quek ser leang global economics & markets research email: … · 2017. 6. 2. · fx insights...

FX Insights Friday, 02 June 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

Friday, 02 June 2017 FX Insights

Chart Of The Day AUD/USD: 0.7385 Bearish; anticipating a break of 0.7355 for 0.7330.

The ease of which the strong 0.7380 support was taken out comes as a surprise. AUD hit a low of 0.7372 yesterday and the

weak daily closing coupled with rapid improvement in downward momentum suggests further AUD weakness in the coming

days. From here, we are anticipating a break of the rising trend-line support at 0.7355 for a move towards last month’s low at

0.7330. The next support below this level is at 0.7260. Stop-loss is placed at 0.7455 even though on shorter-term basis, 0.7420

is already a strong resistance.

mailto:[email protected]:[email protected]:[email protected]


OVERVIEW

Some better-than-expected key US data has helped lift sentiment in US equities, as markets ignored the increased global

diplomatic tension on the back of US President Trump’s announcement that he intends to withdraw the US from the Paris

climate accord. Stronger sentiment was reflected in very slight increases in bond yields in most of the major markets, as well as

a stronger US dollar. The Fedspeak included Governor Jerome Powell telling a New York audience that he still expected

another two rate hikes this year, but that he and his colleagues were watching the inflation data closely. As far as the Fed ’s

balance sheet was concerned, he said that over the coming five years it was hard to see this declining below

Today’s focus will clearly be on the US employment report for May. Markets continue to expect a steady state number of 173k

new jobs being added in May. The unemployment rate is also expected to stay unchanged at a 10-year low of 4.4%. A 0.2%

m/m lift in average hourly earnings would probably lift annual growth a tenth to 2.6% y/y. To round out the US data docket, April

trade deficit is expected to widen to USD46.1bn from USD43.7bn in March.

Latest Flash Note: 01 Jun 17

US Dollar: Further Moderation In Dollar Strength In 2H 2017 https://goo.gl/5y3mpp

https://goo.gl/5y3mpp


* 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.

