Maybank GM Daily - 21 Oct 2015

FX

Global

      Overnight session had mixed corporate earnings report and Wall Street ended the session in modest red. US economic data was decent with 1206K housing starts in Sep, better than expected. Fed Powell spoke of how swings in the treasury market such as that on 15 Oct can affect investor confidence.

      Earlier in the day, Canada had a change of PM. Justin Trudeau’s Liberals won the elections and he will announce the new cabinet on 4 Nov. CAD strengthened below the 1.30-figure against the USD. Elsewhere, NZD was testing the 0.6850 ahead of Fonterra’s dairy auction before slipping to levels around 0.6760. Dairy prices slid marginally by 3.1% at the auction despite lower milk supply this year. Oil prices slipped this morning as markets expect the US Department of Energy to report an increase in supplies. 

      This morning, Japan trade balance remained in deficit with a print of –JY114.5bn. Exports eased to 0.6%y/y, accompanied by a fall in imports of -11.1%.  There is no other first tier data to watch in Asia. Onshore markets are away in Hong Kong. Fed Powell moderates pane on market liquidity in New York tonight. At the moment, risk sentiments seem to favour Asian currencies, with the exception of the MYR, down -0.3%.

Currencies

G7 Currencies

      DXY – At Least Not in Oct. The DXY edged lower and was last seen around 94.80. This was in spite of better housing starts at 1206K for Sep. Sentiments were soured by a mix of corporate earnings report overnight and there are more to watch this week. Implied probability from Fed fund futures for Fed to hike in Oct or even Dec are still at year lows. At this point, daily MACD indicate little bias though weekly MACD still indicates risks to the downside. We expect two-way drift with risks to the downside. Support is still seen at 94.45. Resistance is seen at 95.90 levels (100 and 200 DMAs). Week ahead Fed's Powell Moderates Panel on Markey Liquidity on Wed; Chicago Fed Nat Activity (Sep) Initial Jobless Claims (17 Oct); Continuing Claims (10-Oct); Existing home sales (Sep); Leading Index (Sep) on Thu; PMI-mfg (Oct P) on Fri.

      EUR/USD – Capping Topside. EUR edged higher to levels around 1.1360 this morning. Pair was supported by the fall in the equity prices though we expect upsides to be capped ahead of ECB meeting on Thu. Daily momentum indicators continue to show waning bullish momentum. We reiterate that ECB rhetoric - “can do more QE if need arises” – acts as an invisible hand to slow any upmove. Interim reisistance is seen around 1.1363 ahead of the next, at 1.1500 (23.6% fibo retracement of Jul-Aug rally). Support is seen at 1.1260 (50 DMA), 1.1135 (200DMA). Week ahead ECB Meeting; Monthly Report; FR business confidence, mfg confidence, EC consumer confidence (Oct) on Thu; FR, GE, EC PMI-mfg (Oct P) on Fri.

      GBP/USD – Upside Bias. GBP bulls remained capped by the 100-DMA and a lack of data cues. Pair was last seen around 1.5440 this morning. MACD shows bullish bias and it could be only matter of time for the pair to clear the 100-DMA at 1.5490 which will in turn expose the next resistance at 1.5600. Support at 1.5422 (38.2% fib retracement of the Jun-Oct sell down) continues to hold, before 1.5300 (23.6% fibo of Sep high to low) which is nearer to the 200-DMA. Bias is to the upside though volatile moves expected with Bailey and Carney speaking on Tue. Week ahead brings Retail Sales (Sep) on Thu. Yesterday, BOE McCafferty said the next move to hike rate will depend on the economy and not the Fed. He also noted that core is a lot higher than headline CPI and expects the former to rise in 2016.

      USD/JPY – Heading Back Towards 120. USD/JPY is on the climb this morning as the JPY sold off against the rest of the majors, not helped hby the continuing trade deficit. Exports underperformed expectations in Sep, coming in at just 0.6% y/y vs. consensus’ 3.8% and Aug’s 3.1%. Imports rose 4.0% y/y (Aug: 3.6%), resulting in a trade deficit of JPY114.5bn vs. estimates of JPY87bn surplus. Pair is edging closer back to the 120-handle at 119.89 with intraday momentum still bullish bias, though stochastics is now at overbought levels. For now, risks remains to the upside with action now focused at the upper bound of its current trading range of 118.30-120.60. Immediate resistance is at the 120-handle (200DMA) with a daily close above that level could see the pair head towards 120.70 (50% Fibo retracement of the Aug high to low). Remaining week has Oct PMI-mfg and Aug leading index (Fri).

      AUD/USD – Range-Bound. This pair remained resisted by the 100-DMA at 0.7340, last seen around 0.7270 as the pair remain underpinned by a rather sanguine Minutes released by RBA on Tue. In the near term, the pair is likely to remain range bound within 0.7200-0.7350. Still, we note increasing bets on a rate cut amid concerns that intensifying El Nino could add new pressure on the economy. We hold our view that Australia is seeing nascent signs of bottoming for the economy as well as for the AUD as exports growth starts to become less negative. Weekly momentum indicators are suggesting waning bullish momentum though daily MACD shows some deceleration. A break above the 100-DMA at 0.7350 on daily close exposes next resistance at 0.7440 levels (Jul highs). Week ahead brings RBA's Edey speak and NAB Business Confidence (3Q) on Thu.

      USD/CAD – Liberal Victory. USDCAD slipped after the electoral win by the Liberals and Stephen Harper had to step aside for new PM Justin Trudeau. Last seen around 1.2980, the pair is on the downtick though daily MACD suggests that further dips are likely to be shallow given waning bearish momentum. Next resistance is seen at 1.3080 ahead of the next at 1.3160. Support seen at 1.2930(100-DMA). Bank of Canada is widely expected to stand pat tonight. Week ahead brings Aug retail sales and Sep CPI are due on Thu and Fri respectively.

      NZD/USD – Correcting.  NZD steadied around the 0.6750 cents as we write this morning. Global dairy trade auction last night saw dairy prices were down 3.1%, which is likely to weigh on the NZD. Intraday MACD and stochastics are both indicating bearish momentum. As we had emphasized in our Weekly Technical report, a pull-back towards 0.66-0.67 region is in the making, paving the way for another extension. Next resistance at 0.6800 (21DMA).

Asia ex Japan Currencies

      The SGD NEER trades 0.32% below the implied mid-point of 1.3843. The top end is estimated at 1.3565 and the floor at 1.4121.

      USD/SGD – Supported. The USD/SGD is on the slide this morning, tracking the EUR. Pair is seen around the 1.39-handle with intraday MACD showing bullish momentum, though stochastics is at overbought territories, suggesting that further downside could be limited. Though market is re-initiating some long USD/SGD positions, there are still some hedges for a further downmoves. Option market is pricing USD/SGD strikes at 1.37 as a hedge to the downside, which could give some support to the pair at those levels. Intraday support seen around 1.3850 (21DMA). Resistance is at 1.3940-levels for now. Sep CPI is on tap on Fri.

      AUD/SGD – Pivoting Around 50-DMA. This cross remained around 1.0090, underpinned by the resurgence in the AUD this morning. Prices seem to be pivoting around 50-DMA at 1.0085. Beyond the near-term, we see bearish risks. This cross has made a potential double top with latest high 1.0350 matching another Aug peak of 1.0400. Daily momentum and weekly momentum suggest bearish bias and we expect this cross to remain sold on rallies. Next resistance is seen at 1.0150 (100-DMA). Support is seen at 0.9920.

      SGD/MYR – Upside Risks. SGD/MYR continues its climb higher this morning to 3.0785 on the relative strength of the SGD. Intraday momentum shows bullish momentum and stochastics is now at overbought levels, suggesting further upside ahead. With risks to the upside, look for 3.0990 to curb upside. Dips should find support around 3.0425 (100DMA).

