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Important Disclosure on the last page

Daily FX & Market Commentary

Jan 27 2015

Market Recap

Published from Tuesday to Friday

US stocks rose slightly: S&P500 rose

Table: Daily Market Movement (Jan 26, 2015)
0.3%, led by the energy sub-sector rising
Equity Market Indices
Close Change
% Commodity Futures
1.4%, after OPECs secretary general said oil U.S.
Energy & Metals
S&P 500 Index
2,057.09
+5.3 +0.3% WTI Crude Oil (USD/bbl)
prices may have reached a floor and could
Dow Jones Industrial Average 17,678.70
+6.1 +0.0% Brent Crude (USD/bbl)
move higher soon.
NASDAQ Composite Index
4,771.76
+13.9 +0.3% Natural Gas (USD/MMBtu)
HK stocks rose: HSI rose 0.2% while
COMEX Gold (USD/oz)
Europe
Stoxx Europe 600 Index
372.39
+2.0 +0.5% LME Copper (USD/MT)
HSCEI fell by 0.3% as gains were led by IT
10,798.33 +148.8 +1.4% Bond Yields & CNY
stocks with Tencent rising 3.7% on the day. DAX Index
Japan
U.S. Treasuries - Yields
Hong Kong stocks turnover dampened to
TOPIX Index
1,402.08
-1.1
-0.1% 3-Month - Yield (%)
HK$83bn (vs HK$96bn in the past 5 days).
Nikkei 225 Stock Average
17,468.52
-43.2
-0.2% 5-Year - Yield (%)
10-Year - Yield (%)
China / Hong Kong
European stocks rose: Stoxx 600 rose
Hang Seng Index
24,909.90
+59.5 +0.2% 30-Year - Yield (%)
0.6% continuing gains after ECBs launch of Hang Seng China Enterprises 12,228.16 -31.9 -0.3% USD/CNY
QE program last week despite some
Shanghai SE Composite
3,383.18
+31.4 +0.9% China Renminbi Spot
Data Source: Bloomberg L.P.
uncertainties brewing following the leftist
partys win in the Greek elections on Sunday.

Close

45.15
48.16
2.88
1,279.4

-1.0%
-1.3%
-3.5%
-1.0%

5,519.5

0.0%

Close Change
0.01
-0.01
1.34
+0.03
1.82
+0.03
2.40
+0.02
Close
6.26

%
+0.4%

Hot News: Syriza won the Greek parliamentary elections

Chart: EUR/USD - Monthly

1.0281-1.0433
(uptrend line
supports)
Source Citi, as of Jan 26, 2015

Syriza won the election without majority:

Far-left opposition party Syriza clearly won the Greek
parliamentary elections, with 36.3% of the vote and 149
seats (out of 300), at the higher end of pre-election
polls and just short of an absolute majority.
Syriza is very likely to be the first non-mainstream
party in the Eurozone to lead a government since the
global financial crisis.
However, EUR/USD recovered from the session low of
1.1098 to 1.1238 amid profit taking ahead of FOMC
meeting later this week.

Citi analysts view:

The current bailout expires at end-February and at
end-December, Greek banks received 65bn of
ECB funding, which is in part linked to the existence
of a bailout. The Greek government probably
needs to raise at least 8bn in 2015.
Once a government is formed, negotiations may
well take months to agree on a follow-up bailout
with Greeces troika creditors, and be associated
with some financial market volatility.
A coalition with the anti-bailout Independent Greeks
could further complicate bailout negotiations.
It is likely that an agreement may eventually be
found due to the strong mutual incentives of the
Greek government and its Eurozone creditors to
avoid the worst-case scenarios of Greek
government default or Grexit.
Many aspects of the Greek situation are unique and
we expect the direct implications on other
Eurozone countries to be limited in the near
term. However, Syriza's victory will likely lead to
wider concerns about Eurozone political risks.
On technical analysis (Chart), EUR/USD may test
support levels in the 1.0281-1.0433 area, in
particular the 1.1141 support is likely to give away.

