Maybank GM Daily - 20 Jan 2016

FX

Global

      The risk revival from hopes of stimulus out of China did not last long as WTI slipped under the USD28-level. News of growing US crude stockpiles prompted warnings from the Energy Information Administration that markets could “drown in oversupply” sent US equity indices into negative terrain before ending the session almost flat. NAHB housing market held steady at 60, weakest since last Jul.

      NZD slid this morning on larger than expected decline of -0.5%q/q in CPI for 4Q. Year-on-year, price pressures slowed to just 0.1% from previous 0.4%, well under the consensus of 0.3%. NZDUSD was last seen under the 0.64-figure. AUD was also dragged a little, last seen around 0.69.  Nearer to home, Asian currencies were weaker against the USD in early trades, weighed by a sense of caution that extended from the overnight session. USDCNH is back on the upmove on die-hard short-yuan bets. We expect action to be confined within the 6.57-6.63 range and that could also serve as some support for the rest of the Asians.

      Risk off mood favours the EUR and JPY. Hence, we see EUR above the 1.09-figure despite the fall in German Investor sentiment yesterday, albeit still within tight range ahead of ECB. Day ahead has Malaysia’s CPI. Vietnam picks its new set of leaders for its Communist Party. Beyond Asia, US housing starts, building permits and the more closely watched, CPI for Dec. UK has its ILO unemployment number to watch

Currencies

G7 Currencies

      DXY – Bearish Signals. The dollar index pulled back from intra-day highs to close around 99. There is still little momentum for the DXY and the lacklustre NAHB housing index was uninspiring. We watch Dec CPI due tonight. Consensus expects price pressure to be flat last month. Beyond the near-term, we hold our view of an ascending wedge formation that started since Dec. We see some signs of a reversal as the index continues to lose bullish momentum. Support is seen at 98.79 (50-DMA) before 97.9640 (38.2% Fibonacci retracement of the (Oct-Nov rally) and then at 97.1775 (50% fib). The latter could be a particularly strong support level as it is also marked by the lower bound of the daily ichimoku chart as well as the 100-DMA. Week ahead has Housing Starts (Dec), Building Permits (Dec), CPI (Dec) tonight; Thu has Philadelphia Fed Business Outlook.  Existing Home Sales (Dec); Leading index (Dec) wraps up the week on Fri.

      EURUSD – Neutral. EUR edged above the 1.09-figure this morning, underpinned by soured sentiments. Cautious risk sentiments could continue to keep the pair supported on dips. We hold our view that benign inflation and risks of ECB doing further easing should keep the EUR heading lower. However, weak risk appetite slows its downward pace (inverse correlation between EUR and risk assets). ECB meets tomorrow but we think the current level of EUR does not require much jawboning from the central bank. In addition, a government council member said that discussions of further ECB action will only start in Mar. Nonetheless, there could be some dovish signal, especially after the disappointment in the ZEW survey. The Eurozone ZEW survey fell to 22.7 from previous 33.9. German’s measure fell to 10.2 from previous 16.1. On the charts, momentum indicators are still flat, underscoring a rather neutral position for the EUR. There is no real trend at the moment though recent terror attacks, oil slump and jittery equities could render support for the currency. Resistance at 1.1010 (50% fibo retracement of Oct high to Dec low) still holds, also marked by the upper bound of the daily ichimoku cloud. Support is seen at 1.0750 (23.6% fib). Week ahead brings GE CPI (Dec F); EC Current Account (Nov); GE ZEW (Jan) on Tue; Thu has EC CPI (Dec F); ECB Meeting; Fri has FR, GE, EC PMI Mfg (JanP)

      GBPUSD – Bearish. GBPUSD remained on the decline and was last seen around 1.4170 in early Asia morning. BOE Carney signalled that a rate hike is still sometime away, highlighting global risks and sluggish domestic recovery that weighed on UK consumer prices. Support is seen at 1.4090, ahead of the next at 1.3958 (Mar 09 low). Rebounds to meet barrier at 1.4230 ahead of the next at 1.4352. Week ahead brings CPI, RPI, PPI (Dec) on Tue; Wed has ILO Unemployment rate (Nov); Fri has Retail Sales (Dec).

