Maybank GM Daily - 21 May 2015

FX

Global

DXY retained a firm tone throughout Wed, unfazed by the FOMC Minutes. The report revealed that most participants thought “data available in Jun would provide sufficient confirmation that the conditions for raising (interest rates) had been satisfied”.  That said, there was consensus that economic conditions will improve after the weak first quarter. With that, the Fed is still deemed to be very data-dependent and a September rate hike is very much in the options.        GBP and CAD were the only currencies that gained against the USD on Wed. Minutes of the BOE showed a 9-0 interest rate vote and some perceived it to be slightly hawkish which showed up in the GBP strength that is retained in early Asia trades today. The rest of the majors played catch-up as investors mulled over the latest FOMC Minutes. The greenback pared its recent gains but resistance at 100-DMA at 95.58 is still vulnerable. Oil prices faltered after a firmer session on Wed with brent crude priced at USD64.90/bbl. Over in Europe, Greek parliamentary speaker acknowledged that Greece will not be able to repay a loan to the IMF on 5th Jun unless a deal is reached. That should keep EUR heavy.        In Asia, eyes are on China’s HSBC flash PMI-mfg for May with consensus expecting a firmer print of 49.3 compared to Apr’s actual figure of 48.9. There is little else on the data calendar and UK’s retail sales will be out in late Asian hours. Thereafter, preliminary PMI numbers will be released from the Eurozone before early NY session brings jobless claims, PMI-mfg, Philly Fed, existing home sales and Apr leading index.

Currencies

      DXY – Firm. Dollar stayed supported. FOMC minutes overnight appear to have been taken as somewhat mild hawkish; indicated that while outlook for employment and GDP softened abit, the outlook for inflation increased with the oil price rebounding. Overall the minutes remain consistent with our house-view that a June hike is highly unlikely and that the first hike could take place in Sep 2015. Day ahead sees 95.00 (21 DMA) – 96 range; still favour buying on USD dips.  Week remaining brings existing home sales, leading index and Kansas City Fed Manf. Activity; initial claims (Thu) before Fed William speaks on Fri.

       EUR/USD – Greek Defiance Weighs On. Euro took another dump towards 1.1064 after Greek parliamentary speaker acknowledged that Greece will not be able to repay a loan to the IMF on 5th Jun unless a deal is reached. As of now negotiations continue to be on an impasse but we continue to watch for development. Later today Greek PM Tsipras is expected to present a debt restructuring plan to EU leaders at the 2-day Eastern Partnership summit.  Daily MACD continues to exhibit a bearish divergence while stochastics is showing tentative signs of falling from overbought levels. Support still seen at 1.1050/60 (trend-line support from Apr 2015 lows) before 1.0920 (50 DMA) in the short term. Week remaining brings preliminary PMI-mfg numbers on Thu along with consumer confidence. IFO business survey should round up the week’s data releases. In data overnight, Eurozone Apr CPI inflation was 0% y/y; 0.2% m/m, as expected while German ZEW was worse than expected.

       GBP/USD – Resilient; But Turning Mild Bearish? GBP stayed resilient after BoE minutes reaffirmed that inflation is likely to rise and slack in the UK economy will decrease towards the end of the year. GBPUSD was last at 1.5556 this morning; daily momentum and oscillators are turning bearish bias. Possible bearish divergence as indicated on daily MACD. Next support at 1.5390 (21 DMA). Day ahead focus on retail sales

       USD/JPY – Two-Way Trades. The USD/JPY run towards 121.50 stalled amid JPY selling against the majors. Pair is currently sighted around 121.16 with intraday MACD still showing bullish momentum and slow stochastics at overbought levels. Trades are likely to be cautious ahead of BOJ meeting tomorrow even though no action is expected. Further dips should see support around 120.40. Any rebounds should continue to meet resistance around 121.85.

