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

Thursday, 17 May 2018 FX Insights

Chart Of The Day EUR/SGD: 1.5835
Bearish phase resuscitated’, focus is at 1.5755/60 now.

While we have been bearish EUR since early this month (see update on 02 May, spot at 1.6000), the recent sideway consolidation (amid
oversold conditions) led us to believe that the “odds for extension to 1.5818 are not high” (1.5818 was the low in December last year).
However, we pointed out that only a break of the ‘stop-loss’ level at 1.6000 would indicate that the bearish phase has ended. With that in
mind, the sudden and sharp lurch lower yesterday came as a surprise as EUR plummeted and broke below 1.5818 to hit an overnight low
of 1.5788. The bearish phase has been ‘resuscitated’ and the focus now is at 1.5755/60, the low back in November last year. In our eyes,
this is a rather critical mid to long-term support and a breach of this level could potentially lead to a much lower EUR in the months ahead
(the next major mid to long-term support is at 1.5600). In the meanwhile, we expect EUR to continue to stay under pressure and only a
break of 1.5930 (‘stop-loss’ adjusted from 1.6000) would indicate that the current bearish phase has ended.

FX Insights
Thursday, 17 May 2018
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 OVERVIEW
The US Treasury market has remained under pressure, with the 10-year US Treasury yield hitting a new multi-year high on Wednesday,
topping 3.1% for the first time since 8 July, 2011. The 2-year US Treasury note yield also notched a new multi-year high of 2.593%, its
highest since 11 August, 2008. However, in contrast to Tuesday’s session, this has not prevented an advance on Wall Street, with US
equities higher on the back of a firmer-than-expected industrial production report. The US dollar drifted higher – the US dollar index rose
as high as 93.632, its highest since 19 December.

EUR took the lead in the race to the bottom on Wednesday, after reports that Italy's anti-establishment 5-Star Movement and anti-
immigrant League may ask the European Central Bank (ECB) to forgive EUR250bn of debt. GBP/USD just avoided a fresh YTD low as
EUR/GBP joined the move lower, though remaining clear of a big level at 0.8725. Data wise, Germany’s HICP inflation was unrevised at
1.4% y/y in April and Italy’s HICP was unrevised at 0.6% y/y. Therefore, the HICP inflation rate for the Euro area as a whole was
confirmed at 1.2% y/y, with core inflation confirmed to have fallen to 0.7% y/y. Thursday will be a relatively quiet day in Europe, featuring
just the aggregate Euro area construction data for March and Italy’s trade report for March.

USD/JPY did manage to hold over 110.00. EUR/JPY headed lower, before managing to regain the 130.00-figure from a low at 129.53.
This morning, Japan’s 1Q housing loans growth slowed to 2.7% y/y (from 2.9% in 4Q) whilst core machine orders decreased at a pace of
-3.9% m/m, -2.4% y/y (from 2.1% m/m, 2.4% y/y in February and well below Bloomberg median forecasts of -3.0% m/m, +0.3% y/y).

The commodity currencies have gone some way to resist the USD rise, although we don't see either AUD or NZD in a hurry to regain
recent highs. The New Zealand Government will deliver its first Budget since being formed last year at 10am SGT. This will likely
attract some attention, not so much the macro aspects but for detail on the Government micro-economic plans. In Australia, the focus
will remain on the labour market with the release of the April labour force survey which showed a strong +22,600 employment increase
(from -700 in March while the unemployment rate unexpectedly inched higher to 5.6% (from 5.5% in March).

Recent publications:
17 May 18: BoT Keeps Policy Rate On Hold, With Eyes On The Strength Of Domestic Demand Recovery And Inflation Developments
16 May 18: Japan: 1Q 2018 GDP Contracts, First Time In 9 Quarters
14 May 18: Hong Kong: Growth Surged In 1Q18 On Stronger Exports And Private Consumption
14 May 18: Indonesia: Manageable Current Account Deficit In Q1 2018
11 May 18: RBNZ Slashes GDP And Inflation Forecasts
11 May 18: BoE: The "Unreliable Boyfriend" Returns
10 May 18: Malaysia: BNM Holds Rates At 3.25%, Signals Stability Post-Election
10 May 18: Malaysia: Voting For Change In GE14

FX Insights
Thursday, 17 May 2018
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 USD/SGD: 1.3395
24-HOUR VIEW
USD is expected to trade sideways, likely within a 1.3370/1.3430 range.
Expectation for USD to extend its strength was incorrect as it slipped to hit an overnight low of 1.3388. While the down-move appears to
have scope to extend lower, any weakness is viewed as part of a 1.3370/1.3430 consolidation range and not the start of a sustained
decline. In other words, we expect USD to trade sideways for today, likely within a 1.3370/1.3430 range.

