Daily FX & Market Commentary Market Recap Nov 12, 2014

Please note and carefully read the
Important Disclosure on the last page
Daily FX & Market Commentary
Nov 12, 2014
Published from Tuesday to Friday
Market Recap
• U.S. stocks gained slightly: S&P 500
Index was up 0.1% to 2040 for a fifth
straight day gain which was the longest
rally since June, led by homebuilders
stocks. D.R. Horton, the largest U.S.
homebuilder, rose 2.2% as it said last
quarter’s orders had jumped 38%.
• Oil price fell: Brent crude oil futures fell
0.8%, reaching a new four-year low and
WTI crude oil futures fell 0.7% as investors
speculate OPEC may not cut its oil output
at its meeting later this month.
• Japanese stocks rallied: Nikkei 225
Index surged 2% and TOPIX Index rose
1.1% as investors speculate that Japanese
Prime Minister Shinzo Abe may delay the
plan for consumption tax increase.
Table: Daily Market Movement (Nov 11, 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
2,039.68
17,614.90
4,660.56
+1.4
+1.2
+8.9
+0.1% WTI Crude Oil (USD/bbl)
+0.0% Brent Crude (USD/bbl)
+0.2% Natural Gas (USD/MMBtu)
COMEX Gold (USD/oz)
77.94
81.67
4.25
1,163.0
+0.7%
-0.8%
-0.2%
+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
338.93
9,369.03
+1.2
+17.2
6,665.0
0.0%
1,375.21
17,124.11
+15.1
+343.6
23,808.28
10,652.06
+63.6
+36.2
+0.4% LME Copper (USD/MT)
+0.2% Bond Yields & CNY
U.S. Treasuries - Yields
+1.1% 3-Month - Yield (%)
+2.0% 5-Year - Yield (%)
10-Year - Yield (%)
+0.3% 30-Year - Yield (%)
+0.3% USD/CNY
2,469.67
-4.0
Shanghai SE Composite
-0.2% China Renminbi Spot
Close Change
0.02
-0.01
0.00
1.64
2.36
0.00
3.09
0.00
Close
%
6.13
+0.1%
Data Source: Bloomberg L.P.
Hot News: USD/JPY may rise toward 120 level by year-end
Chart: USD/JPY – Weekly Chart
121.15 (Medium term resistance)
117.95 (Oct 2007 top)
Source: Bloomberg L.P. as of Nov 12, 2014
JPY plunged to 7-year low yesterday:
•Market speculated that Japan’s Prime Minister Shinzo
Abe is considering postponing a planned sales-tax
increase and preparing to call early elections next month.
•Nikkei 225 Index surged 2.0% to close at 17,124
yesterday.
•JPY depreciation accelerated and USD/JPY hit 116.10
session high. The pair finally jumped 0.80% to close at
115.78.
Citi analysts’ view:
• One big event is Prime Minister Abe’s decision on
the 2nd tax hike this Dec. We expect the
government to decide to raise the tax next Oct as
presently scheduled.
• We expect that at the G20 meeting in Brisbane on
November 15/16, JPY weakness may not be neither
singled out nor condemned, which may suppress the
JPY further.
• On technical analysis (Chart), the RSI recently
bounced back to overbought level near 80%.
However we use it as a momentum indicator, and
interpret the higher level as indicating that strong
upward momentum is emerging.
• The present upward momentum seems to be as
strong as the downward momentum in 1995 when
USD/JPY declined sharply from 100 to 80.
Considering this experience and the similarity with
the fast move in 1995, we won’t be surprised even
if the pair could climb to 120 in coming months.
• USD/JPY may climb to interim high from Oct 2007
at 117.95. The medium term resistance zone may
find at 121 level.
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Citibank and Arc Design is a registered service mark of Citibank, N.A. or Citigroup Inc. Citibank (Hong Kong) Limited
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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
USD
EUR/USD
USD/JPY
GBP/USD
USD/CAD
AUD/USD
NZD/USD
USD/CHF
USD/SGD
GOLD
Close Price
Day High
Day Low
87.59
1.2475
115.78
1.5919
1.1336
0.8686
0.7808
0.9645
1.2910
1164.29
88.06
1.2499
116.10
1.5945
1.1402
0.8719
0.7842
0.9701
1.2959
1173.36
87.37
1.2395
114.64
1.5835
1.1318
0.8591
0.7713
0.9625
1.2892
1146.32
Short Term
Comment
Bullish
Bearish
Bullish
Neutral
Bullish
Neutral
Neutral
Neutral
Neutral
Neutral
Support
Resistance
84.75
1.2223
110.66
1.5722
1.1238
0.8545
0.7661
0.9156
1.2716
$1,032
88.70
1.2765
117.95
1.6227
1.1505
0.8899
0.8052
0.9839
1.2977
$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 consolidation: Multiple North American markets closed for Veteran’s/Remembrance day yesterday.
• JPY fell: Market speculated that Japan’s Prime Minister Shinzo Abe is considering postponing a planned salestax increase and preparing to call early elections next month.
• NZD rebounded: U.S. equities rose to record high and agriculture commodity prices surged yesterday.
Daily FX Focus
GBP/JPY may test higher to 189.58:
189.58 (Jan 2005 low)
180.72 (Sep top)
GBP/JPY Outlook:
• Surveys suggest that firms‘ hiring intentions
remain very strong in U.K.
• We expect the jobless rate (3-month average)
may drop to 5.9% in Sep and to 4.7% in 2015end while average wage yearly growth may
mildly rise from 0.9% to 1.0%, which may
underpin the GBP’s investment sentiment.
