Download Report

Please note and carefully read the
Important Disclosure on the last page
Daily FX & Market Commentary
Nov 7, 2014
Published from Tuesday to Friday
Market Recap
• Japanese stocks fell: TOPIX Index fell
1.1% after gaining five days in a row, led by
real estate developers and utilities stocks,
as the stock market remains in ‘overbought’
territory with the 14-day Relative Strength
Index at around 65 on the close.
• U.S. stocks slightly rose: S&P 500 Index
rose 0.3%, as first-time jobless claims
dropped to a three-week low for the week
ended of Nov 1 and Tesla Motors rose
4.4% after citing a surge in orders and rosy
sales growth.
• European stocks slightly rose: Europe
Stoxx 600 Index rose 0.2% after the
European Central Bank president reiterated
plans to revive the euro zone economy by
increasing the ECB’s balance sheet.
Table: Daily Market Movement (Nov 6, 2014)
Equity Market Indices
U.S.
Close Change
% Commodity Futures
Energy & Metals
Close
%
S&P 500 Index
Dow Jones Industrial Average
NASDAQ Composite Index
Europe
2,031.21
17,554.47
4,638.47
+7.6
+69.9
+17.7
+0.4% WTI Crude Oil (USD/bbl)
+0.4% Brent Crude (USD/bbl)
+0.4% Natural Gas (USD/MMBtu)
COMEX Gold (USD/oz)
77.91
82.86
4.40
1,142.6
-1.0%
-0.1%
+5.0%
-0.3%
Stoxx Europe 600 Index
DAX Index
Japan
TOPIX Index
Nikkei 225 Stock Average
China / Hong Kong
Hang Seng Index
Hang Seng China Enterprises
337.08
9,377.41
+0.7
+61.9
6,638.0
0.0%
1,356.35
16,792.48
-15.4
-144.8
23,649.31
10,568.69
-46.3
-53.3
+0.2% LME Copper (USD/MT)
+0.7% Bond Yields & CNY
U.S. Treasuries - Yields
-1.1% 3-Month - Yield (%)
-0.9% 5-Year - Yield (%)
10-Year - Yield (%)
-0.2% 30-Year - Yield (%)
-0.5% USD/CNY
2,425.86
+6.6
+0.3% China Renminbi Spot
Shanghai SE Composite
Close Change
0.02
0.00
1.67
+0.04
2.39
+0.04
3.10
+0.04
Close
%
6.11
0.0%
Data Source: Bloomberg L.P.
Hot News: EUR may fall further amid more easing ahead
Chart: EUR/USD – Monthly Chart
head and shoulder target: 1.2340
1.2043 (July
2012 low)
1.2223 (200MA)
Source: Bloomberg L.P., as of November 7, 2014
EUR/USD plunged yesterday
• The ECB Governing Council (GC) left all its key rates
unchanged. But the introductory statement included a
couple of significant changes, reflecting a more
dovish GC, which suppressed the EUR.
• EUR/USD plunged 0.9% to close at 1.2375 yesterday.
Citi analysts’ view :
• First, a balance sheet target was reinforced with
specific references to the “dimensions it had at the
beginning of 2012”. The implicit balance sheet
expansion target is therefore €1tn.
• Second, the statement highlighted a new degree of
urgency about the need to “closely monitor and
continuously assess the appropriateness of its
monetary policy stance“.
• Draghi highlights 2 contingencies for further easing:
i) if measures were not enough [to increase the
balance sheet] and ii) if the price outlook
deteriorated further.
• We think that both contingencies are likely to be
triggered at some point in the next few months.
• The best strategy for ECB to expand the balance
sheet meaningfully may require government
bonds to be added to the list of instruments. The
door to QE is now wide open. This will likely be
EUR-negative.
• On technical analysis(chart), EUR/USD may
break below the 1.2340 of head & shoulder’s target
and may fall toward the 200MA of 1.2223.
© 2014 Citibank
Citibank and Arc Design is a registered service mark of Citibank, N.A. or Citigroup Inc. Citibank (Hong Kong) Limited
1
Please note and carefully read the
Important Disclosure on the last page
Daily FX & Market Commentary
FX & Commodity Technical Corner
YESTERDAY PERFORMANCE
FX TREND
TECHNICAL
CCY
Close Price
Day High
Day Low
88.07
1.2375
115.21
1.5832
1.1423
0.8559
0.7691
0.9733
1.2960
1141.85
88.15
1.2533
115.52
1.6002
1.1444
0.8627
0.7759
0.9738
1.2964
1149.76
87.13
1.2365
114.06
1.5824
1.1379
0.8554
0.7668
0.9604
1.2910
1138.26
USD
EUR/USD
USD/JPY
GBP/USD
USD/CAD
AUD/USD
NZD/USD
USD/CHF
USD/SGD
GOLD
Short Term
Comment
Bullish
Bearish
Bullish
Neutral
Bullish
Neutral
Neutral
Neutral
Neutral
Neutral
Support
Resistance
84.75
1.2223
110.66
1.5752
1.1238
0.8545
0.7668
0.9156
1.2590
$1,032
88.70
1.2656
117.69
1.6227
1.1505
0.8899
0.8052
0.9839
1.2860
$1,200
Citi Foreign Exchange
Forecast:
0-3
Months
87.59
1.23
109.00
1.60
1.15
0.86
0.77
0.98
1.28
1200
6-12
Months
92.65
1.15
115.00
1.51
1.18
0.80
0.72
1.05
1.30
1240
FX Rate Source: Bloomberg L.P. (cut off time is NY Time 5:00pm)
•
•
•
•
USD rose: U.S. Initial Claims fell unexpectedly from 288K to 278K last week.
EUR plunged: The ECB kept rates unchanged and hinted for more easing at yesterday’s policy meeting.
CAD weakened: Canada Ivey PMI fell from 58.6 to 51.2 in Oct, trailed market estimates.
JPY fell: Yield spreads between U.S. and Japan widened yesterday, which suppressed the JPY.
Daily FX Focus
EUR/GBP may drop to 0.7693-0.7755:
0.8000
0.7693-0.7755
EUR/GBP Outlook:
• Citi analysts anticipate the ECB to implement
QE in late 2014 or early 2015, while the BOE
may raise rates in Q2 2015. EUR may
underperform the GBP.
• In addition, we expect the Eurozone economy
may only grow 1.1% in 2015, while U.K.
economy may grow 3.2%. Under this situation,
EUR/GBP may have further downside in
medium term.
• Citi analysts expect the EUR/GBP to fall to 0.77
and 0.76 for the coming 0-3 months and 6-12
months respectively.
Source: Bloomberg L.P., data as of Nov 7, 2014
Technical Analysis:
• 1) RSI; Trending down; 2) Within downtrend channel
• Since RSI is trending down, EUR/GBP may continue the downside and may fall further to 0.7693-0.7755, with
resistance at 0.8000.
Data to be released for the next 24 hours:
• No important economic data will be released.
NOTE: The brackets are the exchange rates in terms of Hong Kong dollar, with HKD $7.75 exchange rate for reference, and 1,000 yen per unit for JPY/HKD.
© 2014 Citibank
Citibank and Arc Design is a registered service mark of Citibank, N.A. or Citigroup Inc. Citibank (Hong Kong) Limited
2
Please note and carefully read the
Important Disclosure on the last page
Daily FX & Market Commentary
USD/JPY may rise toward 117.69:
121.07 (Dec
2012 top)
117.69 (Oct 2007 top)
110.66 (Aug 2008 top)
JPY Outlook:
• Prospects for economic policy reforms that can
strengthen the fiscal outlook are unlikely to
change following Mid-term elections. The Fed
will likely hike rates in Sep 2015, which may
support the USD in medium to long term.
• BoJ Governor Kuroda at yesterday’s speech
still recognized the weaker yen positively and
expressed the bank’s unshakable will to
overcome the deflation. We anticipate the BOJ
to expand QE again in order to uplift the
inflation level, which may undermine the JPY.
Source: Bloomberg L.P., data as of Nov 7, 2014
Technical Analysis:
• 1) RSI; Overbought; 2) MACD: Crossover; 3) Breach 110.09 resistance
• Technical signals still reflect the USD/JPY to rise toward 117.69, with support at 110.66 in the short term.
Investment Market Update
Coming data release may show strong China’s export
growth while domestic demand remains weak
Chart: Citi analysts’ forecast for China’s
Oct economic data
Data
Date For
8-Nov Oct
Trade Balance (US$ bn)
Exports (%YoY)
Imports (%YoY)
10-Nov Oct
CPI (%YoY)
PPI (%YoY)
Nov 10 - 15 Oct
M0 Supply (%YoY)
M1 Supply (%YoY)
M2 Supply (%YoY)
New Yuan Loans (RMB bn)
13-Nov Oct
IP (%YoY)
FAI -urban (%YoY, ytd)
Retail Sales (%YoY)
Source: Bloomberg L.P. and Citi analysts' forecasts, as of
November 3, 2014
Citi analysts'
forecasts Previous
43.4
30.96
11.3
15.3
5.6
7
1.8
1.6
-2
-1.8
4.2
5
4.8
12.8
12.9
595
857.2
7.9
8
15.7
16.1
11.8
11.6
China to report economic data for October:
• China will release trade data for October on Nov 8. It
will also report CPI and Industrial Production (IP)
growth data next week.
• Earlier this month, China released the official
manufacturing PMI, which fell to a five-month low of
50.8 in Oct. Most sub-indices, including those for new
orders and production, declined.
Citi analysts’ view:
• The official PMI new export order index in Oct was
still higher than the average since the beginning of
the year, indicating solid recovery in the U.S.
• China’s export growth may reach 11.3% year-onyear (yoy) in Oct (Sep: 15.3%) and import growth
may slow from 7.0%yoy to 5.6%yoy. Trade surplus
may increase from $30.9bn in Sep to $43.4bn in
Oct, and should still provide support to RMB.
• Based on data available during the month (up to 24
Oct), overall food prices rose by about 0.2% during
the month. CPI inflation yoy may edge up from
1.6% in Sep to 1.8% in Oct.
• Weak demand and high inventory may continue to
weigh on production. Industrial Production growth
may fall from 8.0%yoy in Sep to 7.9%yoy in Oct.
• Citi analysts believe the targeted easing measures
may not effectively bring down the cost of funding.
Traditional counter-cyclical measures, including
a benchmark rate cut, may be used as early as
in 4Q to contain the downside risks.
NOTE: The brackets are the exchange rates in terms of Hong Kong dollar, with HKD $7.75 exchange rate for reference, and 1,000 yen per unit for JPY/HKD.
© 2014 Citibank
Citibank and Arc Design is a registered service mark of Citibank, N.A. or Citigroup Inc. Citibank (Hong Kong) Limited
3
Daily FX & Market Commentary
Important Economic Data (Nov 3, 2014 – Nov 7, 2014)
Time
Importance
Event
Period Actual
!
Non-manufacturing PMI
Oct
Survey
Prior
53.8
--
54
50.7
Monday
11/03/2014 09:00
CH
11/03/2014 17:00
EC
!!
Markit Eurozone Manufacturing PMI
Oct
50.6
50.7
11/03/2014 17:30
UK
!!
Markit UK PMI Manufacturing SA
Oct
53.2
51.4
51.5
11/03/2014 23:00
US
!!
ISM Manufacturing
Oct
59.0
56.1
56.6
11/04/2014 08:30
AU
!!
Retail Sales MoM
Sep
1.20%
0.30%
0.10%
11/04/2014 11:30
AU
!!!
RBA Cash Rate Target
Nov
2.50%
2.50%
2.50%
11/04/2014 21:30
CA
!
Int'l Merchandise Trade
Sep
0.71B
-0.30B
-0.46B
11/04/2014 21:30
US
!
Trade Balance
Sep
-$43.0B -$40.2B
-$40.0B
11/05/2014 05:45
NZ
!!
Unemployment Rate
Tuesday
Wednesday
3Q
5.40%
5.50%
5.60%
3.70%
11/05/2014 05:45
NZ
!!
Employment Change YoY
3Q
3.20%
3.10%
11/05/2014 07:50
JN
!!
