MARKET SUMMARY Daily Currency Update -

Daily Currency Update - 12 November 2014
DAILY CURRENCY UPDATE
12 November 2014
Price Action
MARKET SUMMARY
OVERVIEW: Markets are relatively calm overnight with US bond markets closed
for the US Veterans Day holiday. US stock indices fluctuate around record
highs, with the S&P 500, NASDAQ and Dow Jones relatively unchanged from
the previous session close. European stock indices extend gains on improving
actual and forecast corporate earnings results (including Vodafone) with the
Euro Stoxx 50 Index up 0.3%. Most European sovereign bonds rally modestly.
The main focus remains on FX markets with USD/JPY rising to a fresh sevenyear high but otherwise USD broadly remains under pressure, reversing
previous moves.
COMMODITIES: Thermal coal prices rise 0.7%, taking gains for the week to 2%
as energy intensive sectors in northern China resume operations after reducing
output to improve air quality for the APEC meeting in Beijing. Metal markets
firm up with the gold price rising 1.5%. A weaker US dollar provides some
support. Crude oil markets are mixed, with WTI crude prices stable but Brent
prices falling. The OPEC meeting to review potential crude oil production cuts is
still two weeks away (27 November) but market chatter is increasing.
1 Year Forward
Spot
1M High
1M Low
EUR/USD
1.2474
1.2886
1.2358
USD/JPY
115.82
116.10
105.23
GBP/USD
1.5920
1.6250
1.5791
USD/CHF
0.9647
0.9742
0.9368
USD/CAD
1.1338
1.1467
1.1072
AUD/USD
0.8694
0.8911
0.8541
AUD/JPY
100.69
100.80
91.76
NZD/USD
0.7816
0.8034
0.7661
USD/SGD
1.2921
1.2977
1.2676
USD/TWD
30.58
30.66
30.33
Onshore
Offshore
30.30
30.34
USD/KRW
1092
1097
1046
1100
1105
USD/CNY
6.1251
6.1446
6.1083
6.2705
6.2864
USD/INR
61.56
61.95
60.91
66.02
65.11
USD/IDR
12222
12282
11974
13030
13058
USD/PHP
44.94
45.13
44.54
45.40
45.27
JPY: The yen drops to its weakest levels in seven years on speculation that
Source: Bloomberg
Japan’s Prime Minister Shinzo Abe is considering postponing a planned
sales-tax increase and preparing to call early elections next month. According to CitiFX G10 Strategist Osamu Takashima, a year end rate of 120.00 is
now on the cards. “The present upward momentum in USDJPY is as strong as the downward momentum was in 1995 when the pair fell sharply from 100 to
80. The similarity indicates it could test 120 by year-end,” he says.
AUD: Meanwhile in Australia, NAB’s measure of business conditions records the largest monthly increase rising to +13 in October from +1.
Conditions are reported to be at the highest level since February 2008. The improvement in business conditions is broad based with the profitability,
trading and employment components all gaining strongly.
Looking ahead, we have employment data and the BoE Inflation Report from the UK tonight.
USD & JPY
USD
USD/JPY High Low Chart
115.82
 USD extends gains in the European morning following prospects of a snap election in Japan and potential delay of the
105.23
116.1
scheduled consumption tax hike next October with the Nikkei news saying that PM Abe has told party leaders to prepare for
possible election.
 USDJPY gains about 30-pips to 115.80 on the headline but by the NY session end, CitiFX e-traders note a reversal in USD sentiment though with selling, mainly against
EUR which chops around 1.2420 for most of the day, but gains over 70-pips into the MY close to a high of 1.2495.
CitiFX Technicals
USDJPY trend across the highs at 116.16

The trend across the highs from June: 116.16
(rising by 18 pips/day)

Interim high from October 2007: 117.95

Medium term resistance zone: 121+
JPY
 USDJPY trades very bid in Asia yesterday in Japan breaking through the 115.59 high and rallying past 116.00, initially attributed to a decent rally in Japanese
equities but later attributed to speculation that PM Abe may be considering delaying the second stage of the implementation of a 10% sales tax, as well as calling a
snap election.
Page 1
Daily Currency Update - 12 November 2014
 Abe is later quoted as saying no decision has they been made, but USDJPY remains firm as LDP member Takashi Sasagawa’s comments hit the wires saying that it is
good to ask voters on whether to raise the sales tax and may have started preparations for a snap election.
 The key indicator for his decision seems to be the preliminary GDP data for the July-September quarter due on Nov. 17 where economist forecasts are looking for a
modest 0.5% rebound on quarter, or an annualized 2.2%, in Q3, after a sharp contraction of 1.8%, or an annualized -7.1%, in Q2.
