Maybank GM Daily - 25 Apr 2014

FX

Global

·         US durable goods order came in firmer than expected at 2.6%y/y and surpassed Feb’s 2.1%. The data lifted sentiments and NASDAQ was up +0.5%, S&P at +0.2% while DJI closed flat. On the side, the volatile initial claims for the week ending 19 Apr was 329K, much higher than 305K in the previous week. 10-year yields remained choppy within 2.68-2.74%, entering Asia near the bottom of the range. DXY was up briefly before easing back to around 76.77, mimicking the moves of the 10-year yields.

·         There were quite a few ECB speakers including Constancio who said that non-conventional instruments, including asset purchases are being considered to stem a prolonged period of low inflation. ECB’s Coene also said that a downside surprise in the Apr inflation numbers may force the Bank to act earlier. Draghi also warned that broad-based asset purchases could commence if inflation outlook worsened (BBG). EUR got an initial lift towards mid 1.38 before slumping towards the 1.3790-mark on Draghi’s words.

·         Early regional starter KRW is in the lead this morning, still reeling from the GDP boost which raised rate hike expectations. MYR trades on the backfoot and has depreciated 0.2% against the greenback. Risk appetite is weak despite the positive NY session as ongoing conflict in Ukraine intensifies. Nikkei is down -0.3%. National CPI edged higher to 1.6%y/y in Mar from previous 1.5%. Core inflation softened a tad to 0.7%. Few data of note in Asia today with eyes only on Philippine’s trade and Singapore’s industrial production. USD/AXJs are likely to remain a mixed bag today, especially with the weekend closing in.

G7 Currencies

·         DXY – Sideways. DXY is still trapped within 79.688-79.988 as we write on Fri morning and pressure is tilted to the downside at the moment. We continue to expect sideway movements within this range, last seen at 79.78. A move below the 79.688-support exposes the next at 79.547. Durable goods order came in better than expected but bullish momentum was killed by concerns over Ukraine and potential Russian retaliation.

·         USD/JPY – Trapped in Range. USD/JPY upticks were still guarded by the 102.68-barrier. Pressure is increasingly to the downside though there are still significant buying interests to keep price action choppy. We see risks of more downside towards 101.96. We expect the pair to continue its gyrations in range. National CPI matched consensus at 1.6%y/y, picking pace from the previous 1.5%. Tokyo CPI also accelerated to 2.9%y/y from the previous 1.3%.

·         AUD/USD – Bearish risks. Pair on the way lower but offers are still stalled by the 0.9256-support. A decisive move under this level exposes the next suport at 0.9218. MACD shows bearish momentum on the intra-day chart. 0.9347 now guards topsides.

·         EUR/USD – Whippy. Pair touched a high of 1.3843 and slumped to a low of 1.3792 before recovering to around 1.3830. There is little momentum on either side and we continue to see intra-day action confined within 1.3791-1.1.3869. Germany’s retail sales will wrap up key data releases for the week.

Regional FX

·         The SGD NEER trades 0.49% above the implied mid-point of 1.2637. The top end is estimated at 1.2385 and the floor at 1.2888.   USD/SGD – Wobbly.  After hitting a overnight hig not seen since 8 Apr of 1.2594, the USD/SGD has reversed and is now hovering around the 1.2578 region. Still there is little momentum on either side, given that our four-hourly MACD forest is hovering around the zero line. Unless IPI surprises, which could then see a re-test of the 1.2594-level, prices are likely to hover around current levels today within 1.2543-1.2587 (50% Fibo retracement from the Oct-Jan upswing) range.

·         Singapore’s IPI is on tap today and market is expecting factory output to rise by 6.4% y/y in Mar, though this was a moderation after Feb’s 12.8% surge.

·         AUD/SGD – Downside risks.  Bearish momentum continues with the cross edging lower on the back of SGD strength and AUD weakness. Cross is currently hovering around 1.1642 with risks still to the downside and RSI printing close to oversold conditions at 27. With our 1.1662-support taken out, further downside moves are likely with next support seen around 1.1623/1.1590 Resistance is still seen at 1.1685.  SGD/MYR – Breaking out.  Cross surged above the 2.600-fig this morning underpinned by MYR weakness, taking out several resistance levels. Currently sighted around 2.6056, risks are still to the upside with RSI printing just off overbought territory at 77.  Next target is 2.6066 (27 Mar high) and a sustained breach could signal a bullish breakout towards 2.6107.

·         USD/MYR – Buoyant. Pair pushed higher and was last seen around 3.2755, buoyed by a lethargic bonds market at home even without much of dollar strength. 3.2843 is the next barrier for the pair. 1-month NDF edged gradually higher, though not showing much momentum on the 4-hourly chart. 3.2853 to cap. Malaysia’s MIER business condition index rebounded to 103.1, snapping its downward trend. The same goes for consumer sentiments which improved but still remained under the key 100-threshold. The data suggests that businesses have turned more optimistic along with consumer sentiments.

·         USD/CNY was fixed lower at 6.1576 (-0.0013), vs. previous 6.1589 (+2.0% upper band limit: 6.2833; -2.0% lower band limit: 6.0369). CNY/MYR was fixed at 0.5280 (+0.0017).

