FX | Retail Research | 15 May, 2020
FX Summary: Technical Views FX USDSGD EURUSD GBPUSD USDCAD AUDUSD NZDUSD USDCHF USDJPY Medium Term Long Short Short Neutral Short Short Short Short Short Term Long Neutral Short Neutral Short Short Neutral Neutral
Relative Performance over the past 12 months Figure 1: FX Performance Daily Timeframe
Source: Bloomberg, CGS-CIMB RESEARCH
FX Price 1M % Change 3M % Change 6M % Change 12M % Change USDSGD 1.4235 0.68% 2.24% 4.52% 3.99% EURUSD 1.0805 -1.59% -0.24% -1.97% -3.56% GBPUSD 1.2230 -3.11% -6.26% -5.06% -5.23% USDCAD 1.4050 1.20% 6.02% 6.05% 4.37% AUDUSD 0.6462 0.31% -3.75% -4.77% -6.94% NZDUSD 0.6003 -1.69% -6.76% -5.92% -8.71% USDJPY 107.25 0.03% -2.30% -1.08% -2.15% USDCHF 0.973 1.36% -0.94% -1.51% -3.53% DXY 100.47 1.60% 1.35% 2.35% 3.01% Price as of Thursday 14th May 2020, closing price. DXY is the US Dollar Index benchmark
Analyst(s) LIM Say Boon T (852) 2532 1116
Benjamin CHAN T (65) 6210 8848 E [email protected]
Please read carefully the important disclosures at the end of this publication.
FX | Retail Research | 15 May, 2020
Dollar Makes Selective Comeback – Focus on Aussie Easing of risk appetites on equities markets has helped the US Dollar Index DXY stage a rebound. But the strengthening is at this stage still tentative and selective. It was most pronounced against the AUD and the GBP. The outlook for the coming week will depend to a considerable extent on whether the tentative pullback in global equities – driven by US markets – continues on renewed concerns about COVID-19 infections and the sustainability of the easing of social restrictions around the world. The tentative bounce in the Dollar was helped by the bearish tone of an address by Fed Chair Jerome Powell, which warned of “liquidity problems” turning into “solvency problems”. Adding to the tailwinds for the Dollar, Mr. Powell also said the Fed was against negative interest rates. His comments drove US equities down, and the equities volatility index VIX up, taking the DXY up along with it.
Figure 2: DXY Daily Timeframe
Source: Bloomberg, CGS-CIMB RESEARCH
Support 1 (S1): 99.80 Resistance 1 (R1): 100.90 Support 2 (S2): 98.80 Resistance 2 (R2): 101.70 Red line = 200 period EMA, Cyan line = 100 period EMA, Blue line = 50 period EMA, Amber line = 20 period EMA
From the 1-year chart above, the DXY trend is positive. It has recovered from a massive selloff from a low of 94.650 to recover strongly on a 2-week rally to a high of 102.992. It is currently in a major sideways consolidation phase. That sideways consolidation phase has been in the range of the 50% and 78.6% Fibonacci retracement levels, with current price action at the at the 61.8% Fibonacci retracement level.
The direction and slopes of the all four EMAs are indicating the uptrend is still intact. Both the modified MACD and RSI with positive readings confirm that. In addition there are no visible signs of negative divergences on the indicators.
Keep in mind the bullish pin bar as well as the rejection of the 100-day EMA (blue highlight) on the 3rd May 2020, which are signalling further upside ahead. All in, there seems to be a high probability of a breakout taking over in the new couple of weeks. This is likely to be supported by the 20 and 50-day EMAs.
Please read carefully the important disclosures at the end of this publication.
FX | Retail Research | 15 May, 2020
AUDUSD – weak US equities, Aussie jobless surge and trade dispute with China weighed significantly
A notable loser against the Dollar was the AUD. Adding to Jerome Powell’s comments, AUDUSD took another hit when the Australian Bureau of Statistics revealed on 14 May that the unemployment rate had risen from 5.2% in March to 6.2% in April. That is the highest jobless rate since September 2015. But if Australia’s unemployment was measured along US and Canadian lines, it would have been much worse, at 11.7%. That would make it more comparable with the US’ rate of 14.7% and Canada’s 13.0%. And that is before accounting for the understatement of true unemployment masked by JobKeeper, a government subsidy scheme which has kept 6 million people on payrolls even if they had not been working at all. That is a massive cost and a threat to the economy if business does not resume soon. The 6 million on JobKeeper is a huge multiple of the current unemployed total of 823,000 people.