02-Jun-17 Summary of Views

FX Pairs Spot Outlook Since/ Rate

Target Trailing-Stop Support Resistance

USD/SGD 1.3865 Bearish 18 May 17

1.3915 1.3755 1.3820

1.3890 1.3920

S1: 1.3830 S2: 1.3800

R1: 1.3890 R2: 1.3920

EUR/SGD 1.5545 Neutral 29 May 17

1.5450 - -

S1: 1.5510 S2: 1.5445

R1: 1.5575 R2: 1.5625

GBP/SGD 1.7865 Neutral 01 Jun 17

1.7810 - -

S1: 1.7755 S2: 1.7660

R1: 1.7920 R2: 1.7955

AUD/SGD 1.0235 *Bearish 02 Jun 17

1.0235 1.0155 1.0310

S1: 1.0205 S2: 1.0155

R1: 1.0265 R2: 1.0310

JPY/SGD 1.2430 Neutral 22 May 17

1.2445 - -

S1: 1.2395 S2: 1.2360

R1: 1.2450 R2: 1.2480

USD/MYR 4.2850 Bearish 26 Apr 17

4.3660 4.2210 4.2850

4.2980 4.3050

S1: 4.2780 S2: 4.2660

R1: 4.2980 R2: 4.3050

USD/THB 34.17 Bearish 16 May 17

34.49 33.80 34.18

34.20 34.24

S1: 34.10 S2: 33.98

R1: 34.20 R2: 34.24

USD/CNH 6.7690 Bearish 17 May 17

6.8740 6.7170 6.7930

6.8000 6.8450

S1: 6.7300 S2: 6.7170

R1: 6.7800 R2: 6.8000

CNH/SGD 0.2047 Bullish 01 Jun 17

0.2045 0.2060

0.2036 0.2033

S1: 0.2043 S2: 0.2036

R1: 0.2055 R2: 0.2060

EUR/USD 1.1220 Neutral 29 May 17

1.1180 - -

S1: 1.1185 S2: 1.1160

R1: 1.1265 R2: 1.1300

GBP/USD 1.2885 Neutral 01 Jun 17

1.2875 - -

S1: 1.2840 S2: 1.2800

R1: 1.2920 R2: 1.3010

AUD/USD 0.7385 *Bearish 02 Jun 17

0.7385 0.7330 0.7455

S1: 0.7355 S2: 0.7330

R1: 0.7420 R2: 0.7455

NZD/USD 0.7065 Bullish 23 May 17

0.7000 0.7130 0.7090

0.7035 0.7000

S1: 0.7035 S2: 0.7000

R1: 0.7105 R2: 0.7130

USD/JPY 111.45 Neutral 24 May 17

111.90 - -

S1: 110.80 S2: 110.50

R1: 111.80 R2: 112.10

FX Pairs Ranges for 01-Jun-17 Performance*

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

USD/SGD 1.3831 1.3869 1.3830 1.3862 +0.19% -0.02% -0.53% -4.42%

EUR/SGD 1.5545 1.5577 1.5518 1.5542 -0.03% +0.02% +2.08% +2.49%

GBP/SGD 1.7823 1.7895 1.7757 1.7857 +0.17% -0.44% -0.92% +0.28%

AUD/SGD 1.0274 1.0310 1.0209 1.0220 -0.53% -1.04% -2.64% -1.81%

JPY/SGD 1.2483 1.2495 1.2426 1.2448 -0.28% +0.43% +0.08% +0.85%

USD/MYR 4.2790 4.2885 4.2790 4.2860 +0.16% +0.21% -0.92% -4.42%

USD/THB 34.03 34.20 33.99 34.14 +0.32% +0.02% -0.92% -4.63%

USD/CNH 6.7485 6.7740 6.7245 6.7513 +0.01% -1.45% -2.00% -3.13%

EUR/USD 1.1240 1.1256 1.1201 1.1211 -0.26% +0.01% +2.59% +7.24%

GBP/USD 1.2890 1.2916 1.2830 1.2880 -0.09% -0.47% -0.46% +4.92%

AUD/USD 0.7431 0.7455 0.7372 0.7375 -0.75% -1.05% -2.13% +2.69%

NZD/USD 0.7087 0.7089 0.7059 0.7062 -0.28% +0.58% +1.81% +1.91%

USD/JPY 110.75 111.47 110.65 111.34 +0.53% -0.42% -0.55% -5.23%


USD/SGD: 1.3865

USD/SGD ended higher by +0.20% at 1.3862 on Thursday. This morning, the SGD NEER is trading at around 0.6% above

the mid-point with 0.5-1.0% range implying USD/SGD within 1.3810-1.3880 based on current FX levels.

Latest Flash Note: 25 May 17

Tradeable Sectors Continue To Boost Economic Growth in 1Q 2017 https://goo.gl/JGBrcl

24-HOUR VIEW: 1-3 WEEKS VIEW:

The anticipated dip in USD was much shallower than

expected as USD rebounded quickly from a low of 1.3830

(last Friday’s low at 1.3808 was unthreatened). The recovery

has scope to extend further but 1.3890 is a major resistance

and is unlikely to yield so easily. Support is at 1.3850

followed by 1.3830.

Bearish: Diminished odds for further USD weakness.

While the outlook for USD is still deemed as bearish, we

have held the same view since Tuesday (30 May) that the

odds for further USD weakness have diminished. However,

confirmation of a short-term low is only upon a move above

the stop-loss at 1.3890. Until then, despite the low odds,

another push lower to 1.3755 is not ruled out just yet. A

move above 1.3890 would indicate that the bearish phase

that started about 2 weeks ago (see update on 18 May, spot

at 1.3915) has ended. Based on the current indications, a

move above 1.3890 would indicate that USD has moved

into a neutral consolidation phase instead of staging a major

bullish reversal.

*Took partial profit at 1.3820.

https://goo.gl/JGBrclhttp://www.uobgroup.com/assets/pdfs/research/FXI_170518.pdf


EUR/SGD: 1.5545


In line with expectation, EUR extended its gain but did not

have enough momentum to push above the major 1.5600

resistance. The quick pull-back from a high of 1.5577

suggests that upward pressure has eased and this pair has

likely moved into a consolidation phase with an expected

range of 1.5510/1.5575.

Neutral: In a 1.5445/1.5625 range.

EUR traded in a muted manner and there is no change to the

current neutral outlook. There is a slight upside bias but last

week’s peak near 1.5625 is acting as a very strong

resistance and is unlikely to yield so easily. In other words,

EUR is expected to continue to trade sideways between

1.5445 and 1.5625 for now.

