GBP/SGD: 1.9855 Next significant resistance above 1.9900 ... · next significant resistance is...

FX Insights Friday, 13 May 2016 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

Friday, 13 May 2016 FX Insights

Chart Of The Day – GBP/SGD: 1.9855 Next significant resistance above 1.9900 is at 2.0240.

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 1.9900 resistance and a clear break above this level could lead to upward acceleration as the

next significant resistance is another 240 pips higher at 2.0240 (high in late February as well as the 38.2% retracement of the

drop from 2.2310 to 1.8950). 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, 1.9900 is a very strong resistance and those who are long from last month should look to

take partial profit at 1.9890 (overnight high of 1.9898). From here, 1.9700 is acting as a key support now and only a break

below this level would indicate that an interim top is in place.

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http://www.uobgroup.com/assets/pdfs/research/FXI_160427.pdf


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 1.1400-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.


* 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-15.

13-May-16 Summary of Views

FX Pairs Spot Outlook Since/ Rate

Target Trailing-Stop Support Resistance

USD/SGD 1.3665 Bullish 05 May 16

1.3575 1.3740 1.3655

1.3600 1.3500

S1: 1.3630 S2: 1.3600

R1: 1.3705 R2: 1.3740

EUR/SGD 1.5615 Bullish 02 May 16

1.5380 1.5730 1.5600

1.5500 1.5450

S1: 1.5530 S2: 1.5500

R1: 1.5625 R2: 1.5680

GBP/SGD 1.9735 Bullish 25 Apr 16

1.9565 1.9890 1.9800

1.9650 1.9600

S1: 1.9690 S2: 1.9650

R1: 1.9810 R2: 1.9890

AUD/SGD 1.0060 Bearish 28 Apr 16

1.0240 0.9950 1.0030

1.0150 1.0190

S1: 1.0020 S2: 1.0000

R1: 1.0110 R2: 1.0150

JPY/SGD 1.2620 Neutral 10 May 16

1.2690 - -

S1: 1.2580 S2: 1.2500

R1: 1.2660 R2: 1.2720

USD/MYR 4.0265 Bullish 04 May 16

3.9800 4.0760 4.0480

3.9800 3.9500

S1: 4.0200 S2: 3.9800

R1: 4.0600 R2: 4.0760

USD/THB 35.23 Bullish 10 May 16

35.24 35.45 35.00

S1: 35.08 S2: 35.00

R1: 35.33 R2: 35.45

USD/CNH 6.5280 Bullish 05 May 16

6.5160 6.5590 6.5290

6.5100 6.5000

S1: 6.5200 S2: 6.5100

R1: 6.5500 R2: 6.5590

CNH/SGD 0.2095 Bullish 06 May 16

0.2085 0.2105 0.2098

0.2084 0.2075

S1: 0.2090 S2: 0.2084

R1: 0.2098 R2: 0.2105

EUR/USD 1.1425 Neutral 06 May 16

1.1405 - -

S1: 1.1395 S2: 1.1350

R1: 1.1450 R2: 1.1475

GBP/USD 1.4440 Neutral 04 May 16

1.4545 - -

S1: 1.4400 S2: 1.4360

R1: 1.4500 R2: 1.4550

AUD/USD 0.7365 Bearish 04 May 16

0.7500 0.7300 0.7415

0.7440 0.7480

S1: 0.7320 S2: 0.7240

R1: 0.7410 R2: 0.7440

NZD/USD 0.6815 Bearish 10 May 16

0.6770 0.6670 0.6860

S1: 0.6780 S2: 0.6715

R1: 0.6860 R2: 0.6900

USD/JPY 108.40 Bullish 10 May 16

108.40 109.70

107.50 107.20

S1: 108.00 S2: 107.50

R1: 108.90 R2: 109.70

FX Pairs Ranges for 12-May-16 Performance*

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

USD/SGD 1.3656 1.3734 1.3656 1.3730 +0.46% +1.09% +2.18% -3.15%

EUR/SGD 1.5596 1.5639 1.5586 1.5610 +0.12% +0.74% +2.09% +1.44%

GBP/SGD 1.9720 1.9898 1.9709 1.9823 +0.54% +0.75% +3.41% -5.09%

AUD/SGD 1.0064 1.0088 1.0007 1.0052 -0.15% -0.87% -2.56% -2.57%

JPY/SGD 1.2589 1.2628 1.2527 1.2585 -0.04% -0.63% +1.72% +6.91%

USD/MYR 4.0250 4.0330 4.0000 4.0170 -0.39% +0.37% +3.58% -6.36%

USD/THB 35.26 35.37 35.19 35.33 +0.17% +0.45% +0.97% -1.97%

USD/CNH 6.5279 6.5500 6.5259 6.5493 +0.33% +0.44% +1.17% -0.27%

EUR/USD 1.1424 1.1432 1.1366 1.1375 -0.43% -0.25% -0.07% +4.74%

GBP/USD 1.4450 1.4532 1.4406 1.4452 +0.02% -0.21% +1.23% -1.92%

AUD/USD 0.7377 0.7380 0.7310 0.7325 -0.66% -1.90% -4.63% +0.43%

NZD/USD 0.6816 0.6849 0.6805 0.6819 -0.01% -0.91% -1.50% -0.01%

USD/JPY 108.41 109.39 108.21 109.01 +0.55% +1.65% +0.44% -9.41%


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 -0.8% from the mid-point this

