fx strat 3.8.2015 pvb - standard chartered · 24 july 2015 to 31 july 2015 source: bloomberg,...

This commentary reflects the views of the Wealth Management Group of Standard Chartered Bank. Important disclosures can be found in the Disclosures Appendix. This document is provided for general circulation and information purposes only, it does not take into account the specific investment objectives, needs or financial situation of any particular person or class of persons and it has not been prepared as investment advice for any such person(s). Prospective investors should seek advice from a financial adviser on the suitability of an investment, taking into account

these factors before making a commitment to invest in an investment

1

fx strategyfx | 3 August 2015

The views expressed in this publication are made on the basis of a 2-4 week outlook and may differ from our longer term views and forecasts from the Global Research function

Payrolls may be the next key USD catalyst

A constructive Fed statement failed to convince USD bulls, resulting in the greenback ending slightly lower last week. In the week ahead, US non-farm payroll data may be key; a strong print might see the USD initiate its next leg higher. A disappointing number, on the other hand, might see the USD fall back into consolidation mode.

The RBA policy meeting will also be closely watched. While consensus expects policy rate to remain unchanged, we see an increased possibility of a surprise rate cut. This, in turn, could cause the AUD to test new lows.

EUR/USD

We remain neutral on the EUR as price action remains range-bound without evidence of any decisive break.

USD/JPY

We remain neutral on the USD/JPY pair and expect it to remain range-bound for now.

AUD/USD

We remain bearish on the AUD/USD pair as it continues to offer room for further downside.

USD/SGD

We remain bullish on the USD/SGD pair as price momentum has been robust, pointing to further upside.

GBP/USD

We turn bullish on the GBP/USD pair (from neutral earlier) as positive chart patterns are likely to support the pair.

XAU/USD

We remain neutral on XAU/USD as we see the pair consolidating after the sharp sell-off.

Pairs Outlook (2-4 wk) Secondary Sup Primary Sup Spot Primary Res Secondary Res

EUR/USD Neutral 1.050 1.085 1.098 1.120 1.140

USD/JPY Neutral 121.50 122.50 124.00 124.50 126.00

AUD/USD Bearish 0.700 0.720 0.730 0.750 0.770

USD/SGD Bullish 1.332 1.355 1.375 1.380 1.400

GBP/USD Bullish 1.520 1.540 1.562 1.589 1.620

XAU/USD Neutral 1,000 1,080 1,096 1,160 1,200

USD/CNH* Neutral 6.147 6.185 6.219 6.230 6.282

USD/ZAR* Bullish 11.725 12.050 12.690 12.855 13.000

NZD/USD* Bearish 0.615 0.640 0.659 0.675 0.685

USD/CHF* Bullish 0.925 0.940 0.965 0.972 0.985

USD/SEK* Bullish 8.200 8.400 8.622 8.800 9.000

USD/CAD* Bullish 1.257 1.282 1.312 1.332 1.375

*SUPPLEMENTARY PAIRS - Going forward, we will maintain the EUR, JPY, AUD, SGD, GBP and XAU outlook while adding just key technical levels for the supplementary pairs

Contents

Payrolls may be the next key USD catalyst 1

EUR/USD 2

USD/JPY 3

AUD/USD 4

USD/SGD 5

GBP/USD 6

XAU/USD (Gold) 7

SUPPLEMENTARY PAIRS 8

Interest Rate Differentials 10

FX Implied Volatility 10

Disclosure Appendix 12

Weekly performance of pairs

24 July 2015 to 31 July 2015

Source: Bloomberg, Standard Chartered

Steve Brice Chief Investment Strategist

Clive McDonnell Head, Equity Investment Strategy

Manpreet Gill Head, FICC Investment Strategy

Adi Monappa, CFA Head, Asset Allocation

Audrey Goh, CFA Senior Investment Strategist

Victor Teo, CFA Investment Strategist

Tariq Ali, CFA Investment Strategist

Abhilash Narayan Investment Strategist

-0.30

0.74

0.04

0.36

0.06

0.00

-0.40 -0.20 0.00 0.20 0.40 0.60 0.80

XAU/USD

GBP/USD

USD/SGD

AUD/USD

USD/JPY

EUR/USD

%

3 August 2015 | fx strategy

This commentary reflects the views of the Wealth Management Group of Standard Chartered Bank. 2

EUR/USD

We remain neutral on the EUR as price action remains range-bound without evidence of any decisive break.