GBP/SGD: 1.7865


GBP registered a range of 1.7757/1.7895, reasonably close

to our sideway trading range of 1.7740/1.7900. However, this

pair ended the day on a strong note and the immediate

pressure in on the upside. That said, 1.7920 is a major

resistance and is unlikely to yield so easily (next resistance

at 1.7955). Support is at 1.7820 followed by the low near

1.7755.


We just shifted to a neutral stance yesterday and there is no

change to the view. The current movement is deemed as the

early stages of a consolidation phase and GBP is expected

to trade sideways for now, likely between 1.7660 and 1.7920.

AUD/SGD: 1.0235


The anticipated weakness in AUD exceeded our expectation

by a wide margin by easily taking out the major 1.0230

support to hit a low of 1.0209. The decline appears to be

running ahead of itself but with no signs of stabilization just

yet, it is too early to expect a sustained rebound. This pair is

more likely to trade sideways at these lower levels, likely

between 1.0205/1.0265.

Shift from neutral to bearish: Overstretched but decline has

room for extension to 1.0155.

The expected extension lower in AUD exceeded our

expectation by breaking below the strong 1.0230 support

(overnight low of 1.0209). The sharp decline suggests that

AUD has moved into a bearish phase. While the decline

seems overstretched, there is room for extension to 1.0155,

the low in September last year. In order to maintain the

current momentum, any short-term rebound should not

move above yesterday’s peak near 1.0310 (stop-loss). On a

shorter-term note, 1.0265 is already a strong resistance.

JPY/SGD: 1.2430


Instead of trading sideways as expected, JPY dropped

below the 1.2445 support to hit an overnight low 1.2426. The

decline appears incomplete even though last week’s low

near 1.2360/65 is likely out of reach (1.2395 is already a

strong support). Resistance is at 1.2450 followed by 1.2480.

Neutral: Still in a range, likely between 1.2360 and 1.2480.

The improved momentum scenario that we highlighted in the

Chart of the Day on Wednesday, 31 May fizzled out rapidly

as JPY dropped below the strong 1.2430 support. This pair is

likely still caught in a range trading mode even though the

immediate bias is for probe towards the bottom of the

expected 1.2360/1.2480 sideway consolidation range.

http://www.uobgroup.com/assets/pdfs/research/FXI_170531.pdf


USD/MYR: 4.2850

USD/MYR is little changed around the 4.2860 levels. Manufacturing output fell in May after the climb in four consecutive

months this year amid slower demand, IHS Markit said in its Nikkei Malaysia manufacturing PMI yesterday. It noted that while

the rate of contraction was overall moderate, the pace was faster than the series average. The Nikkei Malaysia Manufacturing

PMI fell below the threshold of 50 to 48.7 in May. The index just breached the threshold of 50 in April — the first time in more

than two years — indicating increasing manufacturing activities.

1-3 WEEKS VIEW:

Bearish: Increasing risk of a short-term low. [No change in view, see update from yesterday below]

As indicated in recent updates, downward momentum is showing signs of waning and the strong opening this morning

suggests an increasing risk of a short-term low. From here, a break of 4.2980 is enough to indicate that the bearish phase that

started more than a month ago (see Chart of the Day update on 26 Apr, spot at 4.3630) has ended (and the start of a neutral

consolidation phase). Only a clear break below last week’s 4.2660 low would indicate a move towards 4.2210 has started but

the odds for such a move are rather low. *Took partial profit at 4.2850.

USD/THB: 34.17

THB is seeing some slight downward pressure around the 34.19 region ahead of the central bank’s planned briefing on Monday

on the reform of foreign-exchange rules. The BoT has said on Thursday that it will hold a briefing at 3pm SGT without providing

any more details. Yesterday, Thailand’s headline and core inflation came in below market’s expectation in May. Headline

inflation fell 0.04% y/y in May, the first drop in more than a year as a result of lower food prices. Core inflation was 0.46% y/y,

compared to 0.5% in April.

1-3 WEEKS VIEW:

Bearish: Diminished odds for further USD weakness.

USD touched an overnight high of 34.19, just a tick below the stop-loss for our bearish view at 34.20. The bearish phase that

started about 2 weeks ago appears to be close to ending. For more details, see Chart of the Day update from yesterday. *Took partial profit at 34.30.