1-3 WEEKS VIEW

Neutral (since 11 May 18, 1.3370): Pressure has shifted to the upside.
No change in view, see update from yesterday below.

USD dipped to a low of 1.3306 on Monday (14 May), not far above the bottom of our previously expected 1.3290/1.3440 consolidation
range. The subsequent rapid and sharp rebound from the low that hit an overnight high of 1.3457 was not exactly expected. While the
strong advance has shifted the immediate pressure to the upside, it is premature to expect a resumption of the recent bullish phase. That
said, a move above last week’s 1.3490 peak would not be surprising but there is another strong resistance at 1.3540 and in view of the
still overbought condition, the prospect for a clear break above the latter level is not high. Overall, we expect USD to stay supported, at
least for the next several days and only a break below the ‘key support’ at 1.3350 would indicate that the immediate upward pressure
has eased.
LEVELS
Ranges 16 May 2018 Percentage change
Support Resistance
Open High Low Close 1D 1W 1M YTD
S1: 1.3370 R1: 1.3430
1.3443 1.3456 1.3388 1.3404 -0.31% -0.38% +2.28% +0.17%
S2: 1.3350 R2: 1.3490

FX Insights
Thursday, 17 May 2018
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 EUR/USD: 1.1815
24-HOUR VIEW
EUR is expected to consolidate and trade sideways, likely within a 1.1785/1.1855 range.
The anticipated weakness exceeded our expectation as EUR dropped below the 1.1780 support to hit a low of 1.1761. The subsequent
strong bounce from the low suggests that 1.1761 is a short-term bottom. From here, EUR is expected to consolidate its recent sharp
drop and trade sideways. Expected range for today, 1.1785/1.1855.

1-3 WEEKS VIEW

Neutral (since 14 May 18, 1.1950): Immediate pressure is on the downside.
We highlighted yesterday (16 May, 1.1830) that the “immediate pressure is on the downside” and added, “further weakness to 1.1750
would not be surprising”. EUR subsequently hit a low of 1.1761 before rebounding. The price action reinforces our view wherein while
the near-term outlook for EUR is negative, any weakness is unlikely to have enough momentum to move below last December’s low of
1.1715 (1.1750 is already a solid support). On the upside, only a move back above the ‘key resistance’ at 1.1900 (level adjusted lower
from 1.1940) would indicate that the current downward pressure has eased.

LEVELS
Ranges 16 May 2018 Percentage change
Support Resistance
Open High Low Close 1D 1W 1M YTD
S1: 1.1750 R1: 1.1855
1.1836 1.1854 1.1761 1.1807 -0.25% -0.36% -4.61% -1.62%
S2: 1.1715 R2: 1.1900

FX Insights
Thursday, 17 May 2018
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 GBP/USD: 1.3530
24-HOUR VIEW
Recovery appears incomplete, further up-move towards 1.3570 would not be surprising.
We highlighted yesterday that “a retest of the major 1.3450/60 support zone seems likely” but added “a sustained move below these
levels is not expected”. In line with expectation, GBP dropped to an overnight low of 1.3456 before rebounding quickly. The recovery
appears incomplete and further up-move towards 1.3570 would not be surprising. The next resistance at 1.3600 is a major level and is
unlikely to yield so easily. Support is at 1.3495 followed by the low near 1.3455. The latter level is expected to be strong enough to hold
any intraday dip.

1-3 WEEKS VIEW

Bearish (since 01 May 18, 1.3765): Downward momentum has picked up again, expect further weakness to 1.3400.
No change in view, see update from yesterday below. The overnight rebound was surprisingly robust but only break of 1.3600 would
indicate that the bearish phase has ended.

We have held the same view since 04 May (spot at 1.3570) that while the outlook for GBP is still deemed as bearish, the odds for further
weakness to the year-to-date low of 1.3458 are not high. After trading sideways for more than a week, GBP finally perked up and
managed to dip below this level (overnight low of 1.3452). Downward momentum has picked up again and this could lead to further
weakness to 1.3400 within the next week or so. On the upside, the ‘stop-loss’ level is currently at 1.3600, down from 1.3630 previously.

LEVELS
Ranges 16 May 2018 Percentage change
Support Resistance
Open High Low Close 1D 1W 1M YTD
S1: 1.3450 R1: 1.3570
1.3504 1.3520 1.3456 1.3493 -0.11% -0.41% -5.89% +0.35%
S2: 1.3400 R2: 1.3600

FX Insights
Thursday, 17 May 2018
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 AUD/USD: 0.7515
24-HOUR VIEW
Recovery has room to test the strong 0.7540 resistance but a sustained move above this level seems unlikely.
Expectation for further AUD weakness was incorrect as it staged a surprisingly strong rebound to hit an overnight high of 0.7523. While
the recovery appears to be running ahead of itself, there is room for a test of the strong 0.7540 level. At this stage, a sustained move
above this level seems unlikely (next resistance is at 0.7570). On the downside, support is at 0.7480 followed by the 0.7447 low seen
early yesterday.

1-3 WEEKS VIEW

Neutral (since 11 May 18, 0.7525): Prospect for another push lower to 0.7400 has diminished.
AUD recovered most of Tuesday’s decline as it rebounded to hit an overnight high of 0.7524. This level is not from the ‘key resistance’
indicated at 0.7540 yesterday. As highlighted, a break of 0.7540 would indicate that the current mild downward pressure has eased. Until
then, another push lower towards the major 0.7400 support is not ruled out just yet but the prospect for such a move has diminished.

LEVELS
Ranges 16 May 2018 Percentage change
Support Resistance
Open High Low Close 1D 1W 1M YTD
S1: 0.7445 R1: 0.7520
0.7472 0.7524 0.7447 0.7516 +0.58% +0.74% -3.40% -3.62%
S2: 0.7400 R2: 0.7550

FX Insights
Thursday, 17 May 2018
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 NZD/USD: 0.6905
24-HOUR VIEW
NZD is expected to trade sideways between 0.6885 and 0.6930.
The 0.6830 support indicated yesterday was unchallenged as NZD rebounded in a surprisingly robust manner from a low of 0.6851. The
recovery appears to be running ahead of itself and further sustained gain is not expected. From here, NZD is likely to trade sideways
even though the immediate bias is for a probe of the top of the expected 0.6885/0.6930 consolidation range.

1-3 WEEKS VIEW

Bearish (since 02 May 18, 0.7005): Bearish phase has room to extend further to 0.6800.
There is not much to add to yesterday’s update (reproduced below). A break of 0.6940 would indicate that the bearish phase has ended.

While we highlighted yesterday (15 May, spot 0.6915) that “a move below 0.6900 seems likely now”, we added “0.6850 could be out of
reach”. The subsequent sharp decline that hit an overnight low of 0.6855 came as a surprise and indicates that the bearish phase that
started earlier this month (02 May, spot at 0.7005) has scope to extend further to 0.6800. On the upside, we adjust the ‘stop-loss’ level
lower to 0.6940 from 0.6975.

LEVELS
Ranges 16 May 2018 Percentage change
Support Resistance
Open High Low Close 1D 1W 1M YTD
S1: 0.6850 R1: 0.6930
0.6863 0.6919 0.6851 0.6896 +0.51% -1.34% -6.32% -2.64%
S2: 0.6800 R2: 0.6940

FX Insights
Thursday, 17 May 2018
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 USD/JPY: 110.35
24-HOUR VIEW
USD is expected to grind and test the strong 110.75 resistance.
After making strong gains on Tuesday, USD traded in a surprisingly muted manner yesterday, registering a relatively narrow range of 39
pips (between 110.01 and 110.40). While the outlook for USD appears to be supportive, upward momentum is patchy at best and any
advance is expected to be slow and grinding. From here, barring a move back below 110.00, we expect USD to grind higher and test
the 110.75 resistance. At this stage, a clear break above this level is not expected (next resistance is at 111.00).

1-3 WEEKS VIEW

Neutral (since 21 Feb 18, 107.35): Further USD strength to 111.00 is not ruled out.
No change in view, see update from yesterday below.

We have held the same view since last Thursday (10 May, spot at 110.75) wherein the immediate upward pressure could lead to a test of
the major 110.45/50 resistance. After trading sideways for several days, USD finally managed to move higher and hit an overnight high of
110.45. At this stage, the prospect for a sustained move above 110.45/50 is not high but until there is break of the ‘key support’ at
109.65, we could not rule out further USD strength to 111.00.

