FX
Global
·
NY
indices managed to end
Friday with modest gains after a rather choppy session. 10-year yields edged
a tad higher and hovered around 2.64% in early Asia trade. The VIX index
drifted lower with its 3-month implied volatility trade around the lows since
2010. We look for calmer trades in the absence of strong data cues, contained
political risks as well as dollar sogginess. EUR was hammered towards the end
of last week under the key 1.3770-support, giving the dollar a slight lift.
·
With RBNZ’s threat of selling NZD, dovish Yellen as well
as the soggy EUR, favour shifts towards AUD and GBP. Fed Yellen speaks again
at Washington this week. Fed Plosser, Bullard, Lockhart and Lacker will also
take turn to speak in the week. Thus far, expectations that rates will not be
raised prematurely are rather well anchored and we do not expect to be
surprised by any of them. US Retail sales, mfg and inflation numbers
will be watched along with the German ZEW surveys. EU Fin. Mins. Meet in Brussels
while Australia delivers Federal Budget on 13 May.
·
In
Asia, firm USD tone to
support USD/Asians on dips. In Thailand, the possibility of an impeachment of
former PM Yingluck raised tensions. Grenades blasted over the weekend in
Bangkok. China is due to release its liquidity numbers, retail sales,
industrial production, FDI and property numbers which will wrap up the April
data releases. USD/Yuan has been heavy throughout this week but we reckon
respective pairings to steady as desired by the central bank. On the
side, Malaysia’ industrial production is due on Mon while Singapore’s retail
sales and NODX are also scheduled for release.
|
G7 Currencies
·
DXY
– Firm. The greenback
rebounded from the slump in the earlier part of last week and has arrived at
levels around 79.90, capped by the barrier at 79.920. Daily momentum indicators
signal upside risks. 18-DMA is still below the 40-DMA and we think bears will
be keeping check on upticks. Nonetheless, we cannot deny that 79.920 is at risk
and a further move above this level exposes the next at 80.275. 79.688 could
slow declines for now.
·
USD/JPY
– Two-Way Interests. USD/JPY ground lower to levels around 101.70 and pair found
floor at around 101.40. MACD points to more bearish moves ahead. Barring no
escalation in geopolitical risks, we expect pair to remain heavy within
101.30-102.50. A break lower exposes the next support at 100.77.
·
AUD/USD
– Supported. AUD/USD retraced
from its weekly high on dollar advancement but MACD is still tilting higher.
Hence, we do not discount the upside risks towards the 0.9450 as the next
bullish target even as the pair is on the downtick at round 0.9350 this
morning. Downsides to be slowed by 0.9320/0.9270 this week.
·
EUR/USD
– Downside risks. EUR/USD slithered below the
1.3770-support. MACD indicates bearish risk for the pair and we see next
support at 1.3695 while topsides are guarded by the 1.3820-barrier. Pair may
remain heavy for the rest of the month ahead of the next meeting though slumps
may be stalled by technical supports that have proven strong in the past.
Regional FX
·
The
SGD NEER trades 0.57% above
the implied mid-point of 1.2577.
·
We
estimate the top end at 1.2327 and the floor at 1.2827. USD/SGD
– Sideways. USD/SGD found floor at a touch above 9-Apr low of 1.2451. We
expect some consolidation in the week ahead unless stronger cues emerge. A
break here should expose the pair to the next support level at 1.2343 (Oct-2013
low). That is quite unlikely given the lack of momentum. Tight gyrations within
1.2450-1.2525 are all the more expected ahead of the GDP release in the
following week. More aggressive tests to meet next barrier at 1.2540. NODX and
retail sales are not expected to trigger large swings in the pair.
·
AUD/SGD
– Swings. Cross has indeed
been on the swing and was last seen around 1.1700. The 1.1740-barrier proves to
be a firm resistance for the pair. Momentum indicators show risks of more
upsides but a failure to break above the 1.1740-barrier should mean more
intra-range moves within 1.1590-1.1740. Next resistance level is 1.1840. SGD/MYR
– Filling the Gap. The
cross gapped down on MYR strength and waffled around 2.5840 on Fri. Despite the
fact that momentum indicators have flipped south, we expect the cross to
rebound to fill the gap towards 2.5945 before settling within the 2.5840-2.5945
range.