USD/CNH: 6.7690

The PBOC set the CNY central parity sharply stronger, up 543 pips or 0.8% against the dollar on Thursday morning. This is

the largest single day move since early January this year. Offshore CNH rose as much as 0.38% or 253 pips to a high of

6.7234/USD before reversing to end the day lower by 25 pips at 6.7512/USD. CNY ended up 0.2% against the dollar on

Thursday. The spread between CNH and CNY was around 629 pips at the close on Thursday. The Caixin China

manufacturing PMI unexpectedly recorded a contraction in May. The reading dropped below 50 for the first time since June

2016. The index fell to 49.6 from 50.3 in April (May 2016: 49.2). This was in contrast to China’s official manufacturing PMI

which held up at 51.2 in May, unchanged from April. China’s Caixin services PMI for May will be out coming Monday.

1-3 WEEKS VIEW:

Bearish: Next support at 6.7170. [No change in view, see update from yesterday below]

While we have been bearish for about 2 weeks now (see update on 17 May, spot at 6.8740), the stupendous plunge yesterday

comes as a huge surprise, The ease of which major supports at 6.7930 and 6.7830 were taken out coupled with the impulsive

momentum indicates further weakness in the coming days. The next support is at 6.7170, the minor low back in July last year.

We have suggested taking partial profit at 6.7980 previously and those who are still holding short position should lower the

stop-loss to 6.8000 from 6.8450. *Took partial profit at 6.7980

CNH/SGD: 0.2047

1-3 WEEKS VIEW:

Bullish: Over-extended but room for extension to 0.2060.

We just shifted to a bullish stance yesterday and there is no change to the view. That said, we are aware that the current rally is

rather over-extended even though there is room for extension to 0.2060, the high back in March. Stop-loss is adjusted higher to

0.2036 from 0.2033.

http://www.uobgroup.com/assets/pdfs/research/FXI_170426.pdfhttp://www.uobgroup.com/assets/pdfs/research/FXI_170601.pdfhttp://www.uobgroup.com/assets/pdfs/research/FXI_170517.pdf#page=6


EUR/USD: 1.1220 EUR/USD fell towards 1.1200 after the ADP print but found good support at the handle to rebound to 1.1213. The final euro

area Markit manufacturing PMI was confirmed at the very healthy flash reading of 57.0, with Germany’s index revised up

slightly to 59.5 and the French index revised down 0.2pts to 53.8. The Italian PMI was down 1.1pts from its April reading to

53.8 but Spain’s PMI rose 0.9pts to 55.4. In other news, replicating that seen in France earlier this week, Italy’s Q1 GDP

growth was revised up to 0.4% q/q, so that through-year growth now stands at 1.2% y/y. Today’s data docket is light

unemployment data in Spain the major highlight.


While EUR extended its gain as expected, the up-move was

short-lived and last week’s peak near 1.1265/70 was

unthreatened. The recent upward pressure has eased with

the quick pull-back from a high of 1.1256. The current

movement is viewed as part of a consolidation phase even

though the immediate bias is for a probe lower towards the

bottom of the expected 1.1185/1.1245 sideway trading

range.

Neutral: Bullish again if NY closing above 1.1300.

The undertone for EUR is still generally positive even though

as highlighted yesterday, only a clear break above 1.1300

(high in November) would indicate that this pair has re-

entered a bullish phase. This scenario would not be

surprising as long as the key short-term support at 1.1160 is

intact. A breach of 1.1160 would suggest that EUR would

spend more time in a consolidation phase.


GBP/USD: 1.2885

GBP/USD traded mostly sideways. The Markit manufacturing PMI fell 0.6pts to 56.7 in May – a more robust result than the

market was expecting. Today’s UK construction PMI probably will not get a lot of attention in the market, but in the meantime,

we expect some two-way (or more) mudslinging in the weekend press ahead of the elections next week.


We indicated yesterday that “a retest of the overnight high at

1.2921 is not ruled out but the next resistance at 1.2950 is

likely strong enough to contain any further GBP strength”.

GBP hit a high of 1.2916 before easing off quickly. Indicators

are showing mixed signals and the choppy consolidation

over the past couple of days is expected to persist for a while

more. In other words, expect further choppy trading, likely

between 1.2840 and 1.2920.


The outlook for GBP just turned negative yesterday and

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

viewed as part of a broad 1.2800/1.3010 consolidation

phase. Looking further ahead, GBP has to move clearly

below 1.2755/60 to indicate the start of fresh bearish phase.