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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

94.76
1.1238
118.46
1.5078
1.2474
0.7925
0.7426
0.9029
1.3447
1281.38

95.48
1.1296
118.50
1.5104
1.2489
0.7934
0.7469
0.9043
1.3484
1299.37

94.11
1.1098
117.27
1.4966
1.2405
0.7855
0.7399
0.8765
1.3412
1276.00

Short Term
Comment
Bullish
Bearish
Neutral
Neutral
Bullish
Neutral
Neutral
Neutral
Neutral
Bullish

Support

Resistance

90.00
1.1141
115.57
1.4814
1.1725
0.7704
0.7331
0.7406
1.3224
$1,250

95.86
1.1445
120.83
1.5486
1.2500
0.8209
0.7609
0.9500
1.3649
$1,345

Citi Foreign Exchange

Forecast:
0-3
Months
92.54
1.15
116.00
1.53
1.19
0.82
0.77
0.83
1.35
1270

6-12
Months
97.95
1.10
130.00
1.47
1.25
0.72
0.67
0.95
1.37
1240

FX Rate Source: Bloomberg L.P. (cut off time is NY Time 5:00pm)

EUR rebounded: German IFO Business Climate rose from 105.5 to 106.7 in Jan 2015, topped estimates.
JPY and CHF weakened: Global equities rose yesterday and funds flew out of safe-haven assets.
GBP advanced: Market speculated that todays GDP data may show U.K. economys strength.

Daily FX Focus

EUR/GBP may fall toward 0.7186-0.7254:

Recap:
EURGBP fell yesterday after the ECB
announced the QE program last week
and Greeces Syriza won the election.
0.7186-0.0.7254 (1999 &
2003 tops)

0.7755 (Jul 2012 low)

Source: Bloomberg L.P., data as of Jan 26, 2015

Technical Analysis:
1) The pair broke the long-term uptrend line; 2) keeping going down
after breach of 0.7755 support
The technical indicators suggest EUR/GBP may fall further toward
0.7186-0.7254, with resistance at 0.7755.

EUR/GBP Outlook:
Market is now waiting for the U.K. Q4-14
GDP today.
Citi analysts expect the GDP growth
may reach 0.7% QoQ, the eight
consecutive quarters with at least 0.4%
growth since 2002, due to the upbeat
service sector.
The YoY growth may accelerate from
2.6% to 2.9%.
We expect the low oil price, the rising
wage level, the wealth effect due to the
rising asset price and the low rate
condition will support the consumer
spending in U.K., which may underpin
GBP in medium term.

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.
2015 Citibank
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Important Disclosure on the last page

Daily FX & Market Commentary

USD/JPY may trade inside 115.57-120.83:
JPY Outlook:
Last week the BoJ revised down its FY2015
core CPI forecast from 1.7% YoY to 1.0%
YoY, implying the core CPI excluding energy
may rise nearly 2% YoY.
115.57 (Dec 2014 low)
Over the last decades, the core CPI rose
around 1% YoY at best, showing the hurdle
seems extremely high.
The BoJ assumes its extraordinary monetary
easing may bring prices to the level,
suggesting the inflation forecasts are just its
policy target.
If the BoJ stays put despite the actual
inflation rate continuing to undershoot,
Source: Bloomberg L.P., data as of Jan 27, 2015
market participants may start to question the
Technical Analysis:
central banks commitment to the target,
1) The pair rebounded after failure to penetrate 115.57; 2) RSI: prompting the BoJ to take additional easing
neutral
measures in July this year, which may be
We expect USD/JPY may trade inside the range of 115.57-120.83 JPY-bearish in medium term.
with mild upside bias.
120.83 (23 Dec 2014 top)

Investment Market Update

China property sector set to see long-term evolutions

Chart: China Property Market Share of Top 10
developers

Source: NBS; Companies Citi Research., as of Jan 26, 2015

China Property becomes market focus

Recently shares in China property developers have
been volatile after authorities in Shenzhen blocked
unit sales by developers.
Separately, according to media reports, the
Shenzhen government is seeking investors for the
troubled developer Kaisa Group Holdings (1638).