Performance

EUR/USD ended flat over the previous week. Core inflation rose unexpectedly last month. The unemployment rate remained unchanged. However, consumer and business confidence in Germany held near record highs, supporting growth in the Euro area.

In the US, durable goods orders rose strongly in June. Consumer confidence surprised to the downside. The FOMC policy statement continued to indicate a move towards a rate hike at some point this year. The employment cost index, however, was disappointing.

Technical Analysis

Major technical indicators are, on balance, are neutral.

We remain neutral on the EUR. The rising support trend-line from March lows remains intact. A clear breach would be a strong indication of further downside. At the same time, we view the 1.14-1.15 region as a strong resistance region, likely to form a cap in the short term. Hence, we are likely to continue to see consolidation until a clear breach is achieved in either direction.

We would review our outlook if the pair rebounds above 1.14.

Key Signposts

Euro area – Manufacturing PMI (3 August), PPI (4 August), services PMI, composite PMI and retail sales (5 August) and retail PMI (6 August).

US – Personal income, real personal spending, PCE core and ISM manufacturing (3 August), ADP employment change, trade balance, composite PMI and ISM non-manufacturing composite (5 August) and non-farm payrolls change, unemployment rate, average hourly earnings and labour force participation (7 August).

EUR/USD continues to consolidate

Technical Analysis Chart: EUR/USD (Daily)


1.085

1.120

1.00

1.05

1.10

1.15

1.20

1.25

1.30

1.35

1.40

Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15

EU

R/U

SD

EUR/USD 50 dma 100 dma 200 dma

Key technical indicators and forecast*

Technical Indicator Action

RSI (14) Neutral

Oscillator (5,10) Neutral

MACD (12,26,9) Neutral

ADX (14) Neutral

Momentum (14) Sell

Key Levels Level Importance

Secondary Resistance 1.140 High

Primary Resistance 1.120 Medium

Spot 1.098 –

Primary Support 1.085 Medium

Secondary Support 1.050 High

Forecast Consensus

Q3 2015 1.08

Q4 2015 1.05

Q1 2016 1.06

Q2 2016 1.06

* Please see Appendix on Pg 11 for explanation on technical


50 dma 100 dma 200 dma1.1176 1.1027 1.1578



USD/JPY

We remain neutral on the USD/JPY pair and expect it to remain range-bound for now.

Performance

USD/JPY ended almost flat over the previous week. The Bank of Japan cut its growth outlook to 1.7% (from 2%) for 2015. It also cut its inflation forecast to 0.7% (from 0.8%) for the fiscal year ending March 2016.

Technical Analysis

Major technical indicators are neutral.

We remain neutral on USD/JPY. While the pair has demonstrated some strength recently, the strong resistance area at 124.50 appears likely to limit any major upside for now. We believe a breach of this level remains a critical requirement before the broad uptrend can resume. On the downside, we believe the 122.50 level has formed a solid base. Overall, we see the pair trading in the 122.50-124.50 range.

We would review our outlook if the pair moves below 122.50 or moves above 124.50.

Key Signposts

Manufacturing PMI (3 August), monetary base and real cash earnings (4 August), services PMI and composite PMI (5 July) and the BoJ annual monetary meeting (7 August).