Australia’s deteriorating relations with China would not have helped AUDUSD either. Following the government’s call for an investigation into the origins of COVID-19, China has signalled its plans for an 80% tariff on Australia’s barley exports for alleged “dumping”. China has also suspended imports of beef from selected Australian abattoirs. A Government Senator Concetta Fierravanti-Wells called for Australia to “decouple” its economy from China. Note that exports contribute to 22% of the Australian GDP and China accounts for 38% of total exports.
Aussie likely to grind lower on weaker US stock prices. Our call is for weaker US equities prices in coming weeks. That will maintain some downward pressure on AUDUSD which had made two unsuccessful attempts to break above the 0.650 region, forming a potential bearish double top.
The AUDJPY will come in for particular attention as a risk-on/risk-off trade, given its recent close correlation with the S&P 500. AUDJPY has also carved out a potentially bearish double-top formation, after twice being resisted below 70.18, which coincides with the 61.8% Fibonacci retracement of the decline from 27th December 2019 to 19th March 2020.
USDJPY could edge higher if VIX spikes next week. Bank of Japan Governor Kuroda Haruhiko’s comments at a Financial Times seminar did little to affect USDJPY’s sideways drift. Mr. Kuroda said it was not necessary at this stage to take the BOJ rate deeper negative. But he balanced that saying BOJ would focus on making funds available “to firms through the banking system.” USDJPY barely reacted, trading much in line with the sideways trend set during the week. While the short-term technical outlook is neutral at this stage, there is a bias to mildly stronger USDJPY if US equities volatility spikes higher in the coming week.
Please read carefully the important disclosures at the end of this publication.
FX | Retail Research | 15 May, 2020
Short Term Technical View: AUDUSD – Short
Figure 3: AUDUSD 240mins Timeframe
Source: Bloomberg, CGS-CIMB RESEARCH
Entry Price(s): 0.6440-0.6500 Stop Loss: 0.6580 Target(s): 0.6435, 0.6310, 0.6266 Support 1 (S1): 0.6435 Resistance 1 (R1): 0.6580 Support 2 (S2): 0.6310 Resistance 2 (R2): 0.6670 Red line = 200 period EMA, Cyan line = 100 period EMA, Blue line = 50 period EMA, Amber line = 20 period EMA
Analysis: Since the low at 0.5510 on the 19th March, price action has been on a strong counter-trend rally, forming a series of Higher Highs (HH) and Higher Low (HL). That rally top at a high of 0.6570 on the 30th April. The three-month price action is mildly negative as it has retraced to a high of 0.6570 on the 30th April. It made two unsuccessful attempts to break the resistance level at 0.6580 (R1), potentially forming a potential bearish double top.
Since the second Higher High on the 15th April, price action has been bouncing between the 61.8% Fibonacci retracement level and the first major resistance level at 0.6580 (R1). Price action is currently just under the 50-period EMA.
The direction and the slopes of the slower three 20, 50, and 100-period EMAs are flattish, indicating a lack of current upward strength. The MACD is mildly negative, however signal lines have multiple crossovers. With crossover getting lower and lower, this may signify a change of trend forthcoming. The RSI (49) is firm, however bearish divergence has been sighted and we can expect prices to trend lower.
Strategy: We prefer to sell or accumulate short-selling positions between 0.6430 and 0.6500. Aggressive traders may consider selling now. Keep a stop-loss at or above 0.6580. Expect price action to descend to 0.6310 (S2), in the short-term.
Please read carefully the important disclosures at the end of this publication.
FX | Retail Research | 15 May, 2020
Correlation between S&P500 and AUDUSD & NZDUSD
Figure 4: S&P vs AUDUSD & NZDUSD Timeframe
Source: Bloomberg, CGS-CIMB RESEARCH
Analysis: The AUD and NZD often move in tandem so we compare this against the S&P500. They both track the equities quite closely as shown above.
Please read carefully the important disclosures at the end of this publication.
FX | Retail Research | 15 May, 2020
Short Term Technical View: AUDJPY – Short
Figure 5: AUDJPY 240mins Timeframe
Source: Bloomberg, CGS-CIMB RESEARCH
Entry Price(s): 69.300-69.900 Stop Loss: 70.200 Target(s): 68.600, 67.650 Support 1 (S1): 68.600 Resistance 1 (R1): 70.200 Support 2 (S2): 67.650 Resistance 2 (R2): 71.300 Red line = 200 period EMA, Cyan line = 100 period EMA, Blue line = 50 period EMA, Amber line = 20 period EMA
Analysis: Following the sell-off on the 20th February, AUDJPY reach a bottom of 59.905 on the 19th March. The counter- trend rally accelerated as it formed a series of Higher Highs (HH) and Higher Lows (HL). This rally was firmly halted by the first resistance level at 70.200 (R1), which coincides with the 61.8% Fibonnaci rectracement level. The second time it tested the first resistance level (R1) was also the top of the wedge pattern (pink lines). This then formed a potentially bearish double-top formation.
