DAILY FX OUTLOOK Wednesday, October 15, 2014 Major FX Themes  The dollar bounced higher across the board on Tuesday following disappointing EZ (German ZEW, EZ industrial production) and UK (CPI) data points. The greenback also received a boost after the Fed’s Williams (voter in 2015), in fairly balanced remarks, downplayed risks from external growth concerns, reiterated that the Fed trajectory remained a function of inflation and wage developments, and continued to expect a rate hike in mid-2015. Meanwhile, the JPY also benefitted across the board on softening yen-crosses. FX Strategy/Trading Ideas – Medium Term G7 Heat Map  With global growth worries continuing to circulate and crude plumbing lower, the FXSI (FX Sentiment Index) continued to push deeper into Risk-Off territory on Tuesday. Expect the greenback to derive some support at the margins from latest Fed speak, with the Fed’s Mester also cited in the NYT as saying that she hasn’t reduced her growth or inflation outlook on account of the global economic outlook. In addition, she noted that the appreciation of the dollar would have to be on a sustained basis before she would consider altering her outlook.  In our refreshed medium-term FX Heat Map, we have the USD still firmly at the helm across G7 space, especially with the taper slated to terminate at the FOMC at the end of this month. Elsewhere in Asia and outside of renminbi space, we think the regional currencies have also essentially (and finally) latched on to the potential stronger dollar dynamic at this juncture.  Elsewhere, our 22 Sep 14 idea to be short EUR-GBP (0.7864) was stopped out on 13 Oct14 at 0.7925 for an implied -0.73% loss as the luster attached to BOE rate hike expectations were likely suspended amid cited position adjustments.  On the Asian front, our 10 Jul 14 recommendation for a 3M short SGD-MYR (outright: 2.5673) expired at implied 2.5621 on Tuesday, barely yielding an implied +0.20% gain as risk appetite jitters and recent BNM neutrality saw the MYR underperform. Corporate FX & Structured Products Tel: 6349-1888 / 1881 Fixed Income & Structured Products Tel: 6349-1810 Investments & Structured Product Tel: 6349-1886 Interest Rate Derivatives Tel: 6349-1899 Treasury Research & Strategy Tel: 6530-4887 Emmanuel Ng +65 6530 4073 Asian FX ngcyemmanuel@ocbc.com  The dollar also firmed against EM currencies on Tuesday with the ACI (Asian Currency Index) ticking higher on the day. Amid evaporating net portfolio capital inflows and soft recovery prospects (note BOK cut 25bps to 15 October 2014 Daily FX Outlook 2.00% as expected this morning while India’s September CPI inflation dipped), expect any resurgence in broad dollar strength (driven either by the Fed or risk aversion) to negative impact the regional currencies. In the interim, markets may also continue to monitor data releases out of China (note the easing 14-day repo rate yesterday), with September CPI numbers due today (0130 GMT) and monetary aggregates due in the latter part of this week. We stay positive on CNH prospects in the interim.  