·         USD/CNY – Bullish. USD/CNY remained lofty around 6.2505, despite the lower fixing. Fears of outflow and economic slowdown continued to weigh on the pairing. The 6.2305-mark is still the support to reckon for the pair. Bullish moves to dominate with risk of testing the next barrier at 6.2566. China’s PBOC planned to start yuan-denominated gold and oil futures to help establish a global payment system for the yuan (Shanghai Securities News). 1-Year CNY NDFs – Bullish The 1Y NDF bounced to a high of 6.2715 despite the lower fixing. MACD forest is also paring bearish momentum. Recent high of 6.2725 could be challenged but the next barrier is some distance away at 6.2855. Bullish risks cannot be denied with a move above the 6.2725 to required to extend upside.

·         USD/CNH – Supported USD/CNH was bid towards 6.2600-handle before drifting back towards the 6.25-figure this morning. Onshore peers are gaining bullish  momentum and could give the USD/CNH a lift towards the 6.26-figure. 6.2450 to support unexpected downticks. CNH is trading at a discount to CNY.

·         USD/IDR – Still bullish. The USD/IDR is inching higher, trading around 11615 currently as concerns about political stability continues to dominate. Foreign interest has also turned lukewarm with only a net USD2.5mn of equities purchased yesterday. Though risks continue to be tilted to the upside, bullish momentum is waning as indicated by four-hourly MACD forest with the pair currently off overbought conditions. 11658 remains barrier for today and a break of this level would expose the stronger barrier at 11703. 11584 continues to be supportive before 11500. The 1-month NDF remained elevated, but is on the slide this morning with bullish momentum on the wane. Currently the 1-month is hovering around 11662. The JISDOR was fixed above the 11600-level yesterday at 11608, up from Wed’s 11590.

·         USD/PHP – Risks still to the upside. The USD/PHP continues to retreat after Wed’s bullish engulfing move. Pair is currently sighted around 44.708 with risk still to the upside with the pair close to overbought conditions. Yesterday, foreign funds continued to load up on equities with net USD17.9mn in equities purchased. We need to see a sustained break of 44.790-resistance to extend bullish control with the next target at 44.820. 44.640 nearby should continue to provide support before 44.580 today. 1-month NDF is inching lower this morning, hovering around 44.710 from yesterday’s close of 44.760 with upside risks coming off.   Philippines’ imports rose by just 0.3% y/y in Feb, a climb-down from 26.0% in Jan. As a result, the trade deficit narrowed significantly to USD66mn in Feb from USD1.6bn in Jan.

·         USD/THB – Rangy.  Though the 32.370-hurdle was breached yesterday, USD/THB is unlikely to stray significantly away from that level today given sluggish dollar overnight. Pair is currently wobbling this morning around 32.380 with bullish momentum dissipating as indicated by our four-hourly MACD forest. Moreover, the ongoing political saga should also limit any downsides to the pair. Still fund inflows, like they did yesterday with a net THB3.7bn in government bonds purchased vs. a net THB125.3mn in equities sold, could mitigate some of the upside pressures. With the lack of any fresh impetus, price action today is likely to be confined within the 32.200-32.480 range.

Rates

Malaysia

·         Local government bonds continued to be lethargic. Yields ended unchanged despite the MYR gained modestly to 3.2600 from 3.2640-60 at previous close. Prices opened slightly firmer but failed to attract any response from market participants. In afternoon session, better sellers were seen as MYR gradually weakened to 3.2690. At market close, benchmark MGS ended unchanged in a subdued and lackluster market.

·         The IRS curve flattened slightly with better bids on the front end partly in reaction to the hawkish Kiwi after the central bank of New Zealand hiked interest rate by 25bps. Trade was reported at the 1-year point.

·         Buying interest in the PDS market picked up on the belly of the curve, specifically on high-grade papers such as Prasarana and Khazanah traded in good volume today. That being said, demand for short papers remains.

Indonesia

·         Indonesia Investment Coordinating Board (BKPM) reported total investment roses to Rp106.6 tn or 9.8% y-o-y during first quarter of 2014. Domestic Direct Investment (DDI) rose to Rp34.6 tn or 25.9% y-o-y while Foreign Direct Investment (FDI) rose to Rp72 tn or 9.8% y-o-y. Total investment have exceeded Rp100 tn level for third time in a row starting from third quarter of 2013 indicating the Indonesia offers an attractive and sustainable investment climate for firms across the globe.  

·         Indonesia bond market slightly decline on yesterday trading session. Yield curve continue steepening amid benchmark series yield gaining as 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield closed at 7.635% (-0.9bps), 8.059% (-2.9bps), 8.423% (-1.1bps) and 8.538% (0.0bps) while 2-yr yield shifted up to 7.382% (+0.2bps). Trading volume at secondary market remains heavy amounted Rp8,453 bn (vs average per day trading volume of Rp7,602 bn). FR0070 (10-yr benchmark series) and FR0068 (20-yr benchmark series) was the most tradable bond during the day. FR0070 total trading volume amounting Rp2,040 bn with 99x transaction frequency and closed at 102.108 yielding 8.059% while FR0068 total trading volume was recorded amounted Rp1,501 bn with 77x transaction frequency and closed at 98.440 yielding 8.538%.

·         On the corporate bond segment, trading volume was relatively moderate amounting Rp623 bn (vs average per day trading volume of Rp750 bn). ASDF02BCN2 (Shelf registration II Astra Sedaya Finance Phase II Year 2013; B serial bond; Maturity date: 26 Nov 2016; Rating: idAA+) was the top actively traded corporate bond yesterday with total trading volume amounting Rp328 bn and was last traded at 100.41 yielding 9.31705%..

Rgds,

Maybank FX Research

Global Markets

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