·
USD/MYR
– Consolidation. Pair
gapped down to sub-3.23 levels after the hawkish BNM statement. The pair is
likely to fill the gap towards the 3.2380 before consolidation within the
3.2230-3.2495 range. Conditions are looking overstretched for the bears
and we see further dips to be met by buying interests. Expect consolidation
within 3.2230-3.2495. Key release of the week is the BOP current account
balance, which is likely to be favourable to MYR. Industrial production is due
on Mon. 1-month NDF edged higher, in tandem and we expect a week of
consolidation for this pair as well.
·
USD/CNY
was fixed higher at 6.1625 (+0.0044), vs. previous 6.1581 (+2.0% upper band
limit: 6.2883; -2.0% lower band limit: 6.0417). CNY/MYR was fixed at 0.5213
(+0.0005). USD/CNY –Holding
Steady. The fixing is a much higher, likely inspired by the dollar. USD/CNY
also traded in line at around 6.2355. MACD still shows bearish momentum though
directional bias at this point is still unclear. We think pair is likely to
remain capped by 6.2388 in the interim with risks tilted to the upside. China’s
President Xi reiterated that nation has to adapt to the “new normal”, again
flagging slower growth momentum.
·
1-Year
CNY NDFs –Steady. The
1Y NDF edged higher this morning around 6.2260. Pairing is losing bearish
momentum and we still think pair is likely to continue its choppy trade within
6.2020-6.2358.
·
USD/CNH
– Tilting Higher. Pair
crept higher, in tandem with 1-year NDF. Pair is now near recent highs though
daily momentum indicators are still not giving a clear bullish signal. Pair is
now capped by the 6.2392-barrier. A strong move above this level exposes next
at 6.2474. Downticks to be slowed by 6.2290.
·
USD/IDR
– Rangy. The USD/IDR
edged higher this morning to around 11545, trapped in two-way forces of dollar
resurgence and an improved political climate at home. Presidential frontrunner
Joko Widodo clinched the alliance of the National Awakening Party after a
deal with National Democratic Party to form a coalition that could boost his
presidency bid (BBG). PDI-P won 18.95% of the parliamentary vote according to
the General Elections Commission. We expect the pair to remain within the
11475-11600 range this week given a general lack of momentum on either side.
·
USD/PHP
– Downside Risks. USD/PHP
slump under the 43.65-mark at one point but has rebounded to around 43.75 as
investors took profit on the recent PHP rally. Dollar strength is the excuse
but pair still faces downside risk. 43.39 marks the next support level while
44.04 guards bullish attempts. The 1-month NDF also made a slight recovery to
around 43.75, a lift off recent low of 43.50. We expect the latter to be
challenged.
·
USD/THB
– Bullish. Pair
is on the uptick and pressing on the 32.670-barrier which has been a formidable
resistance level. MACD is pointing higher and a move above this level exposes
the next 32.845. This could be inevitable given the dollar strength and
increasing risk of violence at home amid the political uncertainties. Grenades
blasted in Bangkok over the weekend outside the Government House occupied by
anti-government protesters. Support is seen at 32.52.
Rates
·
Post MPC, yields on local government bonds rose in
reaction to the statement indicating that “the degree of monetary accommodation
may need to be adjusted”, implying a rate hike as early as in July. Bid was
given immediately at the opening and market was soft although some buying was
seen from real money and selected offshore party. A stronger MYR which touched
3.2220 from 3.2370-90 failed to boost the market. At market close, yields on 3
to 10-year benchmark MGS spiked up by 8-15bps to 3.53%, 3.66%.3.95% and 4.06%
respectively while yields on 5 to 15-year GIIs rose by 3-7bps. The spike in
yields may have temporarily reflected a 25bps hike in OPR for the front ends.
Meanwhile, BNM announced a MYR2b reopening of 20-years MGS. WI was quoted at
4.70% bid but with muted response.
·
Similarly in the MYR IRS market, rates reacted with a
bearish steepening stance. Prior to the MPC, a 25bps hike was already priced
in. Now post MPC, we think the rates market is pricing in more than one hike in
the curve into the curve. KLIBOR added 1bp to 3.39%.
·
The PDS market equally saw some sell off driven by the
govvies. However, players are still looking for GG papers albeit on higher
yields. Prasarana 2024 changed hands at between 4.55% to 4.59% level, while
Danainfra 2024 dealt in a tighter range of 4.54% to 4.56%. Long end AAAs and
GGs are still in demand even though the bid-offer spreads have widened.
Indonesia
·
There
is no note on Indonesia fixed income today,
Rgds,
Maybank FX Research
Global Markets
Maybank
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