       AUD/USD – Bearish Risk.  AUD/USD broke out of the upward sloping trend channel, and hovered around 0.7880. Pair is on its way towards the 100-DMA at 0.7850, weighed by another the lower iron ore prices.  Daily momentum indicators are increasingly bearish and we expect intra-day bounces to be capped by 0.7918 ahead of the 0.80-figure.

       NZD/USD – Stay Short. NZD continues to trade with a heavy bias amid broad USD rebound. Low of 0.7282 was traded before a mild rebound towards 0.7313 at time of writing. We continue to see further downside in the NZD on a combination of drivers including mounting expectation of RBNZ cutting rates in Jun, weak dairy prices, falling PPI. We mentioned previously support at 0.7320 (previous low in May) if broken should see the pair moving closer to our objective of 0.72 levels.

Asia ex Japan Currencies

      The SGD NEER trades around 0.12% below the implied mid-point of 1.3365. We estimate the top end at 1.3097 and the floor at 1.3631.

       USD/SGD - Bearish Bias. USD/SGD is on the slide this morning after pushing pass 1.34 overnight, helped by the rebound in JPY and EUR. Intraday MACD forest is showing waning bullish momentum and slow stochastics appears to be falling from overbought levels. Further pullbacks should find 1.3295 (50DMA) supportive and any rebound to meet resistance around the 1.3400-figure.

       AUD/SGD – 50-DMA Next to be cleared. AUD/SGD tested below the 50-DMA at 1.0532 and the cross is still sticky around that level. AUD bears reassert and daily momentum indicators show that it could be a matter of time before the AUDSGD reverse lower towards 1.0460, once the 1.0532-support is cleared. Topsides to be guarded by 1.0600 ahead of the next at 1.0675 in the near-term.

       SGD/MYR – Ascending Wedge (Bearish Bias). SGDMYR remains in an ascending wedge and was last seen around 2.6975, awaiting for fresh cues to break-out. Daily stochastics has fallen from oversold levels while momentum is turning mild bearish. As cautioned previously, the break below 2.69 (50 DMA) sees 2.6770 (100 DMA) before 2.63 levels.

       USD/MYR – Mild Upside Bias. USD/MYR eased slightly tracking the mild rebound in oil prices overnight. The pair is expected to continue to take cues from oil prices and the greenback. Pair last traded 3.60 at time of writing. Resistance still seen at 3.62 (100 DMA) before 3.6380 (50 DMA). Support at 3.5870 (21 DMA) is expected to hold. Daily momentum and oscillators are mild bullish bias. Week ahead focus on Apr CPI inflation (Fri).

       USD/CNH – Rangebound. USD/CNH slipped under 6.2050 this morning in spite of the firm dollar tone. We expect USD/CNY fixing to be little changed later and noticed reluctance by PBOC to fix the pair much higher against the dollar, underscoring our view that the central bank wants to ensure a steady yuan. Pair is still 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 6.1924. On 20 May, USD/CNY was fixed 27 pips higher at 6.1125 (vs. previous 6.1079). CNYMYR was fixed 52 pips higher at 0.5815 (vs. 0.5763). In news, fuel consumption rose 4.8% to 89.2mn tons in Jan-Apr compared to the same period a year ago. Elsewhere in Brazil, Premier Li said China will boost currency swap and local currency settlement with Latam. Data-wise, HSBC Flash PMI-mfg for May takes centre stage for Asia today (Cons.: 49.3 vs Apr 48.9). The release is at 0945 (SGT).

       USD/IDR – Rangy. USD/IDR slipped towards the 13100-levels this morning, in line with its regional peers. Pair is currently sighted around 13136 with intraday MACD showing no strong momentum and slow stochastics indicating mild bearish bias. Comments by deputy governor Warijiyo that tight monetary bias is likely to continue given the need to keep inflation and current account deficit within target should weigh on pair ahead. In the absence of fresh catalyst, look for the 12950-13200 range to still hold intraday. The 1-month NDF climbed back to hover around the 13250-levels this morning. Foreign funds sold a net USD7.61mn in equities yesterday and further sell-off in Indonesia assets could keep the pair supported. The JISDOR was fixed lower at 13169 yesterday from Tue’s 13183.

