FX
Global
Risk appetite
recovered overnight as the FOMC meets for a two-day session. This was despite
rumours of a likely Greek exit from a euro as the Athens government made plain
that no fresh suggestions will be presented for negotiations at the 18 Jun
meeting with other finance ministers of the Eurozone. Elsewhere, UK had a
barrage of key data out and the miss in retail price index saw cable slip
briefly towards 1.5540 before a full reversal above the 1.5640 at last sight.
Nonetheless,
optimism was apparent in most of overnight markets, underpinned by an
anticipation of a sanguine outlook from Fed Yellen to set the tone for the
eventual rate lift off in the latter half of the year. The DXY index swivelled
around the 95-figure, supported by a mild retreat by the EUR, under the
1.1250-mark.
With the
focus on FOMC’s decision tonight, it is no wonder that the greenback reigns
this morning, strengthening the most against the AUD. The picture is a bit
mixed in the region with MYR well ahead of the rest, up 0.3% against the USD,
underpinned by the rise in crude prices overnight. SGD and JPY were the laggard
as Asian player poise themselves for a positive session.
The data
calendar is light again with Singapore’s NODX out this morning at -0.2%y/y vs
prev. 2.2% growth. There is little else to focus on this morning and regional
players may steer to the sidelines ahead of the decision tonight. Eurozone’s
May CPI could grab some of the attention at 5pm (SGT). A stronger print could
add fuel to EUR bulls but expect focus to shift towards FOMC decision and
statement thereafter.
Currencies
|
DXY – Consolidate into FOMC. DXY consolidated in recent ranges of 94.55 – 95.22,
before closing at 95 levels amid mixed set of US data overnight - lower
housing starts while building permits was better than expected. Continue to
see range-trading between 94.50 and
95.50, with slight bearish tilt into FOMC (tomorrow morning 2am) Markets will
be watching for signalling effect; pay attention to FOMC projection and tone
of speech – any bullish revision to the dots could be viewed as a potential
rate hike as early as in Sep and watch for tone of speech for to manage
market expectation. We continue to reiterate our long-standing view of a Sep
rate lift off amid firm US data. Technically, we reiterate that the DXY needs to clear above the
97.37 level (61.8% fibo of 99.98 – 93.13) for a sustained move higher. Caution on the downside is a daily close below 94
could well suggest further downside pressure on the DXY towards 93.15 levels.
Week ahead brings MBA mortgage approvals (Wed); FOMC meeting; May CPI;
initial jobless claims, continuing claims; 1Q current account; Jun Philly
Fed; May leading index (Thu).
EUR/USD – Consolidate in Recent Range. Eur’s move towards 1.1330 during the Asian session
yesterday was short-lived as Greek PM Tsipras’s speech in Athens drove
sentiment weaker, taking EUR lower before closing near 1.1250 levels. PM
Tsipras accused the IMF of criminal behaviour, that ECB was strangling Greece
and reiterated that the current Greek parliament was voted into power to end
austerity. Expect the pair to continue to trade recent ranges of 1.12 –
1.13 albeit possibly choppy price action into US FOMC tonight. Greek
headlines will continue to drive sentiment. Euro-area Finance ministers
meeting over Thu-Fri could stretch into the weekend on unconfirmed market
talks after PM Tsipras was said to have met Russian PM Putin last Sun. Week
ahead brings ECB weekly QE details; ECB Draghi speaks (Mon); GE May CPI; GE
Jun ZEW; EC 1Q employment; ECB Mersch, Knot speak (Tue); EC May CPI; EC Apr
construction output EU’s Dombrovski speaks (Wed); GE May PPI; 1Q FR Wages
(Thu); EC Apr current account (Fri).
GBP/USD – Watch 1.5660 Resistance. GBP shrugged initial weakness (marginally softer CPI
and PP) to end the session on a near-1month high around 1.5650 levels.
Watch out for stronger wages data – as that could could reignite fresh
talks of UK rate normalization and fuel the rally further. Medium term,
the bullish weekly momentum remains intact targeting 1.5815 levels (previous
high in Apr) on the upside, while support at 1.5565 (61.8% fibo retracement
of 1.5815 – 1.5158), 1.5486 (50% fibo) are expected to hold. Watch for big
resistance around 1.5660 (76.4% fibo); a decisive close above this resistance
could bring the pair near to our objective of 1.5815. We remain better buyers
on dips. Day ahead sees 1.5550 – 1.5680 range. Week ahead brings Apr
employment change, weekly earnings data; BoE Minutes (Wed); May retail sales
(Thu).
USD/JPY – Directionless. USDJPY continued to hover around the 123.40-region
as the comments by BOJ Governor Kuroda on 10 Jun kept a lid on price action.
As well, markets are tentative ahead of FOMC and BOJ policy decisions tomorrow
and Fri respectively. Our long-standing view is for BoJ to ease in Oct 2015.
Trade data released this morning showed exports rising by just a tepid 2.4%
y/y in May despite JPY weakness so far, and the trade deficit widened to
JPY216bn, which could limit any dip today. Pair should continue to face near
term downside pressure as recent BoJ Kuroda comments likely to weigh on
sentiment. A daily close below support at 122.54 (76.4% Fibonacci retracement
of 121.52 – 125.86) could see the pair re-visit next support at 121.50–121.85
levels (previous resistance before the break-out that happened in May 2015).
Intraday momentum is showing mild bullishness, though stochastics is mildly
bearish bias in the near term. Only an abrupt move and close below 120
would cast doubt over this bullish setup. Remain better buyers on
dips.
AUD/USD – Eyes 0.78. AUD was the laggard this morning as overnight bids
remained resisted by the 100-DMA, last priced at 0.7744 against the USD.
Despite the offered tone in the pair this morning, the price action in the
past two weeks suggests that pressure is building on the 0.78-figure. A
clearance of the 100-DMA at 0.7777 is needed before that. RBA Minutes did not
give fresh impetus to the AUD, as we expected. The cental bank expects macro-prudential
efforts will take a while for full impact to be felt, modest improvement in
hiring sentiments expected in next few months and lower AUD necessary for
investments in some sectors. We still think down-moves are not likely to
sustain. In addition, a clearance of the 0.78-figure could be a double
confirmation of the double bottom pattern formed in the past two weeks.
Westpac leading index slipped -0.1%m/m in May.
USD/CAD – Stuck in Range. USDCAD is still stuck in a tight range, nicely
bounded by the 50-DMA(1.2258) and 100-DMA(1.2409) within the daily ichimoku
cloud. Pair was last seen around the 1.23-figure. Upticks are still resisted
by the 1.2357-resistance and bias on the momentum indicators is not clear. We
still expect the pairing to remain in sideway trades for now with stronger
support seen around 1.2183. We continue to expect action to remain largely
within the daily ichimoku cloud. An unexpected resurgence in bulls may meet
resistance at 1.2388. Week ahead brings May CPI and Apr retail sales on Fri.
NZD/USD – Downside Pressure Persists. NZD remained soft overnight as GDT auction prices
continue to fall further (albeit a smaller sequential fall). Watch support at
0.6950; stops likely to line up under. Favor fading rallies towards 0.7030/50
looking for the next objective at 0.6870. Momentum and stochastics continue
to indicate a mild bearish bias. We continue to reiterate our view for
further downside pressure on the NZD on a combination of drivers including
further expectation of RBNZ cutting rates again in Jul on weak dairy prices,
falling PPI amid weakening demand. We expect at least another 25bps cut and
the next cut could come as soon as the next meeting in Jul. |
Asia ex Japan Currencies
The SGD NEER trades 0.25% above the implied mid-point of 1.3490. We
estimate the top end at 1.3222 and the floor at 1.3759.
USD/SGD – Buy on Dips. USDSGD is trading higher this morning on the back of
softer EUR and JPY after sliding to an overnight low of 1.3420. Pair though
continues to trade within its current 1.3400-1.3480 range. We continue to
reiterate that the pair needs to make a daily close above the neckline at
1.3550 (50% fibo of 1.3941 - 1.3151) for further rally towards 1.3640 (61.8%
fibo); 1.3750 (76.4% fibo). Intraday MACD is showing tentative signs of bearish
momentum, while stochastics is fast approaching oversold levels. Support at
1.34 should hold. While the pair is likely to consolidate in 1.34 - 1.36 range,
we favour buying the pair on dips. May's NODX fell marginally by 0.2% y/y,
though worse than the 2.3% market was expecting, dragged lower by
pharmaceuticals and electronics shipments (-0.7% and -2.5% y/y respectively).
The weak NODX print probably helped to keep the pair supported this morning.
AUD/SGD – Testing the 50-DMA. AUD/SGD is still capped by the 50-DMA, last seen
around 1.0400. Despite the current downtick, we think downsides are unlikely to
be sustained as efforts of AUD bears could be negated to some effect by SGD
weakness. Still, strong resistance is seen at 1.0475, the 50-DMA. The ichimoku
cloud turned higher, possibly allowing more room for upsides. Support is marked
at 1.0330. Daily momentum indicators suggest waning bearish momentum and bias
to the upside. That said, choppy action should continue to remain within
1.0300-1.0520.
SGD/MYR – Lacklustre Range. SGDMYR consolidated in 2.78 – 2.79 range overnight;
traded 2.7840 levels this morning. Weekly MACD and stochastics remain bullish
bias. SGDMYR could still face further upside risk, possibly towards 2.80-2.82.
Day ahead still see 2.7750 – 2.7900 range in absence of fresh catalyst and into
US FOMC.
USD/MYR – Consolidate. USDMYR continued to ease despite stronger USD and
softer oil prices overnight; lows of 3.7360 was traded this morning. Daily
stochastics is showing tentative signs of turning lower from overbought – could
suggest near term mild pressure to the downside. Day ahead expect pair to
consolidate in 3.73 – 3.76 range. We continue to caution that pair could
remain supported on concerns at home, with a risk of overshoot towards 3.80.
Focus on Fitch review of the country’s sovereign rating likely to be due
sometime between now and end-Jun. Malaysia CPI is on tap later today. We expect
headline inflation to pick up on transportation and food prices; expect
inflation to stay firm due to upcoming Ramadan.
USD/CNH – Firmer
In Range. USD/CNH slipped back to print 6.2097 and gap between the CNH
and CNY narrowed, though support is still seen at 6.2067 (50% Fibonacci
retracement of the 2014-2015 rally). That still leaves the pair in rangy
trades. We 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 16 Jun,
USD/CNY was fixed 14 pips lower at 6.1155 (vs. previous 6.1169). CNYMYR was
fixed 14 pips lower at 0.6055 (vs. 0.6069). PBOC allows private investment
funds to enter interbank bond markets (Reuters).
USD/INR – Mounting Upside Pressure. USD/INR bounced yesterday and closed near day’s high
at 64.2525, underpinned by bad trade numbers. Pair is at the brink of breaking
out of the ascending triangle set up after touching a high of 64.30. MACD tilts
to the upside. 1-month NDF is less convincing as the pair slipped from
overnight highs to levels around 64.55. We need a breakout of the 63.835-64.890
range for stronger directional cues. Trade data shows further deterioration in
May with exports falling another 20.2%y/y accompanied by a 16.5% fall in imports.
Trade deficit narrowed to USD10.4bn. In news, ADB President expressed
confidence in the fiscal position of India and support rail reform measures.
The bank will increase lending to India by 50% in next three years.
USD/KRW – Range.
USDKRW traded higher towards 1118.5 levels yesterday. Pair opened near
1119 levels this morning before trading marginally softer towards 1117.5 at
time of writing. Expectation of supplementary budget to offset negative impact
from the MERS scare is building; expect a decision to be made by end-Jun.
Budget amount is likely to be KRW20 – 25tn range in order for it to be
meaningful and to complement accommodative monetary policy. Day ahead,
while 4-hourly stochastics is falling, momentum remains flat. Pair could trade
range between 1112 – 1119 in absence of fresh catalyst. We continue to
reiterate our medium term bearish view for KRW - on concerns over
MERS weigh on growth/domestic consumption/ tourism/ foreign investment against
a backdrop of subdued inflation, weak activity data, soft exports, weak JPY
undercut Korea’s export competitiveness, and rising household debt (165% of
annual household disposable income). USD strength on Fed rate lift-off in Sep
(house view) could further provide support for the pair.
USD/IDR – Range. USD/IDR is edging higher this morning but well-within its current
trading range of 13285-13370. Intraday MACD is showing no strong momentum,
while stochastics is at overbought levels, suggesting range-bound trades are
likely intraday. Any dips ahead should be opportunities to accumulate. Expect
the pair to consolidate within 13250-13400 intraday as markets await both FOMC
and BI policy decisions this Thu (we expect BI to stand pat given rising
inflation, concerns on capital outflows and more time needed to monitor impact
of macroprudential policies). 1-month NDF remain steady around the
13,440-region with little momentum seen on either side though price action is
still on the uptrend. The JISDOR was left unchanged at 13,333 yesterday.
Foreign funds bought a net USD15.00mn in equities yesterday, but removed a net
IDR1.46tn from their outstanding holding of government debt on 15 Jun (latest
data available).
USD/PHP – Bearish Bias. USD/PHP is inching lower back towards the 45-handle
this morning, playing catch-up with its regional peers. Both intraday MACD and
stochastics are bearish bias, suggesting that the 45-handle could be tested
today. A break of that support-level could see the pair headed toward 44.890
and then to 44.715. Resistance is seen around 45.410 for now. 1-month NDF is
coming off back to the 45.200-levels this morning after heading higher towards
45.70 on Mon and could continue its gradual grind lower given that intraday
MACD is showing bearish momentum, though stochastics remained at oversold
levels. Foreign funds continued their equity selling spree with a net USD1.37mn
sold yesterday, though it appears that the selling is tapering off and the let
up could be supportive of the PHP.