 The cash Nikkei closes at a 7-year high with Nikkei futures posting further gains in after-hours trading.
 CitiFX Technicals put out a note overnight pointing to rising resistance at 116.16 on USDJPY and the interim high from October 2007 at 117.95 as the next levels to target
and CitiFX strategists now see a target of 120.00 by year end as IMM, Citi PAIN and Citi FX Access positioning indicators show leveraged investors are not heavily
short JPY.
 Adding to the Yen bearish news is the latest MoF data showing Japanese investors have bought a net JPY1232bn ($10.6bn) in foreign securities in October and excluding
banks (that are FX-neutral), net buying amounts to JPY1851bn ($16.0bn), marking the seventh straight month of net buying.
 The pace of net buying of foreign securities by Japanese investors remains steady and strong with trust accounts (mainly pension funds) net buyers of foreign securities in
October, at JPY833bn ($7.2bn), for the seventh week in a row highlighting that they continue to shift to foreign securities at a rapid pace.
What’s happening in the next 24 hours
US
US
US
Indicator
Citi
Wholesale Inventories, %MoM
Minneapolis Fed's Kocherlakota (voter, dovish) speaks on monetary policy
Philly Fed's Plosser (voter, hawkish) speaks on the economy
--
Consensus
Prior
0.2
0.7
EUR, GBP, CHF
EUR | GBP
EUR/USD High Low Chart
 Both EUR and GBP rally over 60-pips higher from the London session into the NY close with demand led by leveraged
investors while real money and banks sell into the rally though with turnover running at only about half the recent average.
 In sterling that closes above 1.5900, it is as much about positioning adjustments ahead of tonight's key BoE Inflation
Report.
1.2474
1.2358
1.2886
GBP/USD High Low Chart
1.592
CHF
 Meanwhile, CitiFX flows data shows investors have likely stepped up their CHF purchases of late with some of the buying
seemingly related to the upcoming conversion of Hungarian FX mortgages.
 Focus remains on the FX options market as they bet on higher CHF-volatility from here.
 Going into the gold referendum on November 30, Citi strategists think that the ‘No’ vote would likely prevail as the
campaign to keep the status-quo grows more vocal.
 At the same time, a potential ‘Yes’ vote need not trigger an immediate rethink of the EURCHF-peg and could lead to
negative rates, which could have considerable negative impact on CHF.
1.625
1.5791
USD/CHF High Low Chart
0.9647
0.9368
0.9742
What’s happening in the next 24 hours
Eurozone
Eurozone
UK
UK
UK
UK
UK
UK
Indicator
Citi
Industrial Production, %MoM
ECB President Draghi speaks at conference
LFS Unemployment, thousands
LFS Unemployment Rate, %
LFS Unemployment Rate, 1m %
Claimant Count Unemployment, thousands
Claimant Count Rate, %
Avg Earnings Ex Bonus, 3m %
1
0.7
Consensus
Prior
-1.8
-138
5.9
5.9
-20.00
2.8
1
-5.9
--20.00
2.7
1.1
-154
6
5.9
-18.60
2.9
0.9
AUD, NZD, CAD
AUD
 AUD remains within striking distance of this week's lows but is unable to make any real traction toward the 0.8570/80
support level that is now eyed to the downside.
 Note that Citi Commodity Research team have cut their iron ore forecast to as low as USD50 next year and while the
housing data manages to provide a bit of a bid, the bias still favors the downside with interim support levels seen at 0.8610
followed by 0.8580 while the topside is carved out by the 0.8800/10 area.
AUD/USD High Low Chart
0.8694
0.8541
0.8911
NZD/USD High Low Chart
0.7816
NZD
0.7661
Key Events In The Past 24 Hours – NZD ticks down on RBNZ’s Financial Stability Report
 Says NZD still elevated, above sustainable and unjustified levels
 Says won't relax mortgage lending limits for now
0.8034
USD/CAD High Low Chart
1.1338
Price Action
 NZDUSD drops some 20-pips to 0.7802 on the headlines but remains in a no man’s land with the only real trading
opportunity seen on rallies which continue to find supply.
 Targets to sell include the 0.7810/30 area while dips onto the 0.76-handle continue to find some demand.
1.1072
1.1467
What happened in the past 24 hours
Australia
Indicator
Actual
House Price Index YoY%, 3Q
9.1
Citi
Consensus
Prior
8.8
10.1
What’s happening in the next 24 hours
Canada
Indicator
Citi
Teranet/National Bank HPI, %MoM, Oct
--
Consensus
--
Prior
0.3
Page 2
Daily Currency Update - 12 November 2014
DISCLAIMER
“Citi analysts” refers to investment professionals within Citi Research (“CR”), Citi Global Markets Inc. (“CGMI”) and voting members of the Citi Global
Investment Committee.