BOJ Minutes
Oct
--
--
--
11/05/2014 21:15
US
!!
ADP Employment Change
Oct
230K
220K
225K
11/06/2014 08:30
AU
!!
Employment Change
Oct
24.1K
20.0K
-23.7K
11/06/2014 08:30
AU
!!
Unemployment Rate
Oct
6.20%
6.10%
6.20%
11/06/2014 17:30
UK
!!
Industrial Production YoY
Sep
1.50%
1.60%
2.20%
11/06/2014 17:30
UK
!!
Manufacturing Production YoY
Sep
2.90%
2.80%
4.00%
11/06/2014 20:00
UK
!!!
Bank of England Bank Rate
Nov
0.50%
0.50%
0.50%
11/06/2014 20:45
EC
!!!
ECB Main Refinancing Rate
Nov
0.05%
0.05%
0.05%
11/06/2014 21:30
US
!!
Initial Jobless Claims
Nov
278K
285K
288K
11/06/2014 23:00
CA
!
Ivey Purchasing Managers Index SA
Oct
51.2
57.3
58.6
6.80%
Thursday
Friday
11/07/2014 21:30
CA
!!
Unemployment Rate
Oct
--
6.80%
11/07/2014 21:30
CA
!!
Net Change in Employment
Oct
--
0.0K
74.1K
11/07/2014 21:30
US
!!!
Unemployment Rate
Oct
--
5.90%
5.90%
11/07/2014 21:30
US
!!!
Change in Nonfarm Payrolls
Oct
--
230K
248K
For any enquiries, please call (852) 2860-0333.
Source: Source: Bloomberg L.P.
(K = Thousand, M = Million, B = Billion)
This document is based on information provided by Citigroup Investment Research, Citigroup Global Markets, Citigroup Global Wealth Management and Citigroup Alternative Investments. It is
provided for your information only. It is not intended as an offer or solicitation for the purchase or sale of any security. Information in this document has been prepared without taking account of the
objectives, financial situation or needs of any particular investor. Accordingly, investors should, before acting on the information, consider its appropriateness, having regard to their objectives, financial
situation and needs. Any decision to purchase securities mentioned herein should be made based on a review of your particular circumstances with your financial adviser. Investments referred to in
this document are not recommendations of Citibank (Hong Kong) Limited (“Citibank”) or its affiliates. Although information has been obtained from and is based upon sources that Citibank believes to
be reliable, Citi analysts do not guarantee its accuracy and it may be incomplete and condensed. All opinions, projections and estimates constitute the judgment of the author as of the date of
publication and are subject to change without notice. Prices and availability of financial instruments also are subject to change without notice. Past performance is no guarantee of future results. The
document is not to be construed as a solicitation or recommendation of investment advice. Subject to the nature and contents of the document, the investments described herein are subject to
fluctuations in price and/or value and investors may get back less than originally invested. Certain high-volatility investments can be subject to sudden and large falls in value that could equal the
amount invested. Certain investments contained in the document may have tax implications for private customers whereby levels and basis of taxation may be subject to change. Citibank does not
provide tax advice and investors should seek advice from a tax adviser. Investment products: (i) are not insured by the Federal Deposit Insurance Corporation; (ii) are not deposits or other obligations
of any insured depository institution (including Citibank); and (iii) are subject to investment risks, including the possible loss of the principal amount invested. Citi Foreign Exchange: Forecasts are a
joint venture between Citi’s foreign exchange, global macro and technical strategy groups and our developed and emerging markets economists. Under normal circumstances, we expect to present
Forecasts on a monthly schedule although we may offer intra month updates if circumstances dictate. Technical Trend: All views, opinions and estimates derived from CitiFX Technicals (i) may
change without notice and (ii) may differ from those views;, opinions and estimates held or expressed by Citi or other Citi personnel, including Citi Foreign Exchange: Forecast. Should CitiFX
Technicals not cover any major currency pairs, the indication of short-term technical "bullish", "bearish", or "neutral" trends will be based on the result of analysis with various widely known short-term
technical analysis tools, namely RSI, MACD, fibonacci, stochastics, bollinger bands, and simple moving averages.
4