Maybank GM Daily - 24 Mar 2014

FX

Global

·         Geopolitical tensions continue as the Russian annexation of Crimea plus the seizure of two bases (including a military airport) in Crimea by pro-Russia forces over the weekend dominated. Meanwhile, concerns about the China economic and financial situation also put risk back on the table last week. It also did not help that Fed’s Bullard defended Yellen’s comments from last week, saying that they were in line with market expectations on when the Fed would start to tighten policy. Equities fell with the DJI ending the week lower by 0.17%, S&P at -0.29% and NASDAQ at -0.98%.

·         In the week ahead, more Fed speakers are on tap, who will probably provide more clarity on the Yellen comments. Key data releases from the US this week include durable goods order and 4Q GDP estimates. Over in the eurozone, consumer confidence surveys are due for the euro-block while the UK will release 4Q GDP.

·         Some volatility is expected in the currency markets with dollar strength underpinning.  In Asia, flash HSBC PMI-mfg data from China could trigger fresh risk aversion for AXJ should the data disappoint.

G7 Currencies

·         DXY – higher. The index continues to hover around the 80-level at the start of the week. The index remains data dependent and moves could be bullish for now, barring risk events. The 80-figure remains a viable support before 79.920-level. Further upticks could face resistance at 80.40 and 80.524.

·         USD/JPY – congestion still.  Dollar rally and improved risk appetite lifted the pair into a congestion area of 102.10-102.70. Momentum indicators are not providing any clear directional cues for the week ahead. As a result, there is little impetus for the pair to break out ahead of inflation and job numbers on Fri. Trading range this week is likely between 101.77/102.70.

·         AUD/USD – still resilient. The pair remains resilient on the back of higher domestic inflation, strong job data and the possibility of a rate hike. Looks like the AUD is becoming more dependent on domestic data. From the daily chart, little directional bias can be deciphered with range-bound trading likely to extend within 0.8988-0.9138. Looking ahead, RBA Philip Lowe is likely to jonebone and also perhaps the Financial Stability Review on Wed could bring the pair lower. 

·         EUR/USD – scope for bears. The pair was hammered lower to 1.3766 on the back of dollar strength before recovering to end the week at 1.3793. Currently sighted at 1.3787, daily MACD shows increasing bearish momentum and we think that a break of 1.3770-support could see further extensions to the downside.

Regional FX

·         The SGD NEER trades 0.34% below the implied mid-point of 1.2690. The top end is estimated at 1.24352 and the floor at 1.2945.   USD/SGD – upside bias.  The USD/SGD continues to trade above the ichimoku clould, hovering around 1.2746 at last sight. The cloud has turned into a viable support for the pair with 1.2716 (23.6% Fibo retracement of the Oct-Jan upswing). Some consolidation is possible after the recent surge but the bias remains on the upside. 1.2830 is seen as resistance this week.

·         Singapore’s consumer inflation is expected to moderate in Feb to 0.9% y/y from 1.4% in Jan. Feb CPI is on tap later this afternoon.

·         AUD/SGD – bullish.  The bias is still to the upside and the cross has hit the target we were looking for. RSI now prints around 75, close to overbought conditions (denoted by 80) while MACD still indicates bullishness. The cross is likely to remain elevated for now as a result with bids to be slowed by 1.1600 and then to meet resistance at 1.1690.  SGD/MYR – tighter swivels ahead.  The cross is again at the higher end of the 2.5660-2.6000 range as MYR weakened more than SGD. Upmoves are likely to meet resistance at 2.6023 this week. MACD shows slight bullish edge but we reckon there are two way interests to keep the pair within the range. Tighter swivels ahead within 2.5820-2.6023.

·         USD/MYR – trapped in the cloud. Pair breached the 3.30-figure late in the week after FOMC. Prices are still trapped with the ichimoku cloud though MACD signals more bullish moves ahead. Pair need to sustain a move above the 3.3168-level (at the top of the cloud) for another upside extension. Othewise, expect sideway action to continue with 3.2768-3.3168.

·         USD/CNY was fixed lower at 6.1452 (-0.0023), vs. previous 6.1475 (+2.0% upper band limit: 6.2706; -2.0% lower band limit: 6.0247). CNY/MYR was fixed at 0.5346 (-0.0002).

·         USD/CNY – consolidating Spot hovered lower around 6.2206 this morning after the slightly lower fixing this morning. Still, daily MACD continues to indicate bullish momentum ahead with the pair in overbought territory. Support is seen around 6.1967 this week while barrier is remains around 6.2380.  Flash HSBC PMI-manufacturing slipped to an eight month low of 48.1 in Mar, down from 48.5 in Feb. With the PMI reading still below 50, indicating a contraction, China’s growth momentum continues to slow.

