Maybank GM Daily - 14 May 2015

FX

Global

      The dollar slumped even before the key data of the night was out. DXY index was dragged by the bounce in EUR after a slew of growth numbers out of Eurozone which mostly met expectations. The Eurozone expanded 0.4%q/q in 1Q, accelerating a tad from the previous 0.3%. On the other hand, US retail sales stagnated in Apr after a 1.1%m/m expansion in Mar. Unsurprisingly, the contrast in data was amplified by the overnight dollar slide.

      It was the AUD which benefitted most with a 1.7% appreciation against the USD. The currency held above the 0.81-figure and is still on the climb this morning. NZD was second on the rung on Wed while GBP lagged the rest, gains capped by the downward revision in growth forecast from the BOE inflation report. Still, downside could be limited given the central bank’s tightening bias.

      Earlier in Asia, China’s data missed the average forecast surveyed by Bloomberg with most of activity and monetary data missing the consensus marginally. That was not entirely unexpected as China’s interest rate cut on Sun had already prepped the market for lackluster numbers. Still, local stocks took a hit and closed lower on Wed. The day ahead is light on the data calendar with only BSP’s rate decision of note. Consensus does not expect a move from them. Indonesia is out for Ascension Day holiday.

Currencies

      DXY – Buy on Dips. USD made the steepest slide of the week yet with the DXY at 93.675 as we write. The 100DMA at 95.30 will continue to cap near-term bounces. UST 10-yr yields had another choppy session with a rebound towards the 2.3% into close. More near-term downside cannot be ruled out with minor support seen at 93.250 before the next support seen at 92.50 (38.2% Fibonacci retracement of the 2014-2015 rally).  The data docket only has the weekly initial claims and Apr PPI instore. Data releases tomorrow will be watched with Apr industrial production due, accompanied by May Empire Manufacturing, Apr capacity utilization and May Prelim. Univ of Michigan Sentiment.

      EUR/USD – Fade Relief Rally. EUR extended its upmove against the USD, buoyed by growth estimates out the Eurozone that mostly met expectations. Fewer bad headlines on Greece also did not hurt. Price action suggests that the pair may still like to try 1.1450 which we prefer fading into. Support is seen at 1.1135. Near-term uptrend intact with momentum on the daily MACD still slightly bullish. That said, we continue to reiterate our bearish bias on the EUR on a combination of macro factors including diverging monetary policies between Europe and the US (ECB QE while Fed is likely to start tightening Sep 2015), ongoing disinflationary concerns, structural headwinds (labor market slack, high debt, slow reforms, possible fiscal slippages, etc.) and worries over Greece’s ability to meet repayment schedule. There is not much key data out of EU today but Greece sovereign debt rating will be published by Fitch tomorrow. Week ahead, first support at 1.1070 (61.8% fibo, 1.1450, 1.0458), before 1.0950 (50% fibo); while resistance at 1.1450 (Feb 2015 high) should attract keen offers.

      GBP/USD – Supported. GBP/USD extended its climb overnight purely on dollar weakness and the pair hovered around 1.5730, a tad undecided this morning. 200DMA at 1.5613 supports. The GBP lagged the rest of the majors overnight as its gains were capped by the BOE inflation report. Governor Carney did not turn more hawkish as some had expected. 2015 GDP forecast was revised lower to 2.5% from previous 2.9%. 2016 GDP was revised lower from 2.9% to 2.6% while that of 2017 was also downgraded to 2.4% vs. prev. 2.7%. Inflation forecast was tweaked higher to 0.6% from previous 0.5%. Looking ahead, GBP bulls still have some momentum and we expect 1.5613 to support intra-day trades. GBP strength continued to be underpinned by a UK recovery story backed by domestic demand and possible one of the central banks to lead the first rate hike. We wish to highlight market pricing of BoE rate hike remains dovish and risk is biased for an earlier adjustment and could further lend support to the GBP. Weekly chart continues to look supportive for GBP strength; beyond 200DMA see next resistance only at 1.5860. Other data we are watching for today includes Apr RICS house price balance; Mar construction output (Fri).

      USD/JPY – Capped. USD/JPY tracked the dollar overnight lower towards the 119-figure overnight. Pair has since bounced slightly back to 119.20 this morning, helped by AUD/JPY buying. We continue to wait for a trigger that could see a breakout on either side its current 118.50-120.80 trading range. The 118.50-120.80 range should still hold today. Intraday MACD is showing bearish momentum and slow sochastics is now at oversold levels.

      AUD/USD – 2 Steps Forward, 1 Step Back – AUD had another stellar session yesterday and the AUD/USD pair held itself above the 0.81-figure this morning. Near-term resistance is seen around 0.8183 before our next objective can be reached at 0.8286. RSI flags near overbought conditions and given the lack of impetus in the near-term, expect the next upmove to be a grind. Pair is gaining bullish momentum. We still look for a move up towards the 0.8286-mark (38.2% Fibonacci retracement of the 2014-2015 sell-off). The close above 0.8008-mark overnight has given us greater conviction.

      NZD/USD – RBNZ Next to Ease? NZD extended its climb overnight and remain supported this morning, last priced at 0.7544. Data underpins this pair with retail sales surpassing forecasts with an actual print of 2.7%q/q for 1Q, negating the fall in BusinessNZ manufacturing PMI. Still dollar weakness underpins and the NZDUSD challenges the 100-DMA at 0.7544 as we write and a break above the level could expose the next at 0.7611. Near-term support is seen at 0.7478. Beyond near-term trades, we continue to reiterate our bearish bias for the NZD on a combination of drivers including mounting expectation for RBNZ to cut rates following RBA’s move to cut rate (5 May), weaker than expected 1Q wage inflation data (6 May) and declining GDT dairy auction prices to near 6-year lows (we have released a note on this Monday). Our first objective at 0.7350 has already been achieved; next targets on the downside at 0.72 levels. Remain short and add on rally (if any). Resistance at 0.7430, before 0.7480, 0.7530

Asia ex Japan Currencies

      The SGD NEER trades around 0.18% above the implied mid-point of 1.3292. We estimate the top end at 1.3027 and the floor at 1.3556.

      USD/SGD - Bearish Bias. USD/SGD rebounded slightly back above the 1.3260-levels, likely on profit-taking, after hitting a weekly low of 1.3234 yesterday. Pair though remains bias to the downside as indicated by both intraday MACD forest and slow stochastics. Look for the pair to trade rangy around current levels for the time being with topside capped by 1.3320 and downside supported by 1.3230 before 1.3170. We continue to favour buying USD/SGD on dips.

      AUD/SGD – Upside Bias. AUD/SGD continues its uptick, helped by the AUD climb higher. Cross took out our resistance level at 1.0675 (76.4% Fibonacci retracement) yesterday and is now headed towards the 1.08-levels. With the cross currently bullish bias as indicated by intraday MACD, though RSI is at overbought levels.  Look for the next key level at 1.0808 (Mar high) to cap upside. Any unlikely pullbacks remain supported by 1.0592.

      SGD/MYR – Range-Bound. SGDMYR remained above the 2.70-levels this morning, lifted by SGD move higher overnight. Cross though continues to trade in a familiar range of 2.6935 – 2.7090. We continue to caution that an ascending (bearish) wedge appears to be in the making (over the medium term) and that the cross could be on the verge of a breakdown; a decisive close below the 100DMA at 2.67 level could see the pair ease towards 2.6350 (23.8% Fibonacci retracement of 2013 low to 2015 high).  For now, the softer SGD tone and softer oil prices overnight could see the cross trade range-bound intra-day between 2.6900–2.7100.

      USD/MYR – Watch 1Q GDP; Our Economist expect a strong print of +6.2% y/y. The USD/MYR gapped lower at the opening this morning to 3.5820 in line with its regional peers. However, softer oil prices could limit the pair’s downside today. As we have been reiterating, repeated failure to close above 100DMA could well see the pair move lower towards 3.5080 levels. Pair is currently trapped within an intraday ichimoku cloud, suggesting range-bound trades are possible ahead. Continue to expect 3.5650 – 3.6150 range intraday. We have 1Q GDP; Current account tomorrow and our economic team is expecting 1Q GDP growth to come in at +6.2% (above most market estimates; consensus +5.4%). We remain cautious of Fitch rating review that is due mid-May to Jun; we believe a downgrade may not have as much impact on the MYR given market pricing/expectation; on the contrary a no-move from Fitch might well be seen as a positive for the MYR.

      USD/CNH – Steady. USD/CNH slipped (again) this morning, tracking the overnight USD slump. Pair was last seen at the 6.20-figure and is inching lower within the broader consolidative 6.1842-6.2292 range. A breakout is needed for more directional cues at this point. We still await the completion of the head and shoulders pattern and the clearance of the neckline around the 6.19-figure, which is near to the 200-DMA at 6.1896. USD/CNY was fixed 30 pips lower at 6.1093 (vs. previous 6.1123). CNYMYR was fixed 20 pips lower at 0.5775 (vs. 0.5795). China released its Apr activity and monetary data yesterday and numbers missed consensus. Retail sales slowed to 10.0%y/y from previous 10.2%. Industrial production also decelerated a tad to 6.2%y/y  for Apr compared to 6.4% in Mar. Pace of Urban FAI growth softened to 12.0%y/y from the previous 13.5%. Liquidity numbers were out as well with new yuan loans dropped to CNY707.9bn from previous CNY1.18tn. MS money supply growth also fell to 10.1%y/y from 11.6%. Aggregate financing undershoot expectations at CNY1.05trn. While that should not have been totally unexpected given the rate cut last Sun, the Shanghai Comp still slipped in the afternoon session, closing in red. In other news, an official from the State Council warned that fiscal revenue is dragged by the fall in corporate profits. Elsewhere, China will facilitate mortgages backed by rural land rights (Economic Information Daily).

      USD/IDR – Onshore markets are closed for a public holiday today and will re-open tomorrow. USD/IDR closed yesterday at 13097. But the 1-month NDF is bouncing higher again above the 13250-levels after slipping to a low of 13190 overnight as worries about domestic growth and possible rate cut next week weighs on the IDR. Intraday MACD is still showing bearish momentum, though slow stochastics is indicating tentative signs of bullish bias. The sell-off in Indonesian assets continue with foreign funds selling off a net USD28.82mn in equities yesterday, and removing a net IDR0.93tn from their outstanding holding of debt on 12 May (latest data available). The JISDOR was fixed lower at 13188 yesterday from Tue’s 13203.

      USD/PHP – Bearish. The USD/PHP gapped at the opening to 44.600 from yesterday’s close of 44.695, in line with regional peers. Pair has slipped further and is now sighted around 44.575, below our support level at 44.590. Further moves lower is possible should the central bank stand pat at today’s policy meeting as expected (cons.: 4.00%).  A firm break of our support level at 44.590 could expose the next at 44.400. Any rebounds should remained capped around 44.810. Both intraday MACD and slow stochastics are showing bearish bias ahead. 1-month is little changed at 44.700 currently with intraday momentum and oscillators showing bearish bias. On Wed, foreign funds sold a net USD69.72mn in equities, and a further sell-off could limit the USD/PHP downside.

      USD/THB – Capped.  USD/THB slipped back towards the 33.450-levels overnight, tracking the dollar, but has since bounced higher back above the 33.500-levels this morning. Intraday momentum and oscillators though point to bearish bias ahead, suggesting that upside moves are likely to be capped. With our support at 33.460 taken out, support is now at 33.450 before the next at 33.250.  Upticks should meet hurdle around support-turned-resistance at 44.640. On Wed, foreign funds bought a net THB190.30mn in equities which was offset by the sell-off of THB3.74bn in debt, supporting the pair yesterday.

Rates

Malaysia

§  In the government bond market, we saw bargain hunters with end accounts looking to collect at previous day levels but no deals closed. The 5y benchmark MGS 10/20s still saw better buying, ending 1bp lower. Large volumes of MGS 7/16s were done at 3.08% possibly a redirection of flows from maturing short term BNM bills. Today, market will see the 3y GII 5/18 auction. We expect a decent auction with better participation from local Islamic accounts which lack short term Islamic assets.

§  After some big movements, local IRS ended a tad lower without any trades. The focus is now on the GDP data to be released on Friday, 15 May. 3M KLIBOR lowered 1bp to 3.70%, as expected.

§  Quiet day again in the PDS market as players appear to be sitting out and waiting for the release of Malaysia's GDP data this Friday. We saw short and long dated GG papers as well as AA names being traded at MTM levels. We also saw some buying interest on longer dated Plus papers and were given at MTM levels. YTL Power 23 tightened by 2bps.

Singapore

§  In the SGS market, we saw fairly strong bidding interest. SGS traded up until yields ended down 3-8bps, whilst the SGD IRS closed around 7bps lower. There may have been some short covering ahead of US retail sales number last night. Market appear to be pricing in a weaker number after a series of below expectation data from the US recently.

§  In the Asian credit space, new issues performed well. The new Huawei 2025, which was priced at T10+195bps, rallied to T10+176bps with buyers rushing to collect it due to bad allocation. The new Trade and Development Bank of Mongolia also rallied by 3pts up after being issued at par of 9.375%. The issue is guaranteed by the Mongolian government and was last seen dealing around 103.25/103.40. China General Nuclear Power issued USD600m at T10+177.5 which last was seen trading around reoffer level. INDON saw some buying and PHILIP rebounded slightly on the back of UST movement. For the primary market, Sembcorp Industries is issuing Perp NC5 SGD issue at the guidance of 4.75%. It received an orderbook of SGD1.4b but the issue size is capped at SGD600m. We continue to see players staying on the sidelines due to volatile market conditions.

Indonesia

§  Indonesia bond prices rose significantly ahead of the holiday. The surge occurs due to central bank statement of a possible rate cuts yet emphasis that it would depend on to data. Central bank will hold its board of governor meeting upcoming Monday to decide whether to maintain its reference rate or cutting it. U.S. retail sales data which was published last Wednesday which came in unchanged would be a positive sentiment to the bond market today. However, should the 1Q current account widen, bond market may reverse and head negative again. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.6100%, 7.995%, 8.236% and 8.269% while 2y yield shifts down to 7.646%. Trading volume at secondary market was seen heavy at government segments amounting Rp18,388 bn with FR0071 (15y benchmark series) as the most tradable bond. FR0071 total trading volume amounting Rp5,598 tn with 117x transaction frequency and closed at 106.220 yielding 8.236%.

§  Corporate bond trading traded heavy amounting Rp894 bn. PANR01CN2 (Shelf registration I Panorama Sentrawisata Phase II Year 2015; Rating: _idA-) was the top actively traded corporate bond with total trading volume amounted Rp316 bn yielding 11.059%.