G10 FX Weekly
Group Economics Macro & Financial Markets Research Roy Teo +65 6597 8616
USD/JPY breaks through resistance
Georgette Boele, +31 20 629 7789
29 May 2015 • • •
USD/JPY breaks through technical resistance Since the last two weeks, US dollar has strengthened on better US data Greece negotiations affect the euro
US employment report key for US dollar rally
Greece negotiations affect the euro
The US dollar (USD) has strengthened by more than 2%
Uncertainty surrounding Greece debt negotiations with
against its trade weighted basket of currencies since the past
creditors have resulted in an increased demand to hedge
two weeks. Better-than-expected US data have resulted in
short-term volatility in the euro. We remain cautiously
some upward adjustment in interest rate expectations for 2015
optimistic that a last minute deal will be agreed ahead of
and 2016. This has supported the US dollar. However,
Greece’s next EUR 300 million debt payment on 5 June. As
financial markets are still under-estimating the pace of rate
speculators’ net short positions in the EUR remain high, a relief
hikes in the US this year and next, in our view. Therefore, we
rally could push the EUR/USD temporary back above 1.10.
expect the US dollar to rally by another 10-15% this year. In
However, the ECB will continue to convey the message that
the coming week, the US employment report will be released.
QE is here to stay. This could take some wind out of a possible
If non-farm payrolls as we expect and hourly earnings surprise
move above 1.10 in EUR/USD. What is more, we expect a
on the upside, the rally in the US dollar could gain significant
strong US employment report on Friday to more than outweigh
momentum.
any euro supportive news. So EUR/USD is set to decline.
Technical break in USD/JPY
Weaker commodity currencies
The US dollar rallied strongly against the Japanese yen (JPY).
In the past week, lower crude oil prices weighed on both the
The pair broke through the technical resistance of 122, which
Norwegian Krona and Canadian dollar (CAD). As expected,
is significant in our view. Rumoured stop losses that were
the Bank of Canada left monetary policy unchanged on 27
layered above 122, accelerated the move. As a result,
May. We expect the CAD to decline towards 1.30 against the
USD/JPY rallied to a high of 124.41, a level not seen since
USD later this year as interest rate differentials between the
2007. This is good news for the US dollar, because a strong
US and Canada widens in favour of the US dollar. The
rally in USD/JPY has the potential to lead a broader US dollar
Australian dollar (AUD) was sold off after business investment
rally. We expect USD/JPY rally to continue and to reach 128 at
plans were weaker than expected, led by sharp declines in the
the end of this year.
mining industry. This has led to expectations that further monetary stimulus and a lower exchange rate are needed to
USD/JPY breaks through technical resistance
rebalance the economy. We expect the Reserve Bank of Australia to keep the Official Cash Rate unchanged at 2% on 2 June, but shift from a neutral to easing bias. Later this year we
130
expect a 25bp rate cut. We remain negative on the AUD and expect AUD/USD to decline to 0.72 by the end of 2015. 120
ABN AMRO major currency forecasts 110
100 Jan 14
Jul 14
Jan 15 USD/JPY
Source: Bloomberg
Jul 15
EUR/USD USD/JPY EUR/JPY GBP/USD EUR/GBP USD/CHF EUR/CHF AUD/USD NZD/USD USD/CAD EUR/SEK EUR/NOK
28-May 1.0912 123.85 135.14 1.5359 0.7105 0.9486 1.0351 0.7690 0.7244 1.2453 9.2778 8.4749
Q2 2015 1.10 122 134 1.55 0.71 0.95 1.05 0.78 0.73 1.23 9.50 8.25
Q3 2015 1.00 125 125 1.47 0.68 1.05 1.05 0.73 0.69 1.27 9.50 8.25
Q4 2015 1.00 128 128 1.49 0.67 1.05 1.05 0.72 0.68 1.30 9.50 8.00
Source: ABN AMRO Group Economics
Q1 2016 1.05 130 137 1.52 0.69 1.00 1.05 0.7 0.66 1.31 9.50 8.00
Q2 2016 1.05 135 142 1.50 0.70 1.00 1.05 0.68 0.65 1.33 9.50 7.75
Q3 2016 1.10 135 149 1.51 0.73 0.95 1.05 0.67 0.64 1.34 9.50 7.50
Q4 2016 1.15 135 155 1.51 0.76 0.96 1.10 0.66 0.64 1.35 9.50 7.50
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G10 FX Weekly - USD/JPY breaks through resistance
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