Maybank GM Daily - 5 Jun 2015

FX

Global

      The dollar index ended NY session, hardly changed, inching above the 95.50 this morning as market player poised themselves for a US payroll number that could give the greenback another boost. The bond markets took a breather on Thu with the UST 10y yields back around 2.3% by this morning, off its highs at 2.4236%. Stocks declined after IMF lowered the growth forecast for US to 2.5% from 3.1% and Chief Christine Lagarde urging for a delay in the rate hike to 2016. Elsewhere, IMF has packed all the Jun payments of Greece to one due date on 30 Jun, effectively allowing a deferment of the payment due today. Still, EUR wobbled.

      AUD was the underperformer, down -1.3% after retail sales came in flat for Apr. Trade deficit also widened in the same month to AUD3.9bn from previous AUD1.2bn. Oil prices had another sharp pullback, lifting the USD/MYR. Curiously, CAD was the outperformer amongst the majors this morning but expect lower oil prices to keep USD/CAD supported on dips.

      In Asia, Philippines release May inflation numbers this morning, followed by Malaysia’s trade numbers at noon. The wait for NFP has already begun with the DXY ending a doji for Thu. The average forecast is a 226K addition to employment and jobless rate to hold steady at 5.4%. The healthy ADP print and lower jobless claims might be building expectations for a stronger number. Ahead of the release, most Asian players will steer to the sidelines.

Currencies

       DXY – Range Ahead of NFP. USD managed to claw back earlier losses to close the session largely unchanged at 95.46 overnight. Initial jobless claims continue to fall further helping to paint the picture of continuing strength in the US labor market. Focus tonight on May NFP, unemployment rate, average hourly earnings; Fed’s Dudley to speak (Fri). Day ahead expect range trading between 95.30 and 96.00 ahead of US payrolls data tonight. Overnight the IMF made a surprise call urging the Fed to delay its first rate hike till 2016. The basis for this unusual call was relating more to financial instability, rather than for economic reasons.

       EUR/USD – Relief Rally Party Over? EUR eased lower towards 1.1223 lows after an initial surge to as high as 1.1380 yesterday. Talks of profit-taking from recent rally, paring of position ahead of US payrolls data tonight, Greece rejecting EU proposals and deferred the IMF repayment (due today). IMF has given Greece the green light to bundle its obligations due to the IMF this month (about EUR 1.5bn) and make one lump sum payment on 30^th Jun, under an Executive Board decision (adopted in the late-1970s).  Meantime German Chancellor said Greek aid deal is still far from reach a conclusion and that negotiations are ongoing. All these suggest that the initial EUR rally may have come too soon. Technically, there is potential for EUR to fall back to 1.1060 levels (100 DMA) over the short-term. Day ahead brings GE Apr factory orders; EC 1Q GDP; FR Apr trade (Fri). G7 summit in Brussels hosted by Germany over the weekend.

      GBP/USD – Still Choppy; Buy Dips. GBP held ground and closed 1.5364 overnight. BoE kept rates on hold, as expected. Pair was last at 1.5360 levels this morning. Daily stochastics continue to show mild signs of turning higher from oversold levels. Expect the pair to remain choppy. Next resistance at 1.5450 (50% fibo of 1.5090 – 1.5815); support at 1.5260 (76.4% fibo) before firmer support at 1.5180 (50, 100 DMAs). Day ahead sees 1.5260 – 1.5450 range. Day ahead brings BoE/GfK Inflation 12-month expectations (Fri).

      USD/JPY – Consolidation. USD/JPY remains in consolidative mode despite inching higher this morning on the back of a firmer dollar. Pair continues trade close to the upper bound of its current trading range. Sighted currently at 124.49, intraday MACD is still showing bearish momentum, though slow stochastics is bullish bias, suggesting two-way trades are possible. Ahead of US NFP tonight, look for the pair to remain in range trading within 123.40-125.00.

      AUD/USD – Capped. AUD/USD slumped back towards support at 0.7680 and remained sticky thereabouts this morning.  Retail sales did not grow at all in Apr and trade deficit widened in the month, weighing on the AUD. Next support is seen at 0.7598. US NFP is the key data release to eye tonight and expectations are building for a stronger number that could push AUD towards USD0.75. Resistance is seen at 0.7850 ahead of the next at 0.7920.

      NZD/USD – Fade Strength (if any). NZD tried to squeeze higher but failed to break above 0.7170/80 levels (2015 low). Downside remains protected at 0.71. Pair could trade recent range of 0.71 – 0.7180 in absence of fresh catalyst and ahead of US NFP overnight. 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, we caution for potential near term upside squeeze. Daily stochastics shows tentative signs of turning from oversold areas, possibly an upside squeeze (if any). A daily close above 0.7190 could see the pair squeeze towards 0.73 ahead of RBNZ meeting next Thu. We remain better sellers on rally towards 0.73 levels.

      USD/CAD – Supported on Dips. USDCAD remained underpinned by fall in oil prices. Pair was last seen around 1.2500, still guided by the 100-DMA which also coincided with the daily ichimoku cloud. Expect dips to remain supported by next support at 1.2301 at 50-DMA. Daily momentum indicators have lost further bullish momentum and we see sideway trades for the rest of the week. Bids to meet resistance at 1.2629 ahead of the next at 1.2784.

Asia ex Japan Currencies

      The SGD NEER trades 0.06% below the implied mid-point of 1.3492. The top end is estimated at 1.3222 and the floor at 1.3762.

      USD/SGD – Bullish Bias. USD/SGD is once again on the uptick following the resurgence of the dollar overnight. Pair is on the verge of breaking of the intraday ichimoku cloud, signalling a potential further rebound ahead. Intraday MACD is still showing no strong momentum though slow stochastics is bullish bias. With US NFP just round the corner, cautious trades are likely intraday with the pair hovering within 1.3430-1.3525.

      AUD/SGD – Choppy Sideway Trades. AUD/SGD fell along with the sluggish AUD but the low was unable to test the support at 1.03-figure. The ichimoku cloud still caps upticks at 1.0470 and then at 1.0525.  This cross continues to be capped by the ichimoku cloud. Support is seen at 1.0376. Daily momentum indicators do not reveal much directional bias today and we look for choppy action to remain within 1.0240-1.0525.

      SGD/MYR – Bullish Divergence into Uncharted Territories. SGDMYR maintained its upward push into uncharted territories on ringgit weakness and a largely resilient SGD. We had earlier cautioned for a bullish divergence forming (near term) and that implies upside pressure. Cross was last at 2.7562; day ahead watch OPEC talks. We expect some volatility/wild swings in oil prices to influence the MYR and MYR-crosses.

      USD/MYR – Watch resistance at 3.7350. USDMYR opened and gapped marginally higher towards 3.7160 on oil weakness overnight. We continue to reiterate our expectation for further volatility ahead of OPEC meeting and US NFP on Fri. Day ahead also sees Malaysia’s Apr trade data. Daily momentum is bullish bias but stochastics is showing early signs of turning lower from overbought areas. This could suggest possible downside pressure. Watch 3.7350 on the topside for resistance; break above could revisit 3.78. Intra-day 3.69 – 3.73 range expected.

      USD/CNH – Tracking The Onshore to Nowhere. USD/CNH edged higher on 6.2080, in spite of a lower fixing yesterday. We expect little change to USD/CNY fixing 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 4 Jun, USD/CNY was fixed 12 pips lower at 6.1164 (vs. previous 6.1176). CNYMYR was fixed 6 pips higher at 0.5952 (vs. 0.5947). PBOC was said to have added CNY1 trn to local debt swap program quota, doubling the size of the quota that it originally annoucnced in Mar. Deputy Govenor Guo Qingping urged yuan convertibility under capital account and liberalization of the financial markets in Shanghai on Thu.

      USD/INR – Capped. USD/INR touched a high of 64.1125 before closing lower at the 64-figure. We expect the pair to retain an upside bias with players likely to watch the US NFP print later tonight. Finance Minister Arun Jaitley spoke in New Delhi, warning that poorer monsoon rainfall may not have significant impact on output, given that foodgrain stock is plenty. Support for the USD/INR is seen at 63.6975 while recent high of 64.2825 could give way towards next resistance at 64.50-mark.

      1s KRW NDF – Range. 1s KRW NDF traded with a bid tone overnight; high of 1115.50 was traded before easing a touch lower this morning. Over the medium term, we are bearish on the Korean Won against the USD on a combination of drivers including weak growth/inflation dynamics, falling exports, large and rising household debt (which could threaten financial sector stability) amid Fed tightening/strong USD risk. Sharp weakening of the JPY tends to undercut Korea’s export competitiveness and this could potentially see an impetus for policymakers to be biased for a weaker KRW. The pause in BoK rate cuts (in Apr and May meetings) does not suggest the end of an easing cycle as BoK adopts a wait and see approach to assess and some market participants are still expecting further cuts (our base view is for BoK to keep base rate on hold at the upcoming MPC meeting on 11 Jun). Taken together, these factors should keep USDKRW supportive. Day ahead watch interim resistance at 1122 (76.4% fibo of 1140.75 – 1064.50); support at 1111 (61.8% fibo). Daily stochastics are falling from oversold areas.

      USD/IDR – Climbing Higher.  USD/IDR is edging higher to 13293 this morning in line with its regional peers but was down from yesterday’s 13312 - a high not seen since the Asian financial crisis. A sell-off in both equities and government debt likely supported the pair higher though we have only up-to-date equity data only, which showed a net USD29.12mn sold yesterday. We suspect an even larger amount of government debt was sold off yesterday, though data is not yet available, which added upside pressure to the pair.  Both momentum indicators and oscillators are bullish bias. With our barrier at 13250 taken out, new hurdle is now seen around 13350. Support is around 13200. 1-month NDF is edging higher at 13400-region after easing off from yesterday’s high of 13430 with intraday MACD still showing bullish momentum and slow stochastics at overbought levels. The JISDOR was fixed higher at 13243 yesterday from Wed’s 13196.

      USD/PHP – Approaching 45-handle. The USD/PHP is fast approaching the 45-figure on the back of firmer dollar tone and possible renewed expectations that the BSP could cut policy rates given that inflation slowed in May. May inflation rose by 1.6% y/y (Apr: 2.2%) vs. market estimate of 1.9% - the slowest pace since at least Jan 1998, using re-based CPI data that were revised up till Jan 1998. Intraday MACD is still bullish momentum while slow stochastics is at overbought levels. With our hurdle at 44.885 taken out, new barrier is now at the 45.00-handle, while support is seen around 44.715. The 1-month NDF continues to inch higher to 45.06 with intraday MACD showing bullish momentum slow stochastics at overbought levels. Foreign funds sold a net UD22.77mn in equities yesterday and further selling continue to support the pair higher.

      USD/THB – Sideways.  USD/THB is on the uptick this morning and is fast approaching our resistance level at 33.810. Aside from a firmer dollar tone, deteriorating risk appetite with foreign funds selling a net THB1.69bn and THB4.83bn of equities and government debt yesterday also supported the pair higher and a further sell-off could again keep the pair supported today. For now, sideway trades are likely ahead of US NFP later tonight, though a firm break of the 33.810 level could see the pair headed towards 34.00. 33.610 continues to be supportive.

Rates

Malaysia

      Local government bond yields rose 2-9bps on weak UST. Amidst thin liquidity, WI on the 10y MGS reopening jumped 9bps, while other benchmarks moved 1-8bps higher. The 3y MGS benchmark, however, closed 1bp lower as short-ends remain supported. 3-month bills auction received bid/cover of over 3.4 times with average yield of 2.803%.

      MYR IRS curve steepened as levels rose in reaction to bearish tone in global rates on Bunds havoc. 4y IRS traded at 3.885% and 5y IRS traded at 3.99% and 4.00%. 3M KLIBOR was unchanged at 3.69%.

      The PDS market saw some selling pressure with few bids amid rising yields in USTs and Bunds. JKSB 25s was given at 4.35% and later taken at 4.38% which is 8bps wider than its issued price. Surprisingly, we saw buying interest in longer dated Plus and AA names but offers were not seen. Most GGs and AAA names traded were 3-5 year papers. In the AA space buying seen in longer-dated papers as we saw TBEI 25s tighten 4bps from last done.

Singapore

      SGS bear the brunt of the UST and Bunds selloff with the SGS curve rising more than 10bps along the 5y to 20y tenors. Market players likely stay light ahead of the US jobs market data release on Friday.

      Overnight selloff in the Treasury stirred up some action in the Asian credit space. Indons and quasi sovereigns traded almost 1pt down. New issuances overnight Lenovo (issued at par) traded all the way up to 101.50 level before profit takers came in, last seen around 101.15/25 level. New YANTZE (Three Gorges) traded almost 10bps tighter as well. Chinese IGs saw some buying, most traded 1-2bps tighter in spread. The same goes with the recently issued GLPSP 25s (issued at +185), last seen at around 181/179. Flows were generally mixed. Anhui Transportation (BBB+) is issuing 3y USD paper at guidance of T3+225. Given the recent issuance of Guangzhou Communication (as both are state government's toll road operators), we think Anhui's guidance is rather attractive. We prefer to stay sidelined moving into NFP tomorrow.

Indonesia

      Indonesia bond prices slumped yesterday. We see that an aggressive foreign outflow as well as depreciating IDR currency to above Rp13,250 per USD as the culprit of a significant drop in bond prices. However, we noted a rather moderate trading volume supporting the price slump. In line with our view on May 27th daily publish, FR0070 price is now below its par. We believe that the weakening of bond prices would continue and we are watching closely for any reversal signs. 5-yr, 15-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 8.167%, 8.408%, 8.557% and 8.623% while 2y yield shifts up to 7.684%. Trading volume at secondary market was seen moderate at government segments amounting Rp10,807 bn with FR0070 (10y benchmark series) as the most tradable bond. FR0070 total trading volume amounting Rp2,842 tn with 122x transaction frequency and closed at 99.780 yielding 8.408%.

      Corporate bond trading traded moderate amounting Rp578 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 Rp100 bn yielding 8.141%.