USD/JPY still waiting to break out of its consolidation range

Technical Analysis Chart: USD/JPY (Daily)


122.50

124.50

98

102

106

110

114

118

122

126

130


US

D/J

PY

USD/JPY 50 dma 100 dma 200 dma



RSI (14) Neutral



ADX (14) Neutral

Momentum (14) Neutral


Secondary Resistance 126.00 Medium

Primary Resistance 124.50 High

Spot 124.00 –



Forecast Consensus

Q3 2015 124

Q4 2015 125

Q1 2016 126

Q2 2016 127



50 dma 100 dma 200 dma122.33 121.1 118.63



AUD/USD

We remain bearish on the AUD/USD pair as it continues to offer room for further downside.

Performance

AUD/USD ended up (0.36%) over the previous week. Consumer sentiment found some respite in July. New motor vehicle sales rebounded in June.

In China, June industrial profits edged lower while July manufacturing PMI was in-line with expectations. Non-Manufacturing PMI remained resilient in July.

Technical Analysis

Major technical indicators, on balance, are neutral.

However, we remain bearish on AUD/USD. The pair continued to follow its broad trend lower. Presently, the pair seems to be finding support at the 0.72 area. A breach below these levels would be confirmation of further downside.

We would review our outlook if it moves above 0.750.

Key Signposts

Australia – Trade balance, retail sales, the RBA monetary meeting and commodity index (4 August), employment change, unemployment rate and full employment change (6 August) and home loans and the RBA’s monetary policy statement (7 August).

China – Manufacturing PMI (3 August), composite PMI and services PMI (5 August) and exports, imports and trade balance (8 August).

AUD/USD in the midst of a free fall

Technical Analysis Chart: AUD/USD (Daily)


0.720

0.750

0.68

0.73

0.78

0.83

0.88

0.93

0.98


AU

D/U

SD

AUD/USD 50 dma 100 dma 200 dma



RSI (14) Neutral



ADX (14) Neutral





Spot 0.730 –


Secondary Support 0.700 Medium

Forecast Consensus

Q3 2015 0.740

Q4 2015 0.720

Q1 2016 0.720

Q2 2016 0.720



50 dma 100 dma 200 dma0.7756 0.775 0.8035



USD/SGD

We remain bullish on the USD/SGD pair as price momentum has been robust, pointing to further upside.

Performance

USD/SGD ended up (0.04%) over the previous week. Q2 GDP unexpectedly shrank as the manufacturing sector took a blow due to sluggish global demand. Retails sales figures for July came in a little better than expected.

Technical Analysis

Major technical indicators, on balance, are bullish.

We remain bullish on the USD/SGD pair. The pair has continued to hold above the previous resistance (and now support) region of 1.35-36, suggesting a bullish undertone. The recent 50 and 100 DMA cross also suggests the upward trend is becoming firmer. The next focus is likely to be the key resistance at 1.380.

We would review our outlook if the pair moves below 1.332.

Key Signposts

Manufacturing PMI (3 August) and foreign reserves (6 August).

USD/SGD trend looks to get firmer to the upside

Technical Analysis Chart: USD/SGD (Daily)


1.355

1.380

1.22

1.24

1.26

1.28

1.30

1.32

1.34

1.36

1.38

1.40


US

D/S

GD

USD/SGD 50 dma 100 dma 200 dma



RSI (14) Neutral


MACD (12,26,9) Buy

ADX (14) Buy

Momentum (14) Buy




Spot 1.375 –


Secondary Support 1.332 Medium

Forecast Consensus

Q3 2015 1.370

Q4 2015 1.380

Q1 2016 1.380

Q2 2016 1.390



50 dma 100 dma 200 dma1.3418 1.3517 1.333



GBP/USD

We turn bullish on the GBP/USD pair (from neutral earlier) as positive chart patterns are likely to support the pair.

Performance

GBP/USD ended up (0.74%) over the previous week. 2Q GDP as well as service sector indicators were generally in line with expectations. July consumer confidence was slightly below expectations but remained robust overall.

Technical Analysis

Major technical indicators, on balance, are divergent.

