FX
Market liquidity was thin for much of last week and equity investors
ended on a cautious note, weighed by softer crude prices. The dollar
exhibited strength against most of Asia (with the exception of MYR) as well as
against major currencies. The DXY index was last seen above the 96-figure. The
greenback's resurgence will not go unnoticed, not when the week ahead has
plenty of tier one data out of the US.
US PCE core is due tonight. Fed speaks including Yellen, Kaplan as well
as Williams (who will speak from Singapore); ISM manufacturing and Mar payrolls
data are scheduled on Fri. Consensus expects NFP to come in at +208k (vs.
+242k in Feb); hourly earnings at +0.2% m/m (vs. -0.1% in Feb) and unemployment
rate to hold steady at 4.9%. A strong set of data will reinforce the case for
Fed to tighten and this could potentially see a build-up in expectation (and
positioning) for rate hike in Apr or Jun, and this could lend strength to the
USD. Market implied probability for an Apr or Jun rate hike only stand at 6%
and 38%, respectively. For the year, market is only pricing in 35bps hike. Our
bias remains for Fed to hike rates by 2 times this year, with the next hike of
25bps likely to take place in Jun.
USD could face some upside pressure. USDJPY resistance at 113.50 before
115 levels. Downside in USDMYR and USDSGD could stall; retracement could
re-visit 4.08 and 1.38, respectively. Our SGDNEER model shows USDSGD is
about +0.1% above our midpoint of 1.3700. SGDMYR could see a
retracement towards 2.9650; but bias remains for further downside. AUD risk a
pullback towards 0.7350 though the golden cross suggests
Australia, NZ, UK and most of European markets as well as those in HK
are closed for holidays on Mon.
Currencies
G7 Currencies
DXY – Upside Risk. Dollar index continues to climb for the 6th
consecutive session amid more hawkish than expected Fed speaks (vs. dovish FOMC
meeting) last week. Week ahead continues to see a handful of Fed speakers and
notably the Mar payrolls data on Fri. Consensus expects NFP to come in at +208k
(vs. +242k in Feb); hourly earnings at +0.2% m/m (vs. -0.1% in Feb) and
unemployment rate to hold steady at 4.9%. Strong set of data will build up
expectation for rate hike potentially in Apr or Jun, and this will lend
strength to the USD. Market implied probability for a Apr or Jun rate hike
stands at 6% and 38%, respectively. For the year, market is only pricing in
35bps hike. DXY was last at 96.40 levels. Monthly, weekly momentum indicators
remain bearish bias. Bearish momentum on daily chart is waning and stochastics
is rising from oversold conditions. Further pullback could be seen this week.
Next resistance at 96.57 (50% fibo retracement of Mar high to low, 21 DMA), 97
levels (200 DMA, 61.8% fibo). Support at 95.52 (23.6% fibo) and 94.58 (Mar
low). Week ahead brings PCE core, Pending home sales (Feb); Dallas Fed
Mfg (Mar) on Mon; Fed’s Williams speaks; S&P/CS HPI (Jan); Consumer
confidence (Mar); Fed’s Yellen, Kaplan speak on Tue; ADP Employment
(Mar); Fed’s Evans speaks on Wed; Chicago Purchasing Manager (Mar); Fed’s
Evans, Dudley speak on Thu; NFP, hourly earnings, unemployment rate, ISM
Mfg, PMI, Uni of Michigan Sentiment (Mar); Fed’s Mester speaks on Fri.
EURUSD – Downside Pressure. EUR was little changed last Fri amid Good
Fri holidays. Pair was a touch softer this morning; last seen at 1.1160.
Support at 1.1170 (61.8% fibo retracement of Feb high to Mar low) before 1.11
levels (50% fibo) and 1.1040 (200 DMA). Resistance at 1.1250 (76.4% fibo),
1.1380 (Feb high) before 1.1490 (previous highs in Aug and Oct 2015). Bullish
momentum on daily chart is waning and stochastics is falling from overbought conditions.
EUR may face some downside pressure. Week ahead ECB Makuch speaks; ECB
publishes weekly QE data on Tue; EC consumer confidence (Mar); GE CPI (Mar) on
Wed; GE retail sales (Feb); EC CPI, core CPI estimate (Mar) on Thu; EC, GE, FR
PMI (Mar); EC unemployment rate (Feb) on Fri.
GBPUSD – Bearish Bias. GBP remained soft amid renewed concerns
over Brexