FX
Global
The DXY index bounced just before the start of NY session and retained
gains after Jul consumer confidence beat consensus with a print of 90.9, well
above 86.4 seen in the month prior. Equity indices did not fare as well. DJI
started positive but gave back all gains after US President Obama joined the
European Union to impose greater sanctions on Russia. Market jitters drove
bids towards the US treasuries. 10-year yields were choppy throughout
overnight session and traded lower at around 2.46% in early Asia.
It is no coincidence that the greenback firmed ahead of FOMC
decision today, even though there would be no press conference after the
decision. The stronger consumer confidence has investors pricing in any
hawkish tweaks to the statement. Key data on the tap includes the advanced
estimate of 2Q GDP as well as ADP employment survey. |
This morning, we had Japan data. Jun industrial production fell
-3.3%m/m, more than the expected -1.2% and a deterioration from the previous
0.7%. Onshore investors shrugged off the negative data as Nikkei gained
+0.2%. Early starter Kospi was also up +0.3 and the positive sentiments may extend
to the rest of Asia. Onshore markets in Malaysia returns today after a two-day
break for Hari Raya Puasa celebrations. Indonesia is still off and will only
return next Mon. All eyes are on the US given the lack of data catalyst
from the region.
G7 Currencies
DXY – Upside
Risks. DXY bulls gained traction in the European session and hovered
around 81.20 as we write. At this point, RSI on the weekly chart flags
overbought conditions and we expect sideway trades 80.98-81.32 for much of
Asian trades. However, we think risks are still to the upside with the 18-SMA
above the 40-SMA on the intra-day charts. Next barrier is seen around 91.413.
Dips are unlikely to venture deeply below the 80.681.
USD/JPY – Limited Downside. USD/JPY broke above the 102-figure, which we had identified as
resistance, to hit an overnight high of 102.16, helped by a resurgent dollar
overnight. Moreover, worse-than-expected industrial production data, while not
impacting the pair, did little to lift sentiments. The pair is correcting slightly
after yesterday’s uptick and is hovering around 102.10 currently. Intraday MACD
is now indicating slightly bullish momentum, which suggested downsides could be
limited today. Ahead of FOMC outcome today, 101.80 should be supportive today.
Next resistance is seen at 102.20. Industrial production fell 3.3% m/m in Jun,
much worse than the 1.2% decline consensus was expecting, as the impact of the
sales tax hike continue to be felt.
AUD/USD – Downside Risks. AUD/USD slipped to around 0.9380 this morning, weighed by dollar
strength. With a lack of domestic cues at the moment and a strong dollar
environment, risks are tilted to the downside. The 18-SMA has crossed below the
40-SMA, suggesting more offers towards support of 0.9360, ahead of 0.9329.
Barrier is seen at recent high of 0.9422. Watch tonight’s FOMC statement for
cues hereforth. Next domestic data is due tomorrow – Jun building approvals.
EUR/USD – Bearish.
EUR/USD broke below the 1.3432-support and was last seen around 1.3412. Support
at the 1.34-figure is inevitably in focus as any tweaks in the upcoming FOMC
statement could bring about more bearish pressure. On the side, there is a slew
of confidence indicators out of the Eurozone that could also hammer on the
currency. Expect prices to remain heavy with a break of 1.3422-support (25 Jul
low) to expose the next at the 1.34-figure.
EUR/SGD – Heavy. EUR/SGD
is still within tight 1.6640-1.6730 range. The cross is last seen at the softer
end of the range, around 1.6660, dragged by mild EUR weakness. The 18-SMA is
still well below the 40-SMA on 4-hourly chart. MACD indicates that the
pair has lost all bullish momentum and we think risks are to the downside
towards the 1.6640. Next support is seen at the 1.66-figure. Main barrier of
the week is seen around 1.6730. Eyes on the confidence indicators out of the
Eurozone today ahead of the FOMC statement later. A greater divergence between
the Fed and ECB could hammer the cross lower.
Regional FX
The SGD NEER trades 0.55% above the implied mid-point
of 1.2488. The top end is estimated at 1.2240 and the floor at 1.2736.
USD/SGD – Lacking momentum. After hitting a high of 1.2431 overnight on the back of a resurgent
dollar, USD/SGD is correcting to around 1.2420 currently. Intraday MACD is
indicating little momentum currently, suggesting two-way trades are likely
today. Downsides today are likely to be limited by the intraday ichimoku cloud
below with 1.2406 guarding downside. 1.2445 should guard topside today.
AUD/SGD – Downticks. AUD/SGD remains on the slide, dipping to 1.1656 at last sight on
the back of relative SGD strength. Further downsides towards 1.1600 remain a
possibility given the negative cross-over of the 18-DMA and the 40-DMA this
morning. MACD though continues to show little bias in either direction and the
pair is likely to remain trapped between the 1.1620/1.1724 range. SGD/MYR –
Two-Way Trades. SGD/MYR hit an intraday high of 2.5597 this
morning, helped by SGD strength, before easing to around 2.5579 currently.