However, we turn bullish on the GBP/USD pair (from neutral earlier). The pair has been making a series of higher highs and higher lows, remaining relatively resilient. We see the positive bias in the pair holding as long as it remains above 1.54. Key resistance remains the June high of 1.589.

We would review our outlook if the pair falls below 1.540.

Key Signposts

Manufacturing PMI (3 August), nationwide house price index (4 August), services PMI (5 August), the BoE monetary meeting, the BoE inflation report, manufacturing production and NIESR GDP estimates (6 August) and trade balance (7 August).

The GBP/USD trend has turned moderately positive

Technical Analysis Chart: GBP/USD (Daily)


1.540

1.589

1.46

1.48

1.50

1.52

1.54

1.56

1.58

1.60

1.62

1.64

1.66

1.68

1.70

1.72

1.74


GB

P/U

SD

GBP/USD 50 dma 100 dma 200 dma



RSI (14) Neutral


MACD (12,26,9) Buy

ADX (14) Sell



Secondary Resistance 1.620 High

Primary Resistance 1.589 High

Spot 1.563 –



Forecast Consensus

Q3 2015 1.53

Q4 2015 1.52

Q1 2016 1.53

Q2 2016 1.54



50 dma 100 dma 200 dma1.5527 1.5272 1.5433



XAU/USD (Gold)

We remain neutral on XAU/USD as we see the pair consolidating after the sharp sell-off.

Performance

XAU/USD ended down (-0.30%) over the previous week. Last week’s Fed statement was generally positive for the USD and negative for gold.

Technical Analysis

Major technical indicators are bearish.

However, we remain neutral on gold. The pair seems to be entering a consolidation phase along the 1,080 key support. A decisive break below this level would be strong indication of further downside towards the psychological 1000 level. Until then, we prefer to remain on the sidelines.

We would review our outlook if the pair rebounds above 1,160.

Key Signposts

Surprises in economic data, specially related to US core PCE inflation and the labour market report are key for gold this week. A stronger USD may see gold test new recent lows.

Short-term consolidation likely before resumption of downtrend

Technical Analysis Chart: XAU/USD (Daily)


1,080

1,160

1,000

1,050

1,100

1,150

1,200

1,250

1,300

1,350

1,400


XA

U/U

SD

XAU/USD 50 dma 100 dma 200 dma



RSI (14) Sell

Oscillator (5,10) Sell

MACD (12,26,9) Sell

ADX (14) Sell

Momentum (14) Sell


Secondary Resistance 1,200 High

Primary Resistance 1,160 Medium

Spot 1,096 –

Primary Support 1,080 Medium

Secondary Support 1,000 High

Forecast Consensus

Q3 2015 1180

Q4 2015 1200

Q1 2016 1225

Q2 2016 1194



50 dma 100 dma 200 dma1162.17 1186.5 1188.85



SUPPLEMENTARY PAIRS *SUPPLEMENTARY PAIRS – Going forward, we will maintain the EUR, JPY, AUD, SGD, GBP and XAU outlook while adding just key technical