Citibank N.A. and its affiliates / subsidiaries provide no independent research or analysis in the substance or preparation of this document.
The information in this document has been obtained from reports issued by CGMI. Such information is based on sources CGMI believes to be reliable.
CGMI, however, does not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute CGMI's judgment as of the
date of the report and are subject to change without notice. This document is for general information purposes only and is not intended as a
recommendation or an offer or solicitation for the purchase or sale of any security or currency. No part of this document may be reproduced in any
manner without the written consent of Citibank N.A. Information in this document has been prepared without taking account of the objectives, financial
situation, or needs of any particular investor. Any person considering an investment should consider the appropriateness of the investment having regard
to their objectives, financial situation, or needs, and should seek independent advice on the suitability or otherwise of a particular investment.
Investments are not deposits, are not obligations of, or guaranteed or insured by Citibank N.A., Citigroup Inc., or any of their affiliates or subsidiaries, or
by any local government or insurance agency, and are subject to investment risk, including the possible loss of the principal amount invested. Investors
investing in funds denominated in non-local currency should be aware of the risk of exchange rate fluctuations that may cause a loss of principal. Past
performance is not indicative of future performance, prices can go up or down. Some investment products (including mutual funds) are not available to
US persons and may not be available in all jurisdictions. Investors should be aware that it is his/her responsibility to seek legal and/or tax advice
regarding the legal and tax consequences of his/her investment transactions. If an investor changes residence, citizenship, nationality, or place of work,
it is his/her responsibility to understand how his/her investment transactions are affected by such change and comply with all applicable laws and
regulations as and when such becomes applicable. Citibank does not provide legal and/or tax advice and is not responsible for advising an investor on
the laws pertaining to his/her transaction.
COUNTRY SPECIFIC DISCLOSURES
Australia
:
Hong Kong
:
India
:
Indonesia
:
Korea
:
Malaysia
People's Republic of China
:
:
Philippines
:
Singapore
:
Thailand
:
United Kingdom
:
This document is distributed in Australia by Citigroup Pty Limited ABN 88 004 325 080, AFSL 238098. For a
full explanation of the risks of investing in any investment, please ensure that you fully read and understand the
relevant Product Disclosure Statement prior to investing.
This document is distributed in Hong Kong by Citibank (Hong Kong) Limited ("CHKL"). Prices and
availability of financial instruments can be subject to change without notice. Certain high-volatility investments
can be subject to sudden and large falls in value that could equal the amount invested.
This document is distributed in India by Citibank N.A. Investment are subject to market risk including that of
loss of principal amounts invested. Products so distributed are not obligations of, or guaranteed by, Citibank and
are not bank deposits. Past performance does not guarantee future performance. Investment products cannot be
offered to US and Canada Persons. Investors are advised to read and understand the Offer Documents carefully
before investing.
This report is made available in Indonesia through Citibank, N.A. Indonesia Branch. Citibank, N.A. Indonesia Branch is
regulated by Otoritas Jasa Keuangan.
This document is distributed in South Korea by Citibank Korea Inc. Investors should be aware that
investment products are not guaranteed by the Korea Deposit Insurance Corporation and are subject to
investment risk including the possible loss of the principal amount invested. Investment products are not
available to US persons.
This document is distributed in Malaysia by Citibank Berhad.
This document is distributed by Citibank (China) Co., Ltd in the People's Republic of China (excluding the
Special Administrative Regions of Hong Kong and Macau, and Taiwan).
This document is made available in Philippines by Citicorp Financial Services and Insurance Brokerage Phils.
Inc, Citibank N.A. Philippines, and/or Citibank Savings Inc. Investors should be aware that Investment products
are not insured by the Philippine Deposit Insurance Corporation or Federal Deposit Insurance Corporation or
any other government entity.
This report is distributed in Singapore by Citibank Singapore Limited (“CSL”). Investment products are not
insured under the provisions of the Deposit Insurance and Policy Owners’ Protection Schemes Act 2011 of
Singapore and are not eligible for deposit insurance coverage under the Deposit Insurance Scheme.
This document contains general information and insights distributed in Thailand by Citigroup and is made
available in English language only. Citi does not dictate or solicit investment in any specific securities and similar
products. Investment contains certain risk, please study prospectus before investing. Not an obligation of, or
guaranteed by, Citibank. Not bank deposits. Subject to investment risks, including possible loss of the principal
amount invested. Subject to price fluctuation. Past performance does not guarantee future performance. Not
offered to US persons.
This document is distributed in U.K. by Citibank International plc., it is registered in England with number
1088249. Registered office: Citigroup Centre, Canada Square, London E14 5LB. Authorised and regulated by
the Financial Services Authority.
Page 3