morning with mid-point to -1.0% corresponding to USD/SGD range of 1.3615-1.3753 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.

24-HOUR VIEW: 1-3 WEEKS VIEW:

USD rebounded directly without testing the 1.3635 support.

While downward pressure has clearly eased, upward

momentum is not very strong at this stage and this pair has

to stay above 1.3740 before further sustained up-move can

be expected. Overall, the undertone for USD is positive with

strong support at 1.3690 but only a move back below 1.3660

would indicate that a short-term top is in place. The next

resistance above 1.3740 is at 1.3790.

Bullish: To take partial profit at 1.3850/55.

As highlighted yesterday, the bullish USD view is intact and

there is a good chance that we will see a move above 1.3740

(high of 1.3758 at the time of writing). The next level to focus

on is at 1.3855, 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 1.3630 from 1.3600.


EUR/SGD: 1.5630


EUR just edged above the strong 1.5625/30 resistance and

momentum is picking up rapidly. Barring a move back below

1.5580, there is a good chance that the current movement is

the early stages of a rally that could extend to 1.5680.

Bullish: To take profit at 1.5730.

EUR just moved above the strong 1.5620/25 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 1.5680 followed by 1.5730. Those who are

long from last week should look to take partial profit at

1.5730. Stop-loss is adjusted higher to 1.5530 from 1.5500.

GBP/SGD: 1.9855


The strong 1.9650 support was unthreatened as GBP rallied

strongly from a low of 1.9709. Despite the quick pull-back

from a high of 1.9898, the outlook for this pair is still positive

and a move above 1.9895/00 could lead to a quick rise to

1.9960. Support is at 1.9780 and the 1.9709 low is unlikely to

come under threat for now.

Bullish: Next significant resistance above 1.9900 is at

2.0240.

[See Chart of the Day on page 1]

*Took partial profit at 1.9890.

AUD/SGD: 1.0060


The outlook for this pair is rather mixed and range trading is

expected, likely between 1.0010 and 1.0115 (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 0.9950. In other words, the

bearish phase that started two weeks ago is close to ending

but confirmation is only upon break of 1.0150.

*Took partial profit at 1.0140.

JPY/SGD: 1.2605


As mentioned yesterday, the major 1.2500/05 support is not

expected to come under threat (JPY rebounded strongly

from a low of 1.2527). The subsequent choppy movement

has resulted in a mixed outlook and further whippy trading

appears likely. Expected range; 1.2550/1.2660.

Neutral: In a broad 1.2500/1.2720 range for now.

There is no change to our neutral view and we continue to

expect this pair to trade between 1.2500 and 1.2720 for the

next several days.


USD/MYR: 4.0350

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.

1-3 WEEKS VIEW:

Bullish: To take partial profit at 4.0760.

The bullish view is still intact and we continue to target a move to 4.0760 (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 3.9800.

USD/THB: 35.38

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 30-50 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.

1-3 WEEKS VIEW:

Bullish: Target a move to 35.45.

We turned bullish on Tuesday and USD is finally stirring to life. The immediate target of 35.45 is likely within reach soon and a

break above this level would open the way for extension to 35.53. Stop-loss for the bullish view is adjusted higher to 35.12 from

35.00 previously.

USD/CNH: 6.5510

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 6.5167/USD and 6.5486/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.

1-3 WEEKS VIEW:

Bullish: To take partial profit at 6.5590.

The partial profit taking level of 6.5590 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 6.5840. Overall, we will continue to

adopt a bullish USD stance unless the stop-loss at 6.5240 is breached (adjusted higher from 6.5100).