The SGD NEER is perceptibly softer this morning at around +0.38% above its perceived parity with yesterday’s MAS MPS (Monetary Policy Statement) essentially a non-mover. Amid risk aversion and global growth jitters, note also that the index has softened in the current week with the SGD underperforming the USD, JPY and CNY. Meanwhile, NEER-implied USDSGD thresholds are also higher this morning with the pair expected to trade in the upper reaches of a 1.2730-1.2830 range in the near term. On other fronts, expect the USD-MYR to also react higher within a 3.2700-3.2800 range. Asian Curreny Index 106 105 104 103 102 101 Current SGD NEER % deviation 122.71 0.35 USD-SGD 1.2768 10/10/2014 10/09/2014 10/08/2014 10/07/2014 10/06/2014 10/05/2014 10/04/2014 10/03/2014 10/02/2014 10/01/2014 100 +2.00% Parity -2.00% 124.73 122.28 119.83 1.2565 1.2816 1.3078 Source: OCBC Bank G7  Treasury & Strategy Research  EUR-USD Apart from the disappointing data points, the EUR was also weighed by Fitch putting the ratings of France on Rating Watch Negative and growth downgrades from the German government. Expect potential for further bearishness with the ECB’s Draghi scheduled to make two appearances today and German September inflation numbers also on tap. With the pair dissolving below 1.2700 once again, prospects of a test towards 1.2600 may once again loom with markets likely to fade any upticks intra-day.  USD-JPY Sinking UST yields and yield differentials, coupled with risk aversion, continued to keep the USD-JPY suppressed on Tuesday. US retail sales and the Beige Book later today present additional event risks and we maintain a heavy tone for the pair. We continue to watch for a sustained break below the 107.00 floor ahead of the Fibo retracement level around 106.80 and another interim support at 106.60. 2 15 October 2014 Daily FX Outlook  AUD-USD Expect investors to remain wary of upside probes at this juncture in the face of global economic concerns and if 0.8700 is violated, a re-test towards the recent lows of 0.8643 cannot be discounted.  GBP-USD With disappointing September CPI readings pulling gilt futures higher and with markets attempting to defer odds of a BOE rate hike, GBP-USD sliced below 1.6000 and note that the pair has broken below 1.5900 early Wednesday in Asia. Labor market readings are also due today and with the GBP-USD at a year-to-date low, risks for the pair remain towards south. FX Sentiment Index 3.5 3.0 2.5 RISK OFF 2.0 1.5 1.0 0.5 0.0 -0.5 -1.0 RISK ON -1.5 3-Oct-14 3-Apr-14 3-Oct-13 3-Apr-13 3-Oct-12 3-Apr-12 3-Oct-11 3-Apr-11 3-Oct-10 3-Apr-10 3-Oct-09 3-Apr-09 3-Oct-08 3-Apr-08 3-Oct-07 3-Apr-07 3-Oct-06 3-Apr-06 3-Oct-05 -2.0 Source: OCBC Bank 1M Correlation Matrix DXY CHF SGD TWD CAD PHP THB IDR MYR KRW INR CCN12M JPY CNH CNY USGG10 GBP AUD NZD EUR DXY USGG10 1.000 -0.719 0.975 -0.737 0.940 -0.656 0.864 -0.797 0.852 -0.755 0.834 -0.606 0.825 -0.764 0.823 -0.877 0.797 -0.639 0.789 -0.938 0.777 -0.535 0.527 -0.144 0.344 0.187 0.195 0.183 -0.283 0.386 -0.719 1.000 -0.729 0.767 -0.935 0.707 -0.947 0.759 -0.988 0.702 CNY -0.283 -0.240 -0.261 -0.098 -0.471 -0.053 -0.162 -0.195 -0.058 -0.289 0.058 0.196 