      USDJPY – Limited Downsides. USDJPY is back on the slide as yesterday’s improvement in risk appetite over steady Chinese growth proved to be short-lived. Safe-haven flows on concerns over global growth as reflected by soft global oil prices are keeping the pair heavy this morning. We are seeing a sell-off in the majors against the JPY. Pair has lost most of its bearish momentum and is currently seen around 17.45. Still pair continues to trade within its current range of 116.51-118.83. With downside risks dissipating, further downmoves could be limited in the near term. Support remains around 116.40 (38.2% Fibo retracement of the Jul 2014 lows to 2015 highs). Rebounds should meet resistance around 118.85 still. We have only Jan prelim. Nikkei PMI Mfg due on Fri.

      AUDUSD – Supported on Dips. AUD has been paring its overnight gains this morning, weighed by the NZD pullback and was last seen around 0.6890. Westpac consumer confidence for Jan did not help with a 3.5% decline to 97.3. Conditions are still quite bearish in this pair though RSI is rising from oversold conditions. Support is seen at 0.6827 (Jan low) and we expect prices to remain supported on dips. Barrier is seen at 0.6950 (23.6% fib retracement of the Jan sell off) and then at 0.7018 (38.2%).Week ahead has Consumer Inflation Expectation (Jan); HIA New Home Sales (Nov) on Thu. Eyes are also on China’s GDP on Tue.

      NZDUSD – Retracement. NZD slipped towards 0.6375-level after 4Q CPI underwhelmed with a 0.1%y/y print. Price pressures declined more than expected by -0.5%q/q in the quarter. The pair cleared the support around 0.6420 (61.8% Fibonacci retracement of the Aug-Oct rally). Daily momentum is still strongly bearish.  Resistance remains at 0.6423 (support that turns resistance). Thereafter, we see next barrier at 0.6510 (50% fib) ahead of the next at 0.6580 (100-DMA). Support at 0.6420 remains intact ahead of next support level at 0.6310. Week ahead Business Manufacturing PMI (Dec) tomorrow.

      USDCAD – Bullish. USDCAD ended Tue on a doji and was last seen at 1.4580 this morning. Recent high of 1.4660 could form a barrier for further bids and the next resistance is seen at 1.4770 and then at 1.4814. MACD is still bullish. BOC meets tonight with almost half of the analysts surveyed expecting a cut. A failure to do so, may see some retracement. Retail sales for Nov and Dec CPI are due on Fri. 

     Asia ex Japan Currencies

      The SGD NEER trades 1.55% below the implied mid-point of 1.4163. The top end is estimated at 1.3875 and the floor at 1.4451.

      USDSGD – Capped.  USDSGD is bouncing higher as risk appetite waned again on concern over global growth amid softer oil prices. Still, pair remains stuck within its current 1.274-1.4444 range and was last seen around 1.4374. Pair has lost most of its bullish momentum and stochastics is falling from overbought conditions. This suggests the potential for further downmoves in the near term and that the current uptick could be capped with barrier still at the recent highs of 1.4444. Retracement could see moves towards the 1.4320-support. No other data of note for the week ahead.

      AUDSGD – Tilting higher. AUD/SGD stalled in its rebound this morning, last seen around 0.9920. Bearish momentum is waning and RSI is rising from oversold condition. There is still no trend in sight and we prefer to play within range. This cross should remain volatile at the softer end of this 0. 98-1.04 range for a while. Support at 0.9830 remains. Barrier is seen at 1.0030.

      SGDMYR – Bouncing Higher. SGDMYR is back on the uptick on the relative strength of the SGD with the MYR weighed once again by softer oil prices. Last seen around 3.0476, this cross continues to lack directional cues as reflected in the daily technical, though the daily close below the 100-DMA and our 3.0464-support level suggests risks could be turning lower ahead. We continue to await the next trigger for the cross to breakout of the current 3.0300-3.0800 range. We see a symmetrical triangle forming and should this play out, cross could reach a target of around 3.2250. Further upticks should meet resistance around the year’s high of 3.0800. New support is seen around 3.0305 (2016 low so far).