Citi analysts view:

Recent Shenzhen event and the narrowed offshore
debt market could be a game-changer by impelling
developers to rein in aggressive debt-financed
expansion, thus focus on operations/cash flow.
Potential long-term evolutions include:
1) Developers are likely to reduce emphasis on
absolute growth and expansion, instead focusing
more on sustainable business model transformation,
profitability and return-on-equity.
2) Accelerating market consolidation (Top 10s market
share to grow to 21% in 2015 from 2014s 17%) Low quality developers may be marginalized (Chart).
3) SOEs may benefit from greater cooperation with
local governments, particularly in sensitive projects
such as old-town redevelopments,
which are
expected to increase in China.
Positive on China Property: 1H 2015 may be a
favorable investment period for the sector with
multifaceted drivers, i.e. favorable policy backdrop,
more liquidity easing, positive fundamentals e.g. est.
15%yoy sales growth in 1H for key names. Prefer
market leaders, especially SOEs.

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.
2015 Citibank
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Daily FX & Market Commentary

Important Economic Data (Jan 26, 2014 Jan 30, 2015)

Time

Importance

Event

Period Actual

Survey

Prior

Monday
01/26/2015 07:50

JN

Trade Balance Adjusted

01/26/2015 17:00

GE

!!

IFO Business Climate

Dec -712.1B -743.1B -832.5B

Jan

106.7

106.5

105.5

Dec

--

--

Tuesday
01/27/2015 08:30

AU

NAB Business Confidence

01/27/2015 17:30

UK

!!

GDP YoY

4Q

--

2.80%

2.60%

01/27/2015 21:30

US

!!

Durable Goods Orders

Dec

--

0.50%

-0.70%

01/27/2015 22:00

US

S&P/CS Composite-20 YoY

Nov

--

4.40%

4.50%

01/27/2015 23:00

US

!!

New Home Sales MoM

Dec

--

2.70%

-1.60%

01/27/2015 23:00

US

!!

Consumer Confidence Index

Jan

--

95

92.6

01/28/2015 08:30

AU

!!!

CPI YoY

4Q

--

1.80%

2.30%

01/29/2015 03:00

US

!!!

FOMC Rate Decision (Upper Bound)

Jan

--

0.25%

0.25%

01/29/2015 04:00

NZ

!!!

RBNZ Official Cash Rate

Jan

--

3.50%

3.50%

01/29/2015 05:45

NZ

!!

Trade Balance

Dec

--

75M

-213M

01/29/2015 21:30

US

!!

Initial Jobless Claims

Jan

--

--

307K

01/29/2015 23:00

US

Pending Home Sales NSA YoY

Dec

--

--

1.70%

Dec

--

3.50%

3.50%

Wednesday
Thursday

Friday
01/30/2015 07:30

JN

!!

Jobless Rate

01/30/2015 07:30

JN

!!!

Natl CPI Ex Fresh Food YoY

Dec

--

2.60%

2.70%

01/30/2015 18:00

EC

!!

Unemployment Rate

Dec

--

11.50%

11.50%
-0.20%

01/30/2015 18:00

EC

!!!

CPI Estimate YoY

Jan

--

-0.40%

01/30/2015 21:30

CA

!!!

GDP YoY

Nov

--

--

2.30%

01/30/2015 21:30

US

!!!

GDP Annualized QoQ

4Q

--

3.00%

5.00%

01/30/2015 23:00

US

!!

U. of Mich. Sentiment

Jan

--

98.2

98.2

For any enquiries, please call (852) 2860-0333.

Source: Source: Bloomberg L.P.

(K = Thousand, M = Million, B = Billion)

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