levels for the supplementary pairs

We remain neutral on USD/CNH

Technical Analysis: USD/CNH


We remain bullish on USD/ZAR

Technical Analysis: USD/ZAR


We remain bearish on NZD/USD

Technical Analysis: NZD/USD


6.185

6.230

6.10

6.15

6.20

6.25

6.30


US

D/C

NH

USD/CNH 50 dma 100 dma 200 dma

12.050

12.855

9.8

10.2

10.6

11.0

11.4

11.8

12.2

12.6

13.0

13.4


US

D/Z

AR

USD/ZAR 50 dma 100 dma 200 dma

0.640

0.675

0.60

0.65

0.70

0.75

0.80

0.85

0.90

Jun-13 Sep-13 Jan-14 May-14 Aug-14 Dec-14 Apr-15 Aug-15

NZ

D/U

SD

NZD/USD 50 dma 100 dma 200 dma

50 dma 100 dma 200 dma6.2073 6.2187 6.2029

50 dma 100 dma 200 dma12.1756 12.0811 11.7176

50 dma 100 dma 200 dma0.7101 0.7316 0.7519



We remain bullish on USD/CHF

Technical Analysis: USD/CHF


We remain bullish on USD/SEK

Technical Analysis: USD/SEK


We remain bullish on USD/CAD

Technical Analysis: USD/CAD


0.940

0.972

0.830.850.870.890.910.930.950.970.991.011.031.051.07

Jun-13 Oct-13 Jan-14 May-14 Sep-14 Dec-14 Apr-15 Aug-15

US

D/C

HF

USD/CHF 50 dma 100 dma 200 dma

8.400

8.800

6.0

6.4

6.8

7.2

7.6

8.0

8.4

8.8

9.2


US

D/S

EK

USD/SEK 50 dma 100 dma 200 dma

1.282

1.332

0.96

1.01

1.06

1.11

1.16

1.21

1.26

1.31

1.36


US

D/C

AD

USD/CAD 50 dma 100 dma 200 dma

50 dma 100 dma 200 dma8.3214 8.4422 8.0855

50 dma 100 dma 200 dma1.2334 1.2403 1.2053

50 dma 100 dma 200 dma0.9338 0.9505 0.9527



Interest Rate Differentials FX Implied Volatility

Measures the yield of holding the foreign currency relative to the base currency

An appropriate indicator used to gauge future expectations of price movements based on FX options market pricing

EUR/USD EUR/USD

USD/JPY USD/JPY

AUD/USD AUD/USD

USD/SGD USD/SGD

GBP/USD GBP/USD


1.0

1.1

1.2

1.3

1.4

1.5

1.6

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

Dec-09 May-11 Oct-12 Mar-14 Jul-15

EU

R/U

SD

%

Difference between EUR and USD 2 yr swap EUR/USD (RHS)

2

7

12

17

22

Jan-11 Feb-12 Apr-13 Jun-14 Aug-15

2W Implied Volatility

75

85

95

105

115

125

135

0.0

0.2

0.4

0.6

0.8

1.0

1.2


US

D/J

PY

%

Difference between USD and JPY 2 yr swap USD/JPY (RHS)

2

7

12

17

22



0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

0

1

2

3

4

5

6


AU

D/U

SD

%

Difference between AUD and USD 2 yr swap AUD/USD (RHS)

2

6

10

14

18

22



1.15

1.20

1.25

1.30

1.35

1.40

1.45

-1.0

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6


US

D/S

GD

%

Difference between USD and SGD 2 yr swap USD/SGD (RHS)

2

7

12

17



1.4

1.5

1.6

1.7

1.8

-0.2

0.3

0.8

1.3

1.8

2.3


GB

P/U

SD

%

Difference between GBP and USD 2 yr swap GBP/USD (RHS)

3

5

7

9

11

13

15

17





TECHNICAL INDICATORS – EXPLANATORY APPENDIX

RSI (Relative Strength Index) – The RSI indicators can be used to describe the speed at which prices move over a given time period. An RSI above 70 can indicate a currency pair is overbought while an RSI below 30 can indicate the pair is oversold.

Stochastic Oscillator – The Stochastic Oscillator compares where a security's price closed relative to its trading range over a given time period. The security or index is generally considered oversold when the Oscillator falls to 20%, while a reading of 80% is considered overbought.

MACD (The Moving Average Convergence/Divergence) – This indicator shows the relationship between two moving averages of prices. A bearish signal is provided when the main moving average line drops below the second moving average line, and vice versa.

ADX (Average Directional Index) – This indicator quantifies a trend's strength regardless of whether it is up or down. An index rising above zero provides a bullish signal while an index falling below zero provides a bearish signal.

Momentum Indicator – The momentum of a security is the ratio of today's price compared to the price at a given point in the past. If the security's price is higher today, the momentum indicator will be considered strong. If the security's price is lower today, the momentum Indicator will be weak.


