FX
Global
Stronger US labour report saw UST 10-year yields reach for the 2.70%-handle
before easing back to trade around 2.64% into Asia. Dollar rose to a high of
80.315 before leveling off as well. June added 288K of employment, well above
the consensus of 215K. However, some had noted a restraint in wages as average
hourly earnings kept a steady growth pace at 0.2%m/m, underscoring a slack in
the labour market. Bourses rejoiced ahead of the long weekend with a
decent gain of 0.5% for DJI, 0.6% each for S&P and NASDAQ.
ECB kept the status quo last night and President Draghi
said rates will remain low as the central bank readies itself to make outright
purchases in the Asset Backed Securities (ABS) market.
It’s 4th of July and expect thinner markets with US away
for Independence Day. Nikkei trades higher, up +0.8% as risk-on mood extends
into Asia while Kospi hugs the flat-line. We expect the rest of Asia to trade
in mild optimism after the good US jobs number. MYR bucked the trend in AXJ,
underpinned by rate hike expectations as the next MPC meeting nears (10 Jul).
The rest of the regional currencies weakened against the greenback.
G7 Currencies
DXY – Capped. Stronger
labour prints lifted the greenback to a high of 80.315 before easing to trade
around 80.20. The 4-hourly chart flags a MACD that still points up though
forest indicates moderating momentum. Expect this index to remain buoyant today
though gains could be capped by the next barrier at 80.420. Support is seen at
80.03, ahead of 79.920. Beyond intra-day trades, the 18-DMA and 40-DMA is at
the brink of a negative crossover, a bearish signal for the next few sessions.
US is away for Independence Day.
USD/JPY – Consolidation. USD/JPY was unable to breach our
resistance 102.20 and stabilized around that region this morning after jumping
higher underpinned by NFP outperformance and higher yields. Pair is currently
correcting slightly to around 102.14 this morning with risks tilted to the
upside. Pair is currently off overbought territory with RSI printing around 76.
After yesterday’s massive run-up and ahead of the US long weekend, the pair
should be in consolidation mode. A firm break of 102.20-resistance should
expose the next hurdle at 102.44. 101.76 should be supportive today.
AUD/USD – Sideways. AUD/USD remained heavy for much of overnight trade and hovered around
0.9350 this morning. The 18-SMA and 40-SMA is at the brink of another
cross-over. Expect pairing to be stuck in sideway trades albeit with a downward
tile with support seen at 0.9320.Topsides to be capped by 0.9390.
EUR/USD – Downside Pressure. EUR/USD pulled back towards the 1.36-figure as the
greenback shot higher on the jobs number. Bearish momentum persists in this
pairing with next support seen around 1.3586. Intra-day signals are bearish as
well with 18-SMA and 40-SMA crossing lower. Pair has entered a congestion are
within 1.3580-1.3650 but a breakout to the downside is real.
Regional FX
The SGD NEER trades 0.53% above the implied mid-point of 1.2538. T he
top end is estimated at 1.2289 and the floor at 1.2788.
USD/SGD – Supported. USD/SGD is correcting slightly after dipping overnight with the pair
sighted around 1.2473 currently. Intraday MACD is again showing little momentum
in either direction, but the pair should be supported by improving risk
appetite especially in the equities market. Support remains around 1.2451 today
with resistance around 1.2482.
AUD/SGD – Consolidative Trades. AUD/SGD again took out several support levels
on its way down overnight. The cross is currently sighted higher around 1.1662,
following the slight correction of AUD. After yesterday’s plunge, we look for
the pair to consolidate around the 1.1665-region today. Trading range today is
likely between 1.1620/1.1730. SGD/MYR – Downside Bias.
SGD/MYR gapped lower at the opening to 2.5621 and remains on the downtick on
the back of MYR strength. Cross is last sighted 2.5555 and in oversold
conditions with risks bias to the downside currently. With our 2.5665-support
broken, new support is seen around 2.5506 before 2.5430. Resistance remains
around 2.5771.
USD/MYR – Heavy. USD/MYR slumped under the 3.20-figure this morning and bears extended to
trade around 3.1885 as we write. A rate hike on 10 July seems to be almost a
sure-bet for most market players at this point, especially after the recent
words by PM Najib. Next support is seen at 3.1851 for intra-day trades.
Pullback for the rest of the day should be shallow amid buying interests but we
are sure price moves are likely to remain heavy. Topsides guarded by 3.1940.
1-month NDF was also on the slide overnight with only modest recovery this
morning to trade around 3.1930. MACD still shows strong downside momentum. Malaysia’s
trade numbers are due today and most expect exports growth to maintain a decent
pace of 15.2%y/y and imports growth to quicken to 7.7%y/y from the previous
5.0%. Trade balance is expected to shrink to MYR 8.1bn from previous MYR
8.87bn.
USD/CNY was fixed higher at 6.1642 (+0.0061), vs. previous 6.1581 (+2.0%
upper band limit: 6.2900; -2.0% lower band limit: 6.0433). CNY/MYR was fixed at
0.5160 (-0.0023). USD/CNY –Rangy. Spot opened a tad higher before easing back again to
around 6.2130, despite the higher fixing. Support is seen around 6.2094 for
further offers while upticks are likely to be guarded by 6.2231. Intra-day
signals show little bias on either side. We expect rangy trades within the
aforementioned levels. From the press, PBOC has transacted CNY50bn in
sterilization instruments with Industrial and Commercial Bank of China to soak
up the liquidity from the bank (Reuters). Elsewhere, President Xi and South
Korean President Park agreed to set up direct KRW-CNY trading and to complete
free trade discussions this year (BBG).