·         1-Year CNY NDFs – down. The 1Y NDF last printed around 6.2155 with bullish momentum waning. This suggests further downmoves is likely this week.  Support is likely at 6.2058 this week.

·         USD/CNH – sliding. Pair is currently on the downtick at the start of the week, hovering below the 6.20-figure this morning, helped also by the lower fixing. Last seen around 6.1972, prices are sliding in tandem with its onshore peers but bullish momentum is slowing. We also observe that CNH is still trading at a premium to CNY. 6.1775 should be supportive this week, while  6.2122 should guard topside.

·         USD/IDR – upticks. After ending the week at 11436 on Fri, the USD/IDR has come-off and is currently hovering below the 11400-level at 11388 at last sight. Risk aversion plus continuing concerns about China should limit downside. Daily MACD is still showing bullishness with further upside still possible. We reckon barrier is likely at 11535 this week with 11300 supportive. The 1-month NDF stayed below the 11500-level this morning at 11400 compared to 11465 on Fri, though MACD is showing bullish momentum still. The JISDOR was ended the week higher at 11431 compared to its fixing of 11407 on Thu.

·         USD/PHP – sideways.  The USD/PHP is inching higher this morning at 45.280 with risks still increasingly to the upside and in overbought territory. Watch for the BSP decision later this week where a rate hike could weigh on the pair. For now, we expect the pair to trade sideways within 44.840/45.475 this week. The 1-month NDF continue to inch higher above the key 45.000-level at 45.430 this morning with risks still to the upside and the 1-month in overbought territory.

·         USD/THB – still supported. The USD/THB is on the uptick, following further political uncertainty after the Constitutional Court ruling on Fri and not helped by dollar strength. The pair was last sighted around 32.424 with daily MACD showing increasing bullish momentum. With the political impasse still underpinning, we look for resistance at 32.605 this week with support at 32.215. Also watch out for the major rally that the anti-government protestors are planning for this Sat 30 Mar to bring down caretaker-PM Yingluck.  Thailand’s Constitutional Courts ruled on Fri that the 2 Feb general elections were invalid as it did not conclude in one day. In light of this ruling, the Election Commission has said that the new election is likely to be in three months at the very least.

Rates

Malaysia

·         Local government bond yields rose succumbing to selling pressure after USD/MYR gapped up to 3.3110 from 3.2980 at previous close. UST yields remained elevated further added to the soft market sentiment. At market close, yields across benchmark MGS rose by 1-6bps while SPK 2/24 added 3bps to 4.45%.

·         IRS barely moved today. The curve flattened slightly where short-end rates added 1bp and belly rates shed 1-2bps. 2-year traded at 3.55% and 4-year traded at 3.77%. Surprisingly, MYR belly rates and long end rates were well anchored. Offshore rates inched higher along with higher spot FX. Belly rates closed essentially unchanged despite offshore rates having moved some 7bps higher.

·         PDS players stayed on the sidelines in cautious mode in reaction to the govvies selloff. Market was quiet with mostly the usual short-tenor paper being traded. PTPTN opened the book today with guidance of 55bps above MGS.

Indonesia

·         Indonesia bond market closed lower on Friday’s trading as there were minimum market sentiment moving the market.. Yield shifted upwards mostly on all bond tenor. 10-yr and 15-yr benchmark series yield continue shifting upwards to 8.058% (1.7bps) and 8.528% (1.9bps) while 5-yr and 20-yr benchmark series yield shifted down to 7.745 (0.5bps) and 8.627% (1.3bps) respectively. On the other hand, 2-yr yield shifted down to 7.295% (1.6bps). Trading volume at secondary market significantly dropped onf Friday’s trading amounting Rp5,056 bn (vs average per day trading volume of Rp7,602 bn). FR0070 (10-yr benchmark series) and FR0069 (5-yr benchmark series) was the most tradable bond during the day. FR0070 total trading volume amounting Rp945 bn with 31x transaction frequency and was last traded at 102.144 yielding 8.058% while FR0069 total trading volume amounting Rp938 bn with 19x transaction frequency and closed at 100.528 yielding 7.745%.

·         On the corporate bond segment, trading volume was seen thin as well with total trading volume amounting Rp270 bn (vs average per day trading volume of Rp750 bn). BNII01ACN1 (Shelf registration I Bank BII Phase I Year 2011; A serial bond Maturity date: 6 Dec 14; Rating: idAA+) was the top actively traded corporate bond yesterday with total trading volume amounting Rp384 bn and was last traded at 99.65 yielding 8.267%.

Rgds,

Maybank FX Research

Global Markets

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