      USD/MYR – Bullish Bias. USD/MYR is bouncing higher back towards the 4.3000-levels at 4.2755 on the back of weaker oil prices this morning. In the background still is the no confidence vote expected in parliament against the PM as well as the ongoing row between the BNM and Attorney-General over the BNM move to take action against 1MDB for regulatory breaches. Resistance seen at 4.3000 ahead of the next at 4.3505 (7 Oct high) while support is seen around 4.1925 (21DMA). Remaining week has 15 Oct foreign reserves (Thu); and Sep CPI inflation and Budget 2016 (Fri).

      1s KRW NDF – Limited Downside. 1s KRW NDF appears to be in consolidative mode, hovering around the 1130-region. NDF is edging lower and was last seen around 1130 with intraday momentum and oscillators still bullish bias, suggesting that downside could be limited. Support is seen around 1122; 1115, while any rebound should meet resistance around 1140-levels (50DMA). Focus in the remaining week is on 3Q15 GDP (Fri).

      USD/CNH – Two-way Action. USD/CNH extended its slide this morning and was last seen around 6.3670, in anticipation of a lower USDCNY fixing later. Daily chart shows rising bullish conditions. Resistance is seen around 6.3960 ahead of the next at 50-DMA at 6.4042. Break of the latter barrier is eyed for stronger bullish attempts.  Ahead of the opening of the onshore markets, spread between CNH and CNY remained 200 pips. Onshore markets in Hong Kong are away today. USD/CNY was fixed 141 pips lower at 6.3473 (vs. previous 6.3614). CNY/MYR was fixed 61pips higher at 0.6694 (vs. previous 0.6632). PBOC raised CNY 5bn from a sale of one-year bills, China’s debut issuance of yuan denominated sovereign bonds in London.

      SGD/CNY – Tilting Lower.  This cross has been edging lower in the past few days and was last seen around 4.5690, on the uptick. Resistance is still seen at 4.6191 (Aug high). A break there exposes the next at 4.6723 (Jun high). This cross has tested support at 4.5770 (200-DMA). Next support is seen at 4.5490. Daily chart shows RSI falling from overbought conditions, MACD showing deceleration in bullish momentum though weekly chart shows stronger bullish momentum. Recent retracement may be tentative.

      1s INR NDF – Steady. 1s USDINR crept higher yesterday and hovered around 65.40. The 50-DMA at 66.07 remains a resistance. Daily MACD shows that bearish momentum has diminished. The lack of momentum implies two-way trades to continue in the near term within 64.80-66.10. A break to the upside exposes next resistance at 66.38 while a bearish breakout exposes 200-DMA at 64-figure. Strong interests in the local bond markets continues to support the rupee though we suspect some leaning against the winds that keep the 1s USDINR from slipping below the 65-figure. Mon saw foreigners bought USD164.0mn of equities and USD6.6mn of bonds. 

      USD/IDR – Upside Risks.  The USD/IDR gapped higher at the opening again this morning to 13722, playing catch-up with its regional peers. Pair has since settled slightly lower around 13710 with intraday momentum and stochastics still bullish bias. Risks remain on the upside given that domestic concerns (sluggish growth, slow pace of reforms, twin deficits etc.) remain. Immediate resistance remains at 13750 with a break here exposing the next at 13800. Any dips should find support around 13600 (21DMA). The 1-month NDF continues to hover within its recent trading range of 13620-14160, last seen around 13878, with intraday MACD showing mild bullish momenum. The JISDOR was fixed higher for the third straight session at 13634 yesterday from Mon’s 13563. Risk sentiments held up with foreign funds buying a net USD4.02mn in equities yesterday.

      USD/PHP – Edging Higher.  USD/PHP bounced higher to around 46.380 this morning, playing catch-up with the rest of its regional peers. Intraday momentum is showing bullish bias and stochastics is now at overbought levels. With our resistance level at 46.300 taken out, new resistance is at 46.530 (100DMA); 46.820. Support remains around 45.060 (21DMA). 1-month NDF is edging higher this morning to the 46.50-levels with intraday MACD showing bullish bias, and stochastics still at overbought territory. Foreign funds sold a net USD13.93mn in equities yesterday, and continued selling should keep the pair supported today.