Intraday MACD is showing little directional cues again, though risks are still
tilted to the downside as the 18-DMA lies below the 40-DMA. Support is seen at
2.5517, while topside remains guarded by 2.5721.
USD/MYR – Mild Upside Risks. Markets re-opens today and the USD/MYR pairing traded steady around
3.1770 this morning. MACD is slightly above the zero line. Trades are likely to
be a tad biased to the upside ahead of FOMC statement tonight along with ADP
and US 2Q GDP. Eyes are on any impact on 10-year USTs that could also generate
a rippling effect into Malaysian domestic bond markets but any major impact is
unlikely at this point. That said, strong dollar bids are likely to meet
selling interest, slowing upmoves for the pair with a nearby resistance
pencilled in around 3.1820. Support is seen around 3.1660. 1-month NDF touched
a high of 3.1881 before easing to around 3.1840. Risks are on both sides and we
reckon sideway trades to dominate within 3.1748-3.1960 with some upside risks.
USD/CNY was fixed at 6.1645
(+0.0030), vs. previous 6.1615 (+2.0% upper band limit: 6.2902; -2.0% lower
band limit: 6.0437). CNY/MYR was fixed at 0.5142 (+0.0004). USD/CNY –
Downside Bias. Pair opened at the lower end of the intra-day trading
range seen yesterday and edged higher to around 6.1820, inspired by dollar
upmove. Bearish pressure is still dominant on the intra-day charts with 18-SMA
below the 40-SMA (4-hourly). Expect bids to be limited by the
6.1960-resistance. Support at 6.1800 ahead of the next at 6.1737. China’s former
Security Chief Zhou Yongkang is now under investigation. He was an ally of Bo
Xilai who was in turn convicted of bribery and abuse of power (BBG). Elsewhere,
an editorial by China Securities Journal says “heavy” measures could be
undertaken in 2H to support economic growth.
1-Year CNY NDFs –Choppy. The NDF hovered around 6.2460 and price moves are likely to be swing
within 6.2430-6.2485. MACD forest on the intra-day chart is above the zero
line. 18-SMA lies below the 40-SMA but gap between the two narrowed. We think
risks are on both sides but bias is tilted to the upside. USD/CNH –
Shallow Dips. USD/CNH hovered around the 6.18-figure this morning, off
overnight highs. MACD shows little cue, only slightly above the zero line.
18-SMA is below the 40-SMA and upticks may be on short leash. Barrier remains
around 6.1850 for intra-day trades ahead of the next at 6.19-figure. Support is
now seen around 6.1774 (19 Mar low).
USD/IDR – Closed For A Week-Long Holiday. Onshore markets are closed for the Idul Fitri celebrations and will
re-open only next Mon. With onshore markets closed for the week-long holiday,
market focus will be on the offshore price. The 1-month NDF hit a high of 11700
this morning, lifted higher by dollar strength overnight. However, the 1-month
is correcting this morning, trading around 11660 currently. Still, the bias is
to the upside as indicated by intraday MACD forest, suggesting downside could
be limited today. We reckon the 1-month could trade within 11500-11750 today.
USD/PHP – Capped.
Onshore markets re-opened today after the Idul Fitri break with the USD/PHP
bouncing higher following a resurgent dollar overnight. Pair is currently
hovering around 43.445 with intraday MACD indicating little momentum in either
direction though downsides are a possibility given the negative cross-over of
the 18-DMA and the 40-DMA. This suggests upside could be capped today with
support likely around 32.185. Markets will remain focused on the BSP tomorrow
with a rate hike, though this is not our economic team’s expectations, likely
to drag the pair towards 43.070. Still, a thin cloud lies overhead with
immediate resistance likely around 43.528 and we need to see a firm break of
this barrier to expose the next at 43.720. As well, 1-month NDF remains in
choppy trades today, inching lower currently to around 43.410 after hitting an
overnight high of 43.480. Intraday MACD continues to show little momentum in
the day ahead.
USD/THB – Limited Upside. USD/THB is edging higher this morning, underpinned by dollar strength
overnight, but still within familiar ranges. Foreign flows were again mixed
with a net THB1.78bn in equities sold yesterday, but a net THB6.15bn in debt
purchased. Pair is hovering around 31.850 at last sight with intraday MACD
hugging close to the zero line. Still with an intraday inchimoku cloud hanging
overhead, upsides are likely to be limited today with 31.890 guarding topside.
Support nearby is at 31.800 before the next at 31.650. The military junta has
approved infrastructure spending plans, including a dual-track rail system
(costing THB867bn). While the cost of the infrastructure investment plans were
not disclosed, they are estimated to cost THB2.4tn. These plans will be
submitted to the government (when it is established) for approval later.
Rates
There is no write-up on fixed income
today.
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