CNH/SGD: 0.2100

1-3 WEEKS VIEW:

Bullish: Bullish view on track, above 0.2105 shift focus to 0.2109.

There is no change to our current bullish CNH view. The next objective is at 0.2105 and a break above this level would shift the

focus to 0.2109. Stop-loss is adjusted higher to 0.2090 from 0.2084 previously.



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. 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 1.1432. While downward

momentum is picking up, only a clear break below 1.1350

would lead to extension lower to the next support at 1.1300.

Resistance is at 1.1420 ahead of the stronger level at

1.1445.

Neutral: In a 1.1350/1.1500 range now.

There is not much to add as EUR eased of quickly from a

high of 1.1432. On balance, the bias appears to be tilted on

the downside but even if EUR were to move below the strong

1.1350 support, the next level of 1.1300 would not be easy to

crack. On the upside, strong resistance is at 1.1450 ahead of

1.1500.


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. 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 1.4390 support indicated yesterday held as GBP

rebounded strongly from a low of 1.4406 (overnight high of

1.4529). The subsequent rapid pull-back from the top has

resulted in a mixed outlook. Expect sideway trading for

today, likely between 1.4400 and 1.4500.

Neutral: In a 1.4360/1.4550 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 1.4360/1.4550 range

for now.


AUD/USD: 0.7300

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 0.7270/75. Resistance is at 0.7350 ahead of

the stronger level of 0.7380.

Bearish: Expect drift lower to 0.7240.

The strong support at 0.7300 was finally breached at the

time of writing (low of 0.7286). As indicated previously,

downward momentum is not strong and from here, we

expect to see a slow drift lower to 0.7240. Only a move

back above 0.7410 would indicate that the current bearish

phase has ended.

*Took partial profit at 0.7340


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. 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 0.6845/50

resistance (high of 0.6849) before easing off. Indicators are

mostly neutral and this suggests sideway trading for today,

albeit the bias is for a probe lower. Expected range;

0.6775/0.6835.

Bearish: Downside risk has diminished considerably. [No change in view, see previous update below]

The sharp rebound from the low of 0.6717 clearly does not

bode well for our bearish view. That said, unless the 0.6860

stop-loss is taken out, NZD could still stage another leg

lower but the odds for such a move have clearly diminished.


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. 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 first-

quarter 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 108.21 low, momentum

indicators are struggling. While a break above the overnight

high of 109.39 would not be surprising, a move beyond the

major 109.70 resistance appears unlikely for now. Support is

at 108.60 followed by 108.20.

Bullish: Rebound to extend higher to 109.70. [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

109.70 and 107.50 respectively.

jpy=


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

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reproduced or otherwise.

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Last updated on 22 Mar 16 *Last updated on 29 Apr 16

**

UOB FX & Interest Rate Outlook

FX Outlook 2Q16 3Q16 4Q16 1Q17 Rates Outlook 2Q16 3Q16 4Q16 1Q17

EUR/USD 1.11 1.11 1.12 1.13 EU 0.00% 0.00% 0.00% 0.00%

GBP/USD 1.39 1.43 1.46 1.47 UK 0.50% 0.50% 0.50% 0.75%

AUD/USD 0.77 0.79 0.80 0.80 AU* 1.75% 1.75% 1.75% 1.75%

NZD/USD 0.67 0.69 0.70 0.71 NZ 2.00% 2.00% 2.00% 2.00%

USD/JPY 110 111 112 115 JP -0.10% -0.20% -0.20% -0.30%

USD/SGD 1.34 1.35 1.36 1.39 SG 1.30% 1.50% 1.65% 1.75%

USD/MYR 4.05 4.08 4.10 4.10 MY 3.25% 3.25% 3.25% 3.25%

USD/THB 36.0 36.0 36.5 37.0 TH 1.50% 1.50% 1.50% 1.75%

USD/CNY 6.47 6.50 6.45 6.44 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 48.0 47.0 46.0 45.0 PH 4.0% 4.0% 4.0% 4.25%

USD/INR 69.0 70.0 71.1 72.2 IN 6.75% 6.75% 6.75% 6.75%

USD/TWD 32.1 32.3 31.9 31.6 TW 1.38% 1.38% 1.38% 1.38%

USD/HKD 7.80 7.80 7.80 7.80 HK 1.00% 1.00% 1.25% 1.50%

USD/KRW 1180 1190 1200 1230 KR 1.25% 1.25% 1.25% 1.25%

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) 27 - 16 27 - 15 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 -

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 - - -

GBP/SGD: 1.9855 Next significant resistance above 1.9900 ... · next significant resistance is...

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