1/13/16

USD higher vs 5 G-10 currencies as WTI fell toward 12-yr low; UST 10Y yield drops.

BOJ, PBOC said to discuss resuming bilateral FX swap lines; would benefit Japanese banks in China,
Chinese firms needing yen in event of financial crisis; had been allowed to lapse due to countries’
strained relations

Kuroda’s former deputy, Ito, says Japan can endure stronger yen; USD/JPY lower toward 110 may
prove problematic

WTI falls toward 12Y low on perceptions U.S. supplies to increase, weak global demand

Copper falls as Barclays cuts forecasts due to view 1H China rebound less likely

EURUSD- EUR trading close to unchanged on the year and still looks comfortable inside the
1.0800/1.1050 range for now. Support 1.0840/1.0805/1.0785, Resistance 1.0905/1.0945/1.0995.
Preferred Trade zones- Long 1.0775/1.0790, Short 1.0930/1.0945.

USDCHF- USDCHF made marginal new highs on the week but still has yet to challenge the breakdown
area from last week at 1.0070. Support .9995/.9950/.9880, Resistance 1.0040/1.0070/1.0110.
Preferred Trade zones- Long .9930/.9945, Short 1.0090/1.0110.

USDJPY-USDJPY still attempting to recover losses from last week but finding resistance at 118.00
challenging. Support 117.60/117.20/116.70, Resistance 117.85/118.25/118.75. Preferred Trade zones-
Long 116.80/117.00, Short 118.70/118.90.

GBPUSD- GBP selling continues and back at levels not seen since 2010. Support 1.4395/1.4355/1.4325,
Resistance 1.4450/1.4490/1.4535. Preferred Trade Zones- Long 1.4325/1.4350, Short 1.4535/1.4550.

AUDUSD- AUD still consolidating just above .6950 but the lack of buy response off of .6950 has been
anything but impressive. Support .6970/.6945/.6900, Resistance .7020/.7040/.7070. Preferred trade
zones- Long .6900/.6915, Short .7055/.7070.

U.S. STOCKS

S&P 500 -0.3% to 1917.36

DJIA -0.3% to 16348.

COMMODITIES

WTI Crude -3.9% to $30.20/bbl

Gold -0.4% to $1,089/oz (range $1,084-$1,099)

Copper -0.8% to $4,352/mt

KEY VIEWS

Blackstone chief says market volatility connected to China is not the start of the 3rd leg of the global
financial crisis

DB says USD to rally further on higher interest rates, CNY to weaken further throughout 2016 on FX
adjustment

Citi’s Morse says world faces $20 oil on declining production costs, potential supply surge from
drilled/uncompleted wells

BNP says negative rates benefit govt, keep zombie companies alive, make people poorer; BOJ should
end easing

Asian Open
Asia Market Outlook (January 13)

Another downdraft in commodity prices sharply weighed on sentiment overnight, as China

slowdown fears kept risk taking levels subdued. Wall Street saw solid opening gains of 172
points on the Dow all but evaporate as oil prices tested below $31 bbl, while copper fell to a 6-
year low at $1.953/lb. Weakness is likely to spillover further onto regional markets today.

China December trade data headlines amid a light Asian calendar and given current worries,
has the potential to move the markets significantly.

China is expected to report a December trade report surplus of $50 bln, compared to November's
$54.1 bln. Focus will remain on monthly export levels, which declined 6.8% y/y in NOvember, a
5th straight drop. December credit data is on tap as well, with loan growth seen up 15.0% y/y
from November's 14.9%, and new yuan loans expected up to CNY 750 bln from the prior 708.9
bln. Money supply figures could be released too.

In Europe, EU November industrial production is due, along with France December CPI.
December Portugal CPI and December Greece CPI are also on the docket. Germany will sell 10-
year Bunds, and Italy will sell bonds.

The U.S. calendar remains light too, which will keep the focus on China and commodities.
Treasury re-opens $21 bln in 10-year notes. Yesterday's 3-year sale saw strong demand from
indirect bidders. Data includes the December Treasury budget, where we expect a $4.0 bln
deficit, versus the $1.9 bln surplus for December 2014. Weekly MBA mortgage, and weekly EIA
petroleum inventory numbers are also due. Fedspeak includes doves Rosengren on the economic
outlook, and Evans on the economy and monetary policy. The Fed's Beige Book for the January
26-27 FOMC meeting will be released and should reflect ongoing moderate economic
activity. On the earnings front, Infosys and H.B. Fuller report quarterly results.