of Singapore (MAS) - - - 13 - - - - - tba - -

http://www.uobgroup.com/assets/pdfs/research/QGO_2q17.pdf

https://goo.gl/4mXnDa

quek ser leang global economics & markets research ...fx insights monday, 08 may 2017 5 | p a g...

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