USD/THB – Rangy. USD/THB continues to trade within its current 33.615-33.810 range
in the absence of fresh catalyst. Currently hovering around 33.680-region, pair
is showing little directional momentum, suggesting continued range-bound trades
are a possibility ahead. Pair should continue to track dollar moves ahead,
given the lack of domestic impetus. Ahead of FOMC decision tomorrow, pair
should trade rangy within 33.615-33.810 intraday. Foreign funds were net
sellers of Thai assets yesterday with a net THB0.84bn and THB0.10bn in equities
and government debt sold off and further selling should keep the pair
supported.
Rates
Malaysia
§ In the local government bond market, the issue size of
the 7y retap MGS 9/22 was announced at a higher than expected MYR3.5b. Trading
on the 7y benchmark was subdued despite the WI being done 1bp higher than last
done at 4.05%. We do not expect market to move much ahead of the FOMC outcome
this week.
§ The IRS space was quiet and nothing traded in the
market. Rates closed unchanged. 3M KLIBOR stayed the same at 3.69%.
§ Local PDS market was also quiet as investors stayed on
the sidelines ahead the FOMC. In the AAA space, Aman 24s tightened by up to
5bps to 4.40% with MYR55m traded volume. This is roughly 40bps spread over the
benchmark, tightening by 10-15bps. We also saw real money demand for Islamic
papers in the 9y-15y bucket. Islamic papers by Aman, Plus and Danga may
continue to be sought after in the coming sessions. Elsewhere, we saw longer
dated AA papers trading up to 2bps tighter, while GGs mostly traded flat with
better demand at the belly of the curve.
Singapore
§ SGS yields ended lower by 1-8bps across the curve with
the 10y SGS closing at 2.57%. Afternoon saw a pickup in activity after UST
prices moved slightly higher in the afternoon. Bond swap spreads widened and
the 10y closed at -16.5bps against yesterday's -13.5bps. All eyes are on the
FOMC meeting.
§ Another quiet day in the Asian credit space as market
stayed sidelined ahead of the FOMC meeting. Players continued trying to trim
positions amid the volatility in UST. IGs mostly traded wider in spreads, with
some good two way still seen in Chinese tech names and the recent issuances.
Despite the slight UST rally in the afternoon, sovereigns were weak as selloff
persisted against a backdrop of uncertainty in Greece and the FOMC outcome.
PHILLIPs and INDONs were given almost half a point down, together with the
quasi sovereigns.
Indonesia
§ Indonesia bond market closed lower on the note of
minimum market sentiments and ahead of BI Board of Governor and FOMC meeting
today. On the other hand, local auto sales in may continue to fall to 79,236
units or -18.20% YoY. The game changer for LCY bond market would be a dovish
FOMC statement post meeting. 5-yr, 15-yr, 10-yr, 15-yr and 20-yr benchmark
series yield stood at 8.512%, 8.604%, 8.779% and 8.784% while 2y yield shifts up to 8.041%. Trading volume
at secondary market was seen moderate at government segments amounting Rp9,914 bn with FR0070 (10y benchmark series) as the most tradable bond. FR0070 total trading volume amounting Rp2,408 tn with 102x transaction frequency and closed at 98.591 yielding 8.604%.
§ Indonesian government conducted their sukuk auctions
yesterday and received incoming bids of Rp4.47 tn bids versus its target
issuance of Rp2.00 tn or oversubscribed by 2.2x in line with our view. However,
DMO only awarded Rp2.69 tn bids for its 1yr PBS008 which was sold at a weighted
average yield (WAY) of 7.81466%, 5y PBS006 at 8.67790% while 25y PBS007 was
sold at 9.19000%. These figures were higher than our expectation. Incoming bids
were mostly clustered on the short end tenors. SPN-S04122015 bids were rejected
during the auction. Bid-to-cover ratio during the auction came in at 1.03X –
1.32X. Till the date of this report, Indonesian government has raised approx.
Rp61.02 tn worth of debt through bond auction which represents 73.1% of the 2Q
15 target of Rp83.50 tn.
§ Corporate bond trading traded heavy amounting Rp858
bn. BEXI01BCN2 (Shelf registration I Indonesia Eximbank Phase II
Year 2012; B serial bond; Rating: idAAA) was the top actively traded
corporate bond with total trading volume amounted Rp200 bn yielding 8.709%
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