The three-month price action is negative characterised by the downtrend line (pink line). The direction and the slopes of all four EMAs are flattish, indicating a lack of current strength.
The RSI (51) is firm and has been that way for the past two weeks. The MACD has been and remains neutral for the past two weeks, implying the pair has been in the consolidation phase.
Strategy: We prefer to sell or accumulate short-selling positions between 69.300 and 69.900. Aggressive traders may consider selling now. Keep a stop at or below 70.200 or under the downtrend line (pink line). We expect price action to break down this wedge pattern and test the key second support level at 67.650 (S2).
Please read carefully the important disclosures at the end of this publication.
FX | Retail Research | 15 May, 2020
Short Term Technical View: USDJPY – Neutral
Figure 6: USDJPY 240mins Timeframe
Source: Bloomberg, CGS-CIMB RESEARCH
Entry Price(s): - Stop Loss: - Target(s): - Support 1 (S1): 105.80 Resistance 1 (R1): 108.00 Support 2 (S2): 105.00 Resistance 2 (R2): 109.00 Red line = 200 period EMA, Cyan line = 100 period EMA, Blue line = 50 period EMA, Amber line = 20 period EMA
Analysis: Since reaching the low of 101.19 on the 9th March, the USDJPY tested the downtrend (pink line) to reach a high of 111.71 on the 25th March. This false break past that downtrend line lasted five trading days before trading below this downtrend line.
Following the last update on the 29th April, price action reached very close to our first target of 105.80 reaching a low of 105.82 before bouncing off the descending wedge pattern (pink lines).
USDJPY is currently between the 20-period EMA and 200-period EMA with the 20-period EMA crossing over the 50-period and 100-period EMA. The three-month price action is negative. The RSI (53) is firm and bounced off oversold regions. The MACD is positive and trending higher, indicating short-term trend is likely to rise.
Strategy: We prefer to wait and have a clearer picture of the price action, before taking a fresh position.
Bearish scenario: Aggressive traders may take a short position following the breakdwon into the wedge pattern or under the first support level at 105.80 (S1). Bullish scenario: Aggressive traders may initiate a long position following a break out of the second resistance level at 108.00 (R2).
Please read carefully the important disclosures at the end of this publication.
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RETAIL RESEARCH RECOMMENDATION FRAMEWORK*
FOREIGN EXCHANGE RECOMMENDATIONS LONG: The foreign exchange pair's total return is expected to be between +0.5% and 1% or better over the next three months. NEUTRAL: The foreign exchange pair’s total return is expected to range between +0.5% and -0.5% over the next three months. SHORT: The foreign exchange pair's total return is expected to be between -0.5% and -1% or worse over the next three months. SHORT TERM: The time period for this foreign exchange pair is from 1 week to 1 month. INTERMEDIATE TERM: The time period for this foreign exchange pair is from 1 month to 3 months. MEDIUM TERM: The time period for this foreign exchange pair is from 3 months to 1 year. LONG TERM: The time period for this foreign exchange pair is from 1 year to 5 years. RELATIVE STRENGTH INDICATOR (RSI): In this research report, RSI uses a 14-period timeframe, measured on a scale from 0 to 100, with overbought and oversold levels marked at 70 and 30, respectively. It is a momentum indicator, used as an overbought/oversold market timing tool. MOVING AVERAGE CONVERGENCE DIVERGENCE (MACD) INDICATOR: In this research report, MACD is used as a trend indicator. The modified MACD, which is used in this research report, uses periods of 50 EMA and 200EMA. This will make the indicator less sensitive to short-lived price swings – the MACD will response only to significant corrections and substantial rallies. EXPONENTIAL MOVING AVERAGE (EMA): The EMA provides more weight to the most recent prices in an attempt to better reflect new market data. Here, 20, 50, 100, and 200-period moving averages are used in this research report. COMMITMENT OF TRADERS (CoT): The Commodity Futures Trading Commission (Commission or CFTC) publishes the Commitments of Traders (COT) reports to help the public understand market dynamics. Specifically, the COT reports provide a breakdown of each Tuesday’s open interest for futures and options on futures markets in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC. They are current to Tuesday’s closes, but not published until late Friday’s. The Large Speculators are Banks and Large Financial Money Managers, for example. Small Speculators are people like you and me. And, Commercials are Farmers, Hedgers, Producers, and Factories, for example. Foreign Exchange Commitment of Traders reports are based on the corresponding futures contracts traded on the Chicago Mercantile Exchange