      USDMYR – Bouncing Higher Within Range. USDMYR is on the uptick this morning back above the 4.37-levels after sliding towards 4.36-levels yesterday. Pair was not helped by yesterday’s IEA forecast cut for 2016 crude demand underpinned by a supply glut, which sent global oil prices lower, thought Brent crude did see a mild recovery. Pair was last seen around 4.3775 with daily technicals lacking directional cues. We expect range trades in the near term. Still stochastics is turning lower, suggesting that the pair could see some retracement towards 4.3280 (61.8% Fibo retracement of the Oct sell-off) in the near term. Recent high of 4.4415 should continue to cap topside intraday. With MYR still vulnerable, we do not expect BNM to move to support growth when it meets on Thu (21 Jan). Dec CPI is due later today and we have 15 Jan foreign reserves on Fri.

      1s USDKRW NDF – Upticks Within Range. Pair is bouncing higher this morning underpinned by global growth concerns amid softer oil prices. Pair has lost most of its bullish momentum and is last seen around 1211.This suggests risks are turning lower and that further retracement towards the 1200-figure is possible. Jawboning by BOK and Finance Ministry officials should keep the won within its current trading range of 1202-1223. There are no data of note this week.

      USDCNH – Drifting Lower. USD/CNH was steady around 6.5980 at last seen, on a slight uptick as risk appetite remains wanting. Momentum is still bearish and we suspect this pair could remain in choppy trades within 6.5650-6.6300. Daily ichimoku cloud shows a negative cross-over of the conversion line below the base line, another bearish sign. Gap with USDCNY has widened to 200pips at last sight. USD/CNY was fixed 18 pips lower at 6.5578 (vs. previous 6.5596). CNY/MYR was fixed 23 pips higher at 0.6676 (vs. previous 0.6753). China slowed to a growth of 6.9% for 2015, slowest in 25 years. The activity data for Dec also indicated a soft patch for the economy in the last month. The weaker growth numbers triggered hopes for stimulus, namely RRR or an interest rate cut. PBOC Ma Jun said this morning that the central bank has already extended liquidity support in the form of CNY410bn of medium term lending facility (MLF) operations today.

      SGDCNY – Choppy. SGDCNY remained stuck around 4.5790 by close on Tue. This cross remains within the 4.5590-4.6200 range.  The 200-DMA supports at 4.5655 and this level is eyed. A break here could bring the pair towards the 4.5220 (61.8% fib retracement of the Nov-Dec rally). Rebounds likely capped at 4.6190.

      1s USDINR NDF – Choppy. This pair remained little moved around 68.00. Immediate barrier is still seen at recent high of 68.32. Next barrier is seen at 69.15. Support is seen around 67.62, ahead of the next at 67.23. Foreign investors sold USD276.1mn of equities and USD2.4mn of debt on 18 Jan. Expect fear of intervention in the forex markets to keep a lid on the NDF.

      USDIDR – Capped. USDIDR is climbing higher around the 13900-levels, lifted by the firmer dollar overnight amid concerns over global growth. Pair has lost most of its bullish momentum, suggesting that the move higher could be capped. Immediate barrier is at 13922 ahead of the next at 14030 (50.0% Fibo retracement of the Oct downswing). Support is seen around 13782 (2016 low). 1s USDIDR NDF continues to hover above the 14000-levels at 14008 with daily MACD showing waning bullish momentum. The JISDOR was fixed lower at 13921 yesterday from 13931 on Mon. Continued risk aversion led foreign funds to sell-off a net USD24.14mn of equities yesterday. They removed a net IDR0.62tn from their outstanding holding of government debt on 18 Jan (latest data available). There is little data of note for the week ahead.

      USDPHP – Bid in Tight Range.  USDPHP is on the rise this morning, printing 47.750 at last sight. Upmove is in tandem with most of USD/AXJs on weaker risk appetite.  Daily MACD still shows strong bullish momentum. Support at 47.523 is intact still while barrier is seen at 47.89 (Jan high). 1s USDPHP NDF is back above the 48-figure this morning at 48.010 with daily technicals showing waning bullish bias. Risk aversion again yesterday led foreign funds to sell a net USD10.73mn in equities.