LEVELS
Ranges 16 May 2018 Percentage change
Support Resistance
Open High Low Close 1D 1W 1M YTD
S1: 109.00 R1: 110.75
110.33 110.40 110.01 110.38 +0.03% +0.58% +3.06% -2.05%
S2: 109.65 R2: 111.00

FX Insights
Thursday, 17 May 2018
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 EUR/SGD: 1.5835
24-HOUR VIEW
A retest of the overnight low near 1.5790 would not be surprising.
We expected a lower EUR yesterday but the ease of which the strong 1.5865 support was taken out and the subsequent sharp drop
came as a surprise (low has been 1.5788). While the decline appears to be running ‘too fast, too soon’, there is no sign of stabilization
just yet. From here, a retest of the low near 1.5790 would not be surprising but a clear break below this level is unlikely (there is another
very strong support at 1.5755/60). On the upside, only a move back above 1.5880 would indicate that the current weakness has
stabilized (minor resistance is at 1.5855).

1-3 WEEKS VIEW

Bearish (since 30 Apr 18, 1.6051): Bearish phase resuscitated, focus is at 1.5755/60 now.
See Chart of the Day on page 1.

LEVELS
Ranges 16 May 2018 Percentage change
Support Resistance
Open High Low Close 1D 1W 1M YTD
S1: 1.5790 R1: 1.5880
1.5915 1.5923 1.5788 1.5824 -0.57% -0.78% -2.40% -1.41%
S2: 1.5755 R2: 1.5930

FX Insights
Thursday, 17 May 2018
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 GBP/SGD: 1.8155
24-HOUR VIEW
Recovery appears incomplete and could test the 1.8200 resistance.
Expectation for a stronger GBP did not materialize as it dipped to a low of 1.8054 before staging a strong rebound. The recovery
appears incomplete and a test of the 1.8200 resistance seems likely. At this stage, a sustained move above this level is not expected.
Support is at 1.8090 followed by the low near 1.8055.

1-3 WEEKS VIEW

Neutral (since 10 May 18, 1.8240): GBP has moved into a consolidation phase.
There is not much to add as GBP traded in a relatively quiet manner over the past few days. We continue to hold a neutral view on GBP
and expect further sideway trading for now, likely within 1.8000/1.8300 range.

LEVELS
Ranges 16 May 2018 Percentage change
Support Resistance
Open High Low Close 1D 1W 1M YTD
S1: 1.8055 R1: 1.8200
1.8156 1.8168 1.8054 1.8073 -0.46% -0.85% -3.74% +0.53%
S2: 1.8000 R2: 1.8300

FX Insights
Thursday, 17 May 2018
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 AUD/SGD: 1.0070
24-HOUR VIEW
Pressure is still on the upside but 1.0095 is expected to offer solid resistance.
AUD traded between 1.0007 and 1.0076 yesterday, relatively close to our expected 1.0010/1.0070 consolidation range. The subsequent
strong daily closing in NY suggests further upward pressure even though 1.0095 is a major level and is expected to offer solid
resistance (next resistance is at 1.0120). Support is at 1.0035 followed by 1.0000. The latter level is expected to be strong enough to
hold any intraday pull-back.

1-3 WEEKS VIEW

Neutral (since 05 Apr 18, 1.0115): AUD appears to be ready for a sustained recovery.
We have held the same view since last Friday (11 May, spot at 1.0075) wherein we believe AUD has made a short-term low at 0.9959.
The current price action continues to suggest that AUD is ready to stage a sustained recovery. A break of 1.0095 would indicate that a
move to 1.0140 has started. On the downside, only a move back below 0.9960 would suggest that the current upward bias has eased.
On a shorter-term note, the 1.0000 level is already a strong support.

LEVELS
Ranges 16 May 2018 Percentage change
Support Resistance
Open High Low Close 1D 1W 1M YTD
S1: 1.0000 R1: 1.0095
1.0046 1.0076 1.0007 1.0070 +0.23% +0.26% -1.15% -3.43%
S2: 0.9960 R2: 1.0140

FX Insights
Thursday, 17 May 2018
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 JPY/SGD: 1.2150
24-HOUR VIEW
Sharp decline has room to extend lower but last month’s 1.2092 low is not expected to come into the picture.
Against our expectation for sideway trading, JPY declined sharply and hit a low of 1.2137. The drop appears to have room to extend
lower but we do not expect last month’s 1.2092 low to come into the picture (1.2120 is already a strong support). On the upside, only a
break of 1.2200 would indicate that the immediate downward pressure has eased (minor resistance is at 1.2175).