12

Disclosure Appendix This document is not research material and it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. This document does not necessarily represent the views of every function within the Standard Chartered Bank, particularly those of the Global Research function.

Standard Chartered Bank is incorporated in England with limited liability by Royal Charter 1853 Reference Number ZC18. The Principal Office of the Company is situated in England at 1 Basinghall Avenue, London, EC2V 5DD Standard Chartered Bank is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority.

In Dubai International Financial Centre (“DIFC”), the attached material is circulated by Standard Chartered Bank DIFC on behalf of the product and/or Issuer. Standard Chartered Bank DIFC is regulated by the Dubai Financial Services Authority (DFSA) and is authorised to provide financial products and services to persons who meet the qualifying criteria of a Professional Client under the DFSA rules. The protection and compensation rights that may generally be available to retail customers in the DIFC or other jurisdictions will not be afforded to Professional Clients in the DIFC.

Banking activities may be carried out internationally by different Standard Chartered Bank branches, subsidiaries and affiliates (collectively “SCB”) according to local regulatory requirements. With respect to any jurisdiction in which there is a SCB entity, this document is distributed in such jurisdiction by, and is attributable to, such local SCB entity. Recipients in any jurisdiction should contact the local SCB entity in relation to any matters arising from, or in connection with, this document. Not all products and services are provided by all SCB entities.

This document is being distributed for general information only and it does not constitute an offer, recommendation, solicitation to enter into any transaction or adopt any hedging, trading or investment strategy, in relation to any securities or other financial instruments. This document is for general evaluation only, it does not take into account the specific investment objectives, financial situation, particular needs of any particular person or class of persons and it has not been prepared for any particular person or class of persons.

Opinions, projections and estimates are solely those of SCB at the date of this document and subject to change without notice. Past performance is not indicative of future results and no representation or warranty is made regarding future performance. Any forecast contained herein as to likely future movements in rates or prices or likely future events or occurrences constitutes an opinion only and is not indicative of actual future movements in rates or prices or actual future events or occurrences (as the case may be).

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SCB makes no representation or warranty of any kind, express, implied or statutory regarding, but not limited to, the accuracy of this document or the completeness of any information contained or referred to in this document. This document is distributed on the express understanding that, whilst the information in it is believed to be reliable, it has not been independently verified by us. SCB accepts no liability and will not be liable for any loss or damage arising directly or indirectly (including special, incidental or consequential loss or damage) from your use of this document, howsoever arising, and including any loss, damage or expense arising from, but not limited to, any defect, error, imperfection, fault, mistake or inaccuracy with this document, its contents or associated services, or due to any unavailability of the document or any part thereof or any contents.

SCB, and/or a connected company, may at any time, to the extent permitted by applicable law and/or regulation, be long or short any securities, currencies or financial instruments referred to on this document or have a material interest in any such securities or related investment, or may be the only market maker in relation to such investments, or provide, or have provided advice, investment banking or other services, to issuers of such investments. Accordingly, SCB, its affiliates and/or subsidiaries may have a conflict of interest that could affect the objectivity of this document.

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Copyright: Standard Chartered Bank 2015. Copyright in all materials, text, articles and information contained herein is the property of, and may only be reproduced with permission of an authorised signatory of, Standard Chartered Bank. Copyright in materials created by third parties and the rights under copyright of such parties are hereby acknowledged. Copyright in all other materials not belonging to third parties and copyright in these materials as a compilation vests and shall remain at all times copyright of Standard Chartered Bank and should not be reproduced or used except for business purposes on behalf of Standard Chartered Bank or save with the express prior written consent of an authorised signatory of Standard Chartered Bank. All rights reserved. © Standard Chartered Bank 2015.

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fx strat 3.8.2015 pvb - standard chartered · 24 july 2015 to 31 july 2015 source: bloomberg,...

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