1-Year CNY NDFs – Sideways. NDF rose again towards the 6.2570-resistance though
intra-day chart shows a little acceleration in momentum for this pair. Upmove
is inspired by the higher fixing but we expect prices to remain capped given
the mild bullish momentum. Risks are still to the upside however and we see
next barrier at 6.2672.
USD/CNH – Capped. USD/CNH edged higher along with the NDF and was last seen around
6.2150. 6.2193 is still the barrier to watch but the 18-SMA and 40-SMA are
closing in for a positive crossover on the 4-hourly chart. Upside is the
risk for now but we still hold our short USD/CNH call that we made on 11 Jun,
with target seen at 6.1706. CNH trades at a small discount to CNH at the
moment.
USD/IDR – Range-bound. USD/IDR is edging lower this morning despite the
firmer tone of the dollar. Pair is currently sighted around 11910 with intraday
momentum indicators showing little directional clarity at the moment. Still,
pair continues to trade elevated close to the 12000-figure as the presidential
elections approaches and on ongoing concerns about the twin deficits. For the
first time in four days, foreign funds sold a net USD17.39mn in equities
yesterday, putting upward pressure on the pair. Lacking directional cues for
now, we expect the pair to trade range-bound between 11830/12000 today. 1-month
NDF continued to edge below the 12000-level, hovering around 11950 currently
with bullish momentum on the wane. The JISDOR was fixed higher for the second
straight session at 11963 yesterday from 11854 on Wed. BI deputy governor said
that 2Q current account deficit should come in at USD9bn, while the FinMin told
parliament that he expects the economy to expand by 5.3% in 1H2014 with 2014
growth targeted at 5.5%.
USD/PHP – Rangy. USD/PHP is edging close to our support at 43.528 this morning with the
pair currently hovering around 43.583. Positive risks sentiments today could
weigh on the pair in contrast to yesterday’s sell off by foreign funds of a net
USD4.9mn. Intraday MACD is still showing waning bearish momentum, which suggest
downside could be limited. Support nearby is still seen around 43.528 before
43.421 and hurdle to cross remains at 43.831. The 1-month NDF rose to 43.600
this morning, though intraday MACD forest is still hugging close to the zero
line. Jun CPI came in slightly below expectations (cons. 4.6%) at 4.4% y/y
compared to 4.5% in May. The moderation in inflation was due to smaller
increases in housing and transport, which helped to mitigate the uptick in food
prices.
USD/THB – Consolidating. USD/THB is inching higher this morning underpinned by
a resurgent dollar overnight. Pair is seen around 32.405 currently with
intraday MACD forest still hugging close to the zero line. However, upticks are
likely to be mitigate partly by improving domestic conditions as reflected in
rising consumer confidence for the second month (Jun: 65.3 vs. May: 60.7). As
well, continued foreign buying of Thai assets – a net THB446.08mn and THB4.19bn
in equities and debt yesterday – should also be supportive of the THB. Ahead of
the US long weekend, we look for the pair to consolidate within 32.370-32.440
today.
Rates
Local government bond prices opened wide with better sellers on the back
of Prime Minister’s statement through his Facebook
account as market players took it as a hint of imminent rate hike. While most
are expecting the rate hike, the language of the MPC this 10th July would be
most important. Volumes dwindled from yesterday’s trading session as yields
inched a tad higher from previous close.
IRS market was pretty quiet today with no trades
reported. Local IRS curve literally did not respond to higher USD rates market
overnight. At current levels, any downside movement of rates would be limited
by high KLIBOR levels. 3M KLIBOR remained stable at 3.56%.
In the PDS market, market was biddish across all
tenors. Players looked for papers from high grades to AA3. Names that were sought after include
Danainfra, Aman and Tanjung Bin Energy. Most traded below MTM level.
Singapore
Amidst thin volumes, SGS yields jumped tracking the USD rates higher on
much stronger than expected ADP number. Most players however were sidelined
ahead of nonfarm payrolls report. In the morning, SGS started off well
with prices holding up on the back of bottom fishing in selective issues,
whilst the IRS curve tracked the rise in USD rates
overnight. But sentiments took a turn in the latter half of the day as
dealers tried to pare down their exposure. At the close the SGS curve
closed up 1-6bps with only the very short end relatively unscathed. IRS
curve ended the day up 1-6bps on a steepening bias.
In the credit market, the Euro Issue that Republic of
Indonesia came out with was priced at MS+195bps. The 7-year piece traded
slightly tighter, last seen at 99.65/99.75 against issue price of 99.37. On the
other hand, Chinese property names were bought up with some moving USD1 higher.
Overall, demands remained on technology and financial names.
Indonesia
IDR Government bond traded lower today as pressure on Rupiah is still
high despite good news came from success on Indonesia’s EUR Bond Issuance
amounting to EUR 1 billion. In term of allocation, 24% of the notes were placed
with investors in the UK, 19% with investors in Germany/Austria, 18 with
investors in the US, 4% in Switzerland and 11% in the rest of Europe, according
to Bloomberg news. The 10Y bond yield bounced back to 8.13% while 20Y
yield to 8.77% or 10 bps higher compared with yesterday’s closing. Beside the
pressure from Rupiah, investors still worry about the “huge” target issuance in
Q3 amounting to IDR96 trillion (excluding ORI and non Rupiah issuance). Furthermore,
yield closed at 7.74/8.11/8.57/8.72% for 5Y/10Y/15Y and 20Y respectively.
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