Maybank GM Daily - 3 Jun 2015

FX

Global

      EUR bounced on the back of firmer-than-expected Eurozone CPI at 0.3%y/y vs. consensus 0.2%. EUR came within striking distance of the 1.12-figure before settling around 1.1150. Whispers of a last minute deal with Greece also fuelled its upmove and brought the DXY index lower. In US, Apr factory orders underperformed at -0.4%m/m, weighing on the DXY. AUD was the outperformer after RBA left its cash target rate unchanged at 2.00% and little forward guidance for AUD bears. AUD finished the session at 0.7772, drifting lower as early Asia takes profit on the rally.

      Key on Tue was the rate cut by Reserve Bank of India. Policy repo rate and reverse repo rate were lowered 25bps to 7.25% and 6.25% respectively. RBI was keen on boosting investment and needed to cut sooner rather than later to avoid exacerbating inflation towards the end of FY15/16.

      Oil prices took advantage of the dollar slide to head higher overnight, leading the MYR higher.  KRW is a close second to the MYR this morning, underpinned by positive Kospi. Overnight action is uninspiring and Nikkei was also lower at -0.5% as we write. Onshore markets in Indonesia returns from a break yesterday. In the absence of catalyst, expect Asian players to remain a tad cautious ahead of US ADP report tonight which could give a clue on the key payroll number this Fri. Apart from ADP, the Beige book will also be released. Fed Evans and Fed Bullard will have their turn to speak tonight as well.

Currencies

       DXY – Choppy. USD was broadly softer, with DXY down to 95.70 lows overnight. US factory orders and ISM NY were weaker than expected while hopes of a Greek deal sparked off a rally in high-beta currencies. USD is likely to remain volatile and choppy within the 95 – 98 range for the rest of the week with key data coming on stream. Better than expected data could fuel hopes for an earlier Fed rate hike. Technically, we continue to reiterate that daily stochastics is falling from overbought areas, which could imply some near term downside pressure. Week ahead brings MBA mortgage application; May ADP; Apr trade; May services/composite PMI; Fed Beige Book; Fed’s Evans to speak (Wed); Initial jobless claims; continuing claims; 1Q unit labor cost; Fed’s Tarullo to speak (Thu); May NFP, unemployment rate, average hourly earnings; Fed’s Dudley to speak (Fri).

       EUR/USD –Buy on Rumor, Sell on Rally. EUR soared overnight, sparked off by better than expected Euro-area CPI data. More signs of Greece nearing a deal emerged after headlines noted that creditors have drafted their final offer. EURUSD rose as high as 1.1192 before closing at 1.1152 overnight. Yesterday we highlighted in our GM Daily of a potential move higher towards 21DMA of 1.1150.  EURUSD was last at 1.1144 this morning. Daily MACD and stochastics are showing very tentative signs of bullish bias. Next resistance at 1.1220 (61.8% fibo of 1.1467 – 1.0819) before 1.1310 (76.4% fibo). Support at 1.1080 (100 DMA), 1.0970 (23.6% fibo, 50 DMA). Expect Greek headlines to drive sentiment and given that the market has moved ahead of actual Greek outcome; it is hard not to imagine a buy on rumor, sell on rally trade in the making.   Week ahead brings ECB meeting (expect no surprise, Draghi to reiterate that ECB will stick with QE program); EC Apr retail sales, unemployment rate; EC, GE, FR, IT May services/composite PMI (Wed); EC, GE, FR, IT May retail PMI; FR 1Q unemployment rate (Thu); GE Apr factory orders; EC 1Q GDP; FR Apr trade (Fri). G7 summit in Brussels hosted by Germany over the weekend.

      GBP/USD – Choppy. GBP firmed on better than expected construction PMI (9-year high), mortgage approvals (largest rise in 6 years) amid broad USD weakness. Pair was last at 1.5340 levels this morning. Daily stochastics are showing tentative signs of turning higher from oversold levels. Expect the pair to remain choppy. Next resistance at 1.5370 (61.8% fibo of 1.5090 – 1.5815), before 1.5450 (50% fibo); support at 1.5260 (76.4% fibo) before firmer support at 1.5180 (50, 100 DMAs). Day ahead sees 1.5260 – 1.5400 range. Week ahead brings May nationwide house prices; May services/composite PMI (Wed); BoE meeting (Thu); BoE/GfK Inflation 12-month expectations (Fri).

      USD/JPY – Capped. USD/JPY briefly crossed the 125.00-figure at 125.05 – a high not seen since 2002 – before easing off below 124-figure overnight, weighed by dollar weakness. Pair has bounced back above 124.00-levels at last sight with intraday MACD and slow stochastics now bearish bias, suggesting rebounds today could be capped. Look for pair to hover within its current trading range of 123.40-125.00 with the bias tilted to the downside today. BOJ Kuroda’s meeting with PM Abe did not reveal anything of significance regarding policy as FX was not discussed.

      AUD/USD – Potential Upside Squeeze. AUD/USD rebounded with a strong rally and the pair touched a high of 0.7790 before drifting lower to levels around 0.7750 this morning as early market players take profit. 1Q GDP will be released later with consensus expecting a 2.1%y/y growth and a 0.7%q/q expansion. We think it will take a very weak number for AUD to collapse again and risks are to the upside. Key resistance level at 0.7796 at 50-DMA is eyed. Support is seen around 0.7683. For the week, we had caution for a potential squeeze higher and this could see the pair re-visit 0.7830 levels (100 DMA). Favor fading this squeeze. Week ahead brings Apr retail sales; trade (Thu).

      NZD/USD – Sell on Rallies. NZD enjoyed a move higher towards 0.7201 levels overnight thanks to AUD rally amid broad USD weakness. GlobalDairyTrade auction continues to see the 6^th consecutive fall in auction prices (-4.3%). Wining price was US$2412, at its lowest level since Jul 2009. We continue to see further downside pressure on the NZD on a combination of drivers including mounting expectation of RBNZ cutting rates in Jun, weak dairy prices, falling PPI. Bearish momentum remains intact but daily stochastics are showing very tentative signs of turning from oversold levels. We remain better sellers on rally towards 0.7230 levels.

      USD/CAD – Supported on Dips. USDCAD pulled back yesterday, weighed by the dollar slide as well as the oil rebound. Price was last seen around 1.2415, still supported by the 100-DMA. The pair was also underpinned by the daily ichimoku cloud. Expect dips to remain supported by next support at 1.2301 at 50-DMA. Weekly momentum indicators have lost further bearish momentum. Bids to meet resistance at 1.2629 ahead of the next at 1.2784.

Asia ex Japan Currencies

      The SGD NEER trades 0.19% below the implied mid-point of 1.3460. We estimate the top end at 1.3190 and the floor at 1.3729.

      USD/SGD – Capped. USD/SGD slipped overnight to a low of 1.3455 before rebounding towards 1.3500 this morning as the dollar firmed. Momentum indicators and oscillators though are still bearish bias, suggesting that the pair’s upside could be capped. Upticks are likely to meet resistance around 1.3550 intraday. Dips today if any is likely to see support around 1.3430. Aside from May PMI today, week is data-quiet. PMI rose to 50.2 in May, beating estimates of 49.3, but the rise in electronics PMI to 49.8 (cons.: 49.5) was still short of expansion mode.

      AUD/SGD – Upside Bias. AUD/SGD rallied in tandem with the rest of AUD crosses after RBA held rates but this cross is still capped by the ichimoku cloud, last printed 1.0480. Support is seen at 1.0459 and prices are sticky around the 50-DMA. Daily momentum indicators do not reveal much directional bias today and we look for price action to remain within 1.0400-1.0525 today.

      SGD/MYR – Bullish Divergence. SGDMYR remains well-bid, pushing above 2.73 on ringgit weakness and a largely resilient SGD. While the medium term set-up continues to call for a downside, we are cautious near-term bullish bias. Bullish divergence appears to be forming. Topside could challenge the previous high at 2.7350 and even push further towards 2.75 as OPEC talks loom this week. We expect some volatility/wild swings in oil prices to influence the MYR.

      USD/MYR – Volatile. USDMYR eased towards 3.68 on broad USD weakness and oil price gains overnight. We continue to reiterate our expectation for further volatility ahead of OPEC meeting and US NFP on Fri. Technically, the pair appeared to have broken above its strong resistance at 3.66 (61.8% Fibonacci retracement of 3.7350 – 3.5388). Daily momentum and stochastics are bullish bias. Expect range of 3.6650 – 3.6950 intra- day.

      USD/CNH – Tracking The Onshore to Nowhere. USD/CNH last printed 6.1990, weighed by the dollar slide. We expect USD/CNY fixing to be lower later and 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 1 Jun, USD/CNY was fixed 18 pips higher at 6.1225 (vs. previous 6.1207). CNYMYR was fixed 44 pips higher at 0.5943 (vs. 0.5898). PBOC will allow financial institutions to issue certificates of deposits to individuals and companies. This could draw more deposit from the shadow-banking sector. Minimum size for individuals is CNY300,000 and CNY10mn for corporates

      USD/IDR – Bearish Tilt.  Onshore markets re-opened and the USD/IDR is inching lower, playing catch-up with its regional peers. Intraday MACD and slow stochastics are now bearish bias, suggesting a downside tilt to the pair is possible. In the absence of fresh catalyst, expect the pair to trade within 13150-13250 intraday with the bias to the downside. 1-month NDF is currently sighted hovering near the middle of its 13230-13345 trading range at 13290 with intraday MACD showing mild bearish momentum and slow stochastics is bearish bias. There was no JISDOR fixing yesterday as onshore markets were closed.

      USD/PHP – Supported. The USD/PHP slipped lower to 44.645 this morning, playing catch-up with its regional peers, after climbing to 44.709 yesterday. Intraday MACD is showing no strong momentum, though slow stochastics is indicating bullish bias ahead. With no fresh catalyst ahead, pair should continue trading choppily ahead with topside capped by 44.750 and dips should see support around 44.530. The 1-month NDF is inching higher above 44.700 at last sight with both intraday MACD and slow stochastics still showing little directional bias. Foreign appetite for Philippines asset continue to wane with funds selling a net UD47.54mn in equities yesterday and further selling could support the pair higher.

      USD/THB – Rangy.  USD/THB continued its climb higher, driven by the firmer dollar tone and possibly by the inflation rising by the slowest pace since Aug 2009, but remained within its current trading range of 33.600-33.810. Pair is showing no strong momentum in either direction, signalling range-bound trading is likely ahead. Look for range-bound trades within 33.600-33.810 intraday. A firm break of the 33.810 barrier exposes the key psychological hurdle at 34.00. Foreign funds sold a net THB1.66bn and THB1.27bn of equities and government debt yesterday and further assets sale could be support the pair’s upswing today. CPI for May fell by 1.27% y/y, more than consensus’ expectation of -1.10%.

Rates

Malaysia

      Local government bond prices inched lower amidst wide bid-offer spread. Buying interest was seen on off-the-run MGII 2/16 and the 3y benchmark MGS 10/17. Other part of the curve remains defensive as market takes cue from weaker Ringgit. Meanwhile, BNM announced plan for MTB/MiTB issuance for June, with increased issue size ranging from MYR500m to MYR1,000m.

      In the IRS market, 5y traded at 3.95%-3.96% despite a quiet day for MGS. 3M KLIBOR was unchanged at 3.69%.

      The PDS market was uneventful. AAA names in the 9-10 year bucket were given with better offer. That being said, some buyers were seen picking up Telekom, Suria KLCC and longer-dated Plus names. Plus 36s tightened by 2 bps while other AAA names traded about 1bp wider. In the AA space, we did see some interest in short duration 3y UEM and YTL Power names with both names tightening by 2bps.

Singapore

      SGS market was relatively tame and quiet with yields 4-6bps higher across the curve whereas the SGD IRS was about 5-6bps higher. Bond-swap spreads was stable. USDSGD spot edged higher. Bond-swap spread may tighten as SGD funding slowly moves higher amidst higher US rates.

      Asian credit space saw more buying as weaker UST prompted some demand. Chinese IGs traded a tad tighter in spreads. Indons traded down 0.2-0.5pts with a generally negative sentiment on Indon names. News came out that Pertamina is planning USD issuance and in reaction the bond traded a tad lower. Property names were slightly more active with two-way flows on names like Dalwan, Agile and Cogard. Buying trend continues for Indian names. Overall the sentiments were biddish even though volume was thin.

Indonesia

      Please note that there is no updates for Indonesia as onshore markets were closed yesterday for a public holiday.