       USD/PHP – Gapping Lower. The USD/PHP gapped lower to 44.518 at the opening this morning from its close of 44.588, playing catch up with its regional peers. Pair has since rebounded slightly higher to 44.533. Pair has lost most of its bearish momentum and slow stochastics is showing bullish bias, suggesting that downside could be limited today. Further dips today are likely to see support at 44.400, while rebounds should meet resistance around 44.650. The 1-month NDF is on the slide this morning, hovering around 44.560 this morning. Foreign funds sold a net USD8.03mn in equities yesterday and a further sell-off could keep USD/PHP supported.

       USD/THB – Consolidation.  USD/THB appears to be in consolidation around the 33.500-region after climbing back from Mon’s low of 33.290. Intraday MACD forest is still showing mild bullish momentum, but slow stochastics is indicating tentative signs of falling, suggesting rangy trades are possible ahead. Intraday should see the 33.450-33.670 hold today. THB found some support yesterday from foreign buying of a net THB1.98bn in equities, which offset the sell-off of a net THB0.88bn in debt that capped the pair’s upside yesterday.

Rates

Malaysia

       Lacklustre trading day in the local government bond market. Players look to the FOMC’s minutes released last night and the 11th Malaysia Plan later today for more leads. There is also the auction of the new 20y MGS 5/35 in the market today.

       The IRS market was extremely quiet yesterday and there were no trades reported. 3M KLIBOR stayed the same at 3.70%.

       PDS market was slightly more active with focus on longer dated GG and AAA papers. Dana 30, Plus 26 and 27 all tightened by 1bp. PTPTN 26s, however, traded 1bp wider partly due to infrequent quotes. AA names at the belly of the curve saw good demand, especially TPSB and UEM. UEM papers were taken at offer level with UEM 22s tightening 4bps. Bumitama 19 was also taken on the offer side, tightening 1bp. We believe players remain cautious and are waiting for clearer market signals. For now, we prefer high quality AAAs and GGs.

Singapore

       SGS fell closely tracking the fall in overnight UST on the back of a strong US housing start number for Apr 2015. SGS yields were up 6-8bps at the belly of the curve, and up 1-4bps elsewhere. The issue size for the new 10y benchmark SGS is SGD2.6b, of which SGD300m is expected to be tendered by MAS. SGD IRS levels mostly remained the same.

       Asian credit space traded wider on the back of UST selloff overnight. Nonetheless, more buyers came in during the afternoon session. ICBC Singapore’s new 3y traded about 7bps tighter from reoffer and the recently issued Beijing State Owned was still being lifted. There was some interest on O&G names as well. In the primary space, Zhengzhou Yutong is issuing a 3y CNH bond enhanced with a standby letter of credit from the Bank of China Macau, with guidance ranging 4.00-4.05%. The order book stood at an overwhelming CNH6b but we find the level rather tight at the guidance. All eyes were on last night’s FOMC minutes.

Indonesia

       Indonesia bond market closed lower on yesterday trading session in line with our view. There were minimum sentiments and market was rather quite during the day. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.743%, 8.023%, 8.194% and 8.313% while 2y yield shifts up to 7.487%. Trading volume at secondary market was seen thin at government segments amounting Rp8,337 bn with FR0070 (10y benchmark series) as the most tradable bond. FR0070 total trading volume amounting Rp2,535 tn with 127x transaction frequency and closed at 102.177 yielding 8.023%.

       Corporate bond trading traded thin amounting Rp301 bn. JSMR01CN2T (Shelf registration I Jasa Marga Phase II Year 2014 T Seri; Rating: idAA) was the top actively traded corporate bond with total trading volume amounted Rp90 bn yielding 8.212%.