AUD/USD: 0.7385

AUD remains soft on the back of iron ore prices, which have dropped to an eight-month low and in Australia’s biggest market for

the raw material, data yesterday showed the Caixin manufacturing PMI fell for a third straight month in May to 49.6, a level that

signals contraction, from 50.3. Whilst Australian retail sales figures for April showed stronger-than-expected 1 percent growth,

private spending rose by a smaller-than-expected 0.3%.


The anticipated weakness in AUD exceeded our expectation

by taking out the 0.7380 support to hit a low of 0.7372. The

weak daily closing suggests that AUD is still under pressure

even though the month-to-date low near 0.7330 is likely out

of reach (0.7355 is already a strong support). Resistance is

at 0.7400 followed by 0.7420. The high of 0.7455 seen early

yesterday is unlikely to come into picture.

Shift from neutral to bearish: Anticipating a break of 0.7355

for 0.7330.

[See Chart of the Day on page 1]


NZD/USD: 0.7065

NZD traded with a slight downward bias against the USD on Thursday. The pair was last seen around the 0.7070 levels. In an

announcement at MEETINGS, New Zealand’s largest business tourism trade exhibition yesterday, New Zealand has attracted

business events that will deliver $311 million to the New Zealand economy. The events were secured by Tourism New

Zealand and industry over the last four years and will bring nearly 100,000 people to the country.


We indicated yesterday that “a short-term top is likely in

place and the current pull-back has room to extend lower to

0.7060”. In line with expectation, NZD moved lower to hit an

overnight low of 0.7059. From here, he undertone still

appears to be negative but lackluster downward momentum

suggests a slow drift lower towards the major 0.7035

support. Resistance is at 0.7085 but only a move above

0.7100 would indicate that the current weak undertone has

stabilized.

Bullish: Diminished odds for further NZD strength. [No change in view, see update from yesterday below]

NZD hit a high of 0.7123 yesterday before dropping quickly

and ended the day on a weak note. Unless there is a break

above the strong 0.7130 resistance within these 1 to 2 days,

a breach of the stop-loss at 0.7035 would not be surprising

and would indicate that the bullish phase that started last

Tuesday, 23 May (spot at 0.7000) has ended. We have

suggested taking partial profit previously at 0.7075.

*Took partial profit at 0.7075.

http://www.uobgroup.com/assets/pdfs/research/FXI_170523.pdf#page=10


USD/JPY: 111.45

USD/JPY rebounded 0.5% to 111.37 and recovered from losses sustained in the earlier part of the week. The pair remains

capped by offers at 111.50. Notably, Japan’s Nikkei manufacturing PMI rose 0.4pts to 53.1 in May following a 1.1pt upward

revision to the flash reading. Meanwhile, Japan’s MoF corporate survey reported a 1.3% q/q in capex in 1Q (excluding

software) so that through-year growth rose to a higher-than-expected 5.2% y/y.


Expectation for a retest of the strong 110.45/50 support was

wrong as USD rebounded strongly from a low of 110.65. The

rapid recovery has room to extend further to 111.80 but last

week’s peak near 112.10 is likely out of reach. Support is at

111.15 followed by 110.80.


The sharp bounce from the 110.45 low seen two days ago

suggests that the mild downward pressure has eased. After

testing the bottom of the expected 110.50/112.00

consolidation range, USD appears to be moving towards the

top end of the range. At this stage, a sustained move above

112.00 seems unlikely. Overall, there is no indication that the

neutral phase that started last Wednesday would end any

time soon.

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 01 Jun 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 1.11 1.12 1.13 1.13 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 0.74 0.75 0.75 0.76 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 113 114 115 116 JP -0.20% -0.20% -0.20% -0.30%

USD/SGD 1.39 1.40 1.42 1.43 SG 1.05% 1.25% 1.40% 1.50%

USD/MYR 4.35 4.32 4.30 4.28 MY 3.00% 3.00% 3.00% 3.00%

USD/THB 34.5 34.8 35.0 35.3 TH 1.50% 1.50% 1.50% 1.75%

USD/CNY 6.80 6.82 6.85 6.88 CN 4.35% 4.35% 4.35% 4.35%

USD/IDR 13300 13500 13600 13700 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 65.6 66.5 67.2 68.0 IN 5.75% 5.50% 5.50% 5.50%

USD/TWD 30.0 30.3 30.5 30.7 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 1130 1140 1150 1160 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 - -

quek ser leang global economics & markets research email: … · 2017. 6. 2. · fx insights...

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