      USD/THB – Whippy But Within Range. USD/THB is whippy this morning, oscillating between gains and losses, though it continues to be capped by the 35.500-levels. Pair is seen around the 35.400 levels with intraday momentum indicators bullish bias, though stochastics is falling from overbought levels. Pair continues to hover within its current trading range of 34.990-35.660. Any downside could be limited as concerns about sluggish domestic growth amid global growth concerns remain. We continue to look for 35.660-levels to cap upmoves intraday. Any dips should find support nearby around 35.360 (21DMA) before 35.280. We need to see the 35.500-level taken out for further bullish extension towards 35.660. After Tue’s sell-off, foreign investors are back, purchasing a net THB0.42bn and THB0.33bn in equities and government debt, helping to keep the THB supported. Data-light week with just 16 Oct foreign reserves on tap on Thu. Note that onshore markets are closed on Fri for Chulalongkorn Day.

Rates

Malaysia

      Government bonds at the front end to the belly rose 1-3bps higher as MYR depreciated. Issue size on the 7y retap MGS 9/22 auction was announced at MYR3.5b as expected by market. There were no WI trades, though the current bond was last dealt at 4.01% at a decent volume.

      An absolutely quiet day in the local IRS market, with no rates being dealt. 3M KLIBOR still remained at 3.74%.

      Local PDS market was quiet, including the AAA and GG spaces. Bids for Putra 24 came in 1bp tighter but nothing dealt. Only PASB 18s traded in the GG space at 4bps tighter than MTM. Buying interest was focused on the short-dated AA space which generally traded 1-2bps wider.

Singapore

      SGS market remains muted with intermittent selling of short-dated bonds seen. Long end bonds outperformed again with the yield curve flattening further. SGS yields ended 1-3bps higher, and swap spreads generally widened. With higher USDSGD and forward premiums staying supported, the SGD IRS curve was pushed up, closing 2-5bps higher.

      Asian credit spreads opened wider and stayed there. MALAYS and INDON widened as their currencies opened weaker. Sovereign bonds traded down but found dip buyers. INDON 25 wrapped up at around 100 (99.75/100.125), with INDON 25 EUR outperforming as it tries to catch up on RV. But illiquidity in EUR papers is still a concern given sporadic interest.

Indonesia

      Indonesia bond market weakened for the second day of the week as the currency depreciates. The weakening for the past several days indicates that the strengthening last two weeks was supported by sluggish U.S. labour data rather than any positive event domestically. Market sentiments were basically minimal during the day. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 8.466%, 8.711%, 9.006% and 9.048% while 2y yield shifts up to 8.127%. Trading volume at secondary market was seen thin at government segments amounting Rp8,070 bn with FR0070 as the most tradable bond. FR0070 total trading volume amounting Rp1,049 bn with 44x transaction frequency and closed at 98.014 yielding 8.711%.

      Indonesian government conducted their sukuk auctions yesterday and received incoming bids of Rp2.99 tn bids versus its target issuance of Rp2.00 tn or oversubscribed by 1.49x. However, DMO only awarded Rp1.73 tn bids for its 5mo, 2y and 5y bonds. Incoming bids were mostly clustered on SPN-S series. 5mo SPN-S was sold at a weighted average yield (WAY) of 7.25508%, 2y PBS009 was sold at 8.62863% while the 5y PBS006 was sold at 8.64364%. No bids were rejected during the auction. Bid-to-cover ratio during the auction came in at 1.43X – 5.23X. On total, Indonesian government has raised approx. Rp440.8 tn worth of debt through domestic and global issuance which represent 97.5% of this year target of Rp452.2 tn.

      Corporate bond trading traded thin amounting Rp531 bn. ANTM01BCN1 (Shelf registration I ANTAM Phase I Year 2011; B serial bond; Rating: idA) was the top actively traded corporate bond with total trading volume amounted Rp150 bn yielding 10.497%.