• On the other hand, JPY weakness may persist
as the BOJ may implement additional QE next
year. This will likely undermine the JPY in
medium term.
Source: Bloomberg L.P., data as of Nov 12, 2014
Technical Analysis:
• 1) RSI; Trending up; 2) Breaching major resistance at 180.72
• The technical signals hint that GBP/JPY may rise toward 189.58 in medium term, with support at 180.72.
Data to be released for the next 24 hours:
• U.K. Unemployment Rate (3M average) – Citi: 5.9%; Previous: 6.0%.
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
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Please note and carefully read the
Important Disclosure on the last page
Daily FX & Market Commentary
NZD/USD may range trade between 0.7661-0.8052:
NZD Outlook:
NZ Total Card Spending rose from 0.0% to
1.5% in Oct, implying that the domestic demand
remains strong.
According to Citi’s Economic Surprise Index, the
NZ index rebounded from -19.4 to -8.80,
signaling that NZ data is improving. This may
support the kiwi at the lows in the short term.
However, in the medium term, since the RBNZ
may keep rate unchanged until Q4 2015 and
commodity prices may remain weak, NZD
upside may be limited.
0.8052 (Feb low)
0.7661(Nov low)
Source: Bloomberg L.P., data as of Nov 12, 2014
Technical Analysis:
• 1) RSI; Neutral level; 2) Stochastic: Crossovers
• Technical signals reflect the NZD/USD to remain range trading between 0.7661-0.8052, with mild upside bias.
Investment Market Update
Longer-term outlook for Japanese stocks remains positive
Citi analysts’ view:
Chart: TOPIX Index
Citi analysts’ end-2015
forecast level: 1,550
1600
1500
1400
1300
1200
1100
1000
11/13
01/14
03/14
05/14
07/14
09/14
11/14
Source: Bloomberg. L.P., as of Nov 11, 2014
The TOPIX Index rose 7.5% since BOJ’s end-Oct
stimulus
• The TOPIX Index climbed 1.1% to its highest close
since June 2008 as yen fell as much as 0.8% against
the dollar yesterday.
• Japanese stocks added 7.5% since Oct. 30, the day
before the Bank of Japan expanded stimulus and the
nation’s government pension fund said it will boost
domestic stock holdings.
• In the near term, Citi analysts believe Japanese
equities may see some correction before the formal
decision to raise the consumption tax again in early
Dec but longer-term outlook is still positive.
• Citi analysts remain positive on Japanese equities,
with the view that "quantitative and qualitative
easing" (QQE) is likely to boost demand for
Japanese stocks via ETF purchases, but most
importantly it may raise Japanese equity prices by
improving corporate earnings in Japan via yen
weakness.
• Citi analysts anticipate the TOPIX Index to reach
1,550 by end-2015, about 13% potential upside
from current levels (chart).
• Japanese equities may face headwinds in 2H 2016
through 2017, as 1) yen weakening vs the dollar
may end, 2) the share price awareness of the Abe
administration may weaken after the Upper House
election in July 2016, and 3) if the 2016 inflation
rate does rise to around 2%, the room for additional
monetary easing may shrink.
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
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Daily FX & Market Commentary
Important Economic Data (Nov 10, 2014 – Nov 14, 2014)
Time
Importance
Event
Period Actual
Survey
Prior
Monday
11/10/2014 09:30
CH
!!
CPI YoY
Oct
1.60%
1.60%
1.60%
11/10/2014 21:15
CA
!
Housing Starts
Oct
183.6K
200.0K
197.4K
-¥714.5 -¥782.5B -¥831.8B
Tuesday
11/11/2014 07:50
JN
!!
Trade Balance BoP Basis
Sep
11/11/2014 08:30
AU
!
NAB Business Confidence
Oct
4
--
5
Nov
--
--
0.90%
Wednesday
11/12/2014 07:30
AU
!
Westpac Consumer Conf SA MoM
11/12/2014 08:30
AU
!!
Wage Price Index YoY
3Q
--
2.60%
2.60%
11/12/2014 17:30
UK
!!!
Jobless Claims Change
Oct
--
-25.0K
-18.6K
11/12/2014 17:30
UK
!!!
ILO Unemployment Rate 3Mths
Sep
--
5.90%
6.00%
11/12/2014 18:30
UK
!!!
Bank of England Inflation Report
Nov
Thursday
11/13/2014 08:00
NZ
!
ANZ Consumer Confidence MoM
Nov
--
--
-3.40%
11/13/2014 08:01
UK
!!
RICS House Price Balance
Oct
--
25%
30%
11/13/2014 13:30
CH
!!
Retail Sales YoY
Oct
--
11.60%
11.60%
11/13/2014 13:30
CH
!!
Industrial Production YoY
Oct
--
8.00%
8.00%
11/13/2014 21:30
US
!!
Initial Jobless Claims
Nov
--
--
278K
Friday
11/14/2014 03:00
US
!
Monthly Budget Statement
Oct
--
-$111.7B
--
11/14/2014 18:00
EC
!!!
CPI YoY
Oct
--
0.40%
0.40%
11/14/2014 18:00
EC
!!!
GDP SA YoY
3Q
--
0.60%
0.70%
11/14/2014 21:30
US
!!!
Retail Sales Advance MoM
Oct
--
0.20%
-0.30%
11/14/2014 21:30
US
!!!
Retail Sales Ex Auto MoM
Oct
--
0.20%
-0.20%
11/14/2014 22:55
US
!!
Univ. of Michigan Confidence
Nov
--
87.5
86.9
For any enquiries, please call (852) 2860-0333.
Source: Source: Bloomberg L.P.
(K = Thousand, M = Million, B = Billion)
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