      USDTHB – Downside Risks. USDTHB continues to see some relief as possible profit-taking amid a light domestic data weak keeps the pair weighed. Pair was last seen around 36.300 with daily MACD forest showing waning bullish momentum and stochastics still turning lower. This continues to suggest that risks are beginning to turn to the downside ahead. Support nearby is seen around 36.190 (21DMA) before the next at 36.080 (61.8% Fibo retracement of the Oct high to low). Resistance is around 36.423 (2016 high) ahead of the next at 36.670 (multi-year high seen in Oct 2015). Investor sentiments were mixed yesterday with foreign funds buying in government debt. Quiet data week with just 15 Jan foreign reserves and Dec customs trade data on tap sometime this week. The cabinet has approved a draft bill to add THB56bn to the 2016 fiscal spending. The breakdown of the additional spending is as follows: THB20bn to expand high-speed internet nationwide and to ASEAN; THB32.7bn to central budget for future projects; and THB8.3bn to compensate treasury. Funding for this additional spending will come from the sale of 4G mobile-phone licenses late last year.

Rates

Malaysia

      Governments bonds were quickly taken up as USDMYR declined and crude oil prices climbed up. On the back of this bullish tone, the MGS yield curve lowered 2-4bps with a good amount of volume traded totaling MYR4.8b.

      IRS levels higher by 1-3bps, with the 6m trading at 3.79% and 5y at 3.93%. Further upside was capped by the rally in MGS. The 5y basis is tightening on some flows. 3M KLIBOR remained the same at 3.83% but could inch lower soon.

      The PDS market saw strong buying in AAAs, especially in the 4y-10y bucket, as MGS rallied. Putra, Plus, Rantau and Danga were well bid and mostly tightened 1-2bps. The GG curve was also well bid with the belly outperforming. At the long end, Prasa 30 tightened 1bp to 4.86% (z+32bps; G+29bps) which we think is a tad tight. AA space was muted, though long-dated JEP papers did tighten 1-3bps.

 Singapore

      Good buying interest in SGS as equities and oil prices rebounded. SGS 06/21, which would soon be reopened, was particularly well bid. The buying drove yields down in a steepening manner, with front end 3-5bps lower and back end 2bps lower. SGD IRS curve also bull steepened by 2-5bps. A lower USDSGD and swap implied rates could drive the yield curve lower and narrow the spread between SGD and USD rates.

      Asian credit market firmer on better sentiment. INDON sovereigns were up 1.0-1.5pts and the new NIPLIF traded above par again, last seen around 100.25/100.50. Chinese IG spreads generally widened, alongside financials and properties, which mostly saw sellers. Meanwhile, Chinese tech sector had more buyers. On CNH front, demand is increasing for short-dated papers including Yanlord and GRNCH as funding rates have stabilized. Bank of Communications HK Branch is issuing USD500m of 3y bonds guiding at T3+120 (+/-5bps).  

 Indonesia

      Indonesia bond market closed with a loss as China 4Q GDP came in at 6.8% YoY which is slightly slower compared to 3Q GDP of 6.9% YoY while the WAY during the auction came in slightly higher compared to previous day closing. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 8.490%, 8.633%, 8.825% and 8.837% while 2y yield shifts up to 8.292%. Trading volume at secondary market was seen heavy at government segments amounting Rp18,370 bn with FR0056 as the most tradable bond. FR0056 total trading volume amounting Rp9,342 bn with 143x transaction frequency and closed at 98.208 yielding 8.633%.

      Indonesian government conducted their conventional auctions yesterday and received incoming bids of Rp25.00 tn bids versus its target issuance of Rp12.00 tn or oversubscribed by 2.08x. However, DMO only awarded Rp14.00 tn bids for its 1y SPN which was sold at a weighted average yield (WAY) of 7.23111%, 11y FR0056 was sold at 8.61369%, 16y FR0056 was sold at 8.84946% while 20y FR0072 was sold at 8.87608%. Incoming bids were mostly clustered on the FR0056 series. No bids were rejected during the auction. Bid-to-cover ratio during the auction came in at 1.46X – 2.97X. Till the date of this report, Indonesian government has raised approx. Rp30.0 tn worth of debt through bond auction which represents 30.8% of the 1Q 16 target of Rp97.33 tn.

      Corporate bond trading traded moderate amounting Rp633 bn. BACA02SB (Subordinated Bank Capital II Year 2015; Rating: idBBB-) was the top actively traded corporate bond with total trading volume amounted Rp185 bn yielding 11.987%.