1-3 WEEKS VIEW

Neutral (since 27 Feb 18, 1.2405): Still neutral but scope for a probe of 1.2090/95.
While we continue to hold a neutral view, JPY closed below the strong 1.2150 support in NY (close of 1.2139). Downward momentum
has ticked higher and the near-term bias is tilted to the downside. From here, barring a move back above 1.2220, we JPY to edge lower
and probe the 1.2090/95 low seen last month.

LEVELS
Ranges 16 May 2018 Percentage change
Support Resistance
Open High Low Close 1D 1W 1M YTD
S1: 1.2120 R1: 1.2200
1.2184 1.2204 1.2137 1.2139 -0.36% -1.01% -0.71% +2.30%
S2: 1.2090 R2: 1.2220

FX Insights
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 UOB FX & Interest Rate Outlook
FX Outlook 2Q18 3Q18 4Q18 1Q19 Rates Outlook 2Q18 3Q18 4Q18 1Q19

EUR/USD 1.25 1.27 1.29 1.29 EU 0.00% 0.00% 0.00% 0.00%

GBP/USD 1.40 1.38 1.36 1.36 UK 0.50% 0.75% 0.75% 0.75%
AUD/USD 0.79 0.81 0.83 0.83 AU 1.50% 1.50% 1.50% 1.75%
NZD/USD 0.74 0.75 0.75 0.75 NZ 1.75% 1.75% 1.75% 2.00%
USD/JPY 100 103 107 110 JP -0.10% -0.10% -0.10% -0.10%
USD/SGD 1.29 1.30 1.32 1.33 SG 1.70% 1.70% 1.85% 1.85%
USD/MYR 3.88 3.85 3.80 3.80 MY 3.25% 3.25% 3.25% 3.25%
USD/THB 31.00 31.30 31.50 31.80 TH 1.50% 1.75% 1.75% 1.75%
USD/CNY 6.30 6.35 6.40 6.50 CN 4.60% 4.60% 4.60% 4.60%
USD/IDR 13,800 13,850 13,900 13,950 ID 4.25% 4.25% 4.50% 4.50%
USD/PHP 52.50 53.00 53.50 54.00 PH 3.25% 3.25% 3.25% 3.50%
USD/INR 65.0 65.30 65.60 66.00 IN 6.00% 6.00% 6.00% 6.00%
USD/TWD 29.4 29.6 29.8 30.0 TW 1.38% 1.38% 1.38% 1.50%
USD/HKD 7.85 7.85 7.83 7.80 HK 2.25% 2.25% 2.50% 2.75%
USD/KRW 1,070 1,080 1,090 1,100 KR 1.75% 1.75% 2.00% 2.00%
US 2.00% 2.00% 2.25% 2.50%

Updated on 23 Mar 18

Central Bank Meetings 2018

Central Bank Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Federal Reserve (FOMC) 31 - 21* - 02 13* - 01 26* - 08 19*
European Central Bank (ECB) 25 - 08 26 - 14 26 - 13 25 - 13
Bank of England (BOE) - 08# 22 - 10# 21 - 02# 14 - 01# 20
Reserve Bank of Australia (RBA) - 06 06 03 01 05 03 07 04 02 06 04
Reserve Bank of New Zealand (RBNZ) - 08^ 22 - 10^ 28 - 9^ 27 - 08^ -
Bank of Japan (BOJ) 23** - 9 27** - 15 31** - 19 31** - 20**
Monetary Authority of Singapore (MAS) - - - 13 - - - - - tba - -
Bank Negara Malaysia (BNM) 25 - 07 - 10 - 11 - 05 - 08 -
Bank of Thailand (BOT) - 14 28 - 16 20 - 08 19 - 14 19
Bank Indonesia (BI) 18 15 22 19 17 28 19 16 27 23 15 20
Bangko Sentral ng Pilipinas (BSP) - 08 22 - 10 21 - 09 27 - 15 13
Bank of Korea (BOK) 18 27 - 12 24 - 12 31 - 18 30 -
Taiwan Central Bank (CBC) 22 21 27 20
Reserve Bank of India (RBI) 07
*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.

FX Insights
Thursday, 17 May 2018
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Disclaimer

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FX Insights
Thursday, 17 May 2018
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