0.365 0.643 1.000 0.386 0.418 0.322 0.213 0.246 SPX MSELCA -0.578 -0.828 -0.554 -0.804 -0.483 -0.782 -0.593 -0.893 -0.746 -0.825 -0.438 -0.794 -0.571 -0.775 -0.689 -0.923 -0.445 -0.812 -0.751 -0.899 -0.400 -0.690 -0.193 -0.416 0.394 0.067 0.192 0.040 0.526 0.409 0.893 0.915 0.708 0.754 0.590 0.833 0.623 0.844 0.533 0.812 CRY -0.625 -0.577 -0.623 -0.546 -0.662 -0.461 -0.498 -0.567 -0.487 -0.655 -0.282 -0.124 0.057 0.301 0.609 0.699 0.570 0.677 0.519 0.602 GC1 -0.685 -0.702 -0.701 -0.580 -0.333 -0.560 -0.602 -0.463 -0.543 -0.477 -0.427 -0.199 -0.699 -0.225 -0.147 0.388 0.241 0.571 0.569 0.687 CL1 -0.525 -0.515 -0.526 -0.523 -0.692 -0.336 -0.602 -0.672 -0.395 -0.764 -0.290 -0.011 0.442 0.428 0.660 0.891 0.764 0.540 0.495 0.49 VIX 0.540 0.492 0.464 0.578 0.714 0.486 0.474 0.667 0.496 0.689 0.413 0.249 -0.348 -0.180 -0.522 -0.845 -0.606 -0.605 -0.605 -0.493 ITRXEX 0.475 0.504 0.472 0.589 0.617 0.395 0.650 0.758 0.441 0.809 0.399 -0.048 -0.511 -0.412 -0.518 -0.883 -0.721 -0.483 -0.545 -0.448 Source: Bloomberg Treasury & Strategy Research 3 15 October 2014 Daily FX Outlook Immediate technical support and resistance levels EUR-USD GBP-USD AUD-USD NZD-USD USD-CAD USD-JPY S2 1.2523 1.5750 0.8643 0.7709 1.1308 107.00 S1 1.2600 1.5800 0.8700 0.7800 1.1314 107.02 Current 1.2639 1.5889 0.8703 0.7825 1.1317 107.34 R1 1.2700 1.5898 0.8800 0.7900 1.1400 108.00 R2 1.2920 1.5900 0.8974 0.8176 1.1450 110.09 USD-SGD EUR-SGD JPY-SGD GBP-SGD AUD-SGD 1.2644 1.6012 1.1800 2.0197 1.1031 1.2700 1.6100 1.1850 2.0200 1.1100 1.2767 1.6136 1.1896 2.0286 1.1111 1.2796 1.6200 1.1897 2.0300 1.1200 1.2800 1.6352 1.1900 2.0344 1.1364 1198.49 16.73 1200.00 17.30 1230.90 17.35 1236.03 17.40 1254.28 18.09 Gold Silver Source: OCBC Bank FX performance: 1-month change agst USD 2.0 % 1.0 0.0 -1.0 -2.0 -3.0 -4.0 -5.0 ZAR RUB PLN TRY HUF ARS CLP MXN BRL COP CNY TWD INR KRW PHP IDR THB MYR SEK SGD JPY NOK CHF NZD CAD AUD GBP -7.0 EUR -6.0 Source: Bloomberg Medium Term G10 FX Heat Map AUD AUD NZD 2 NZD 2 EUR 1 2 GBP 1 2 EUR GBP 1 1 9 1 1 1 2 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 JPY JPY 9 1 1 1 CAD 1 1 1 1 2 USD 1 1 1 1 2 SGD 1 1 1 1 CAD 2 USD 2 1 9 2 9 1 2 2 2 Source: OCBC Bank Treasury & Strategy Research SGD 4 15 October 2014 Daily FX Outlook G10 FX Heat Map AUD NZD AUD EUR GBP 2 2 1 9 1 1 2 2 1 9 1 1 1 2 2 2 1 2 1 9 1 NZD 1 EUR 2 2 GBP 2 2 JPY 2 2 JPY 1 1 1 1 CAD 9 9 2 2 1 USD 1 1 2 1 1 SGD 1 1 2 9 CAD USD 1 SGD 1 2 2 1 2 2 2 1 2 Source: OCBC Bank Asia FX Heat Map USD USD JPY CNY SGD MYR KRW TWD THB PHP INR IDR 1 2 2 2 2 2 2 2 2 2 1 2 2 2 1 2 2 2 2 1 1 2 2 2 2 1 2 2 2 2 2 2 1 2 2 1 1 1 1 2 2 2 2 2 1 2 1 1 2 1 1 2 1 2 JPY 1 CNY 2 1 SGD 2 2 1 MYR 2 2 1 2 KRW 2 2 2 2 2 TWD 2 1 2 2 1 2 THB 2 2 2 2 1 2 2 PHP 2 2 2 2 1 2 1 1 INR 2 2 1 1 1 2 1 1 1 IDR 2 2 2 2 2 1 2 2 2 2 2 Source: OCBC Bank Treasury & Strategy Research 5 15 October 2014 Daily FX Outlook This publication is solely for information purposes only and may not be published, circulated, reproduced or distributed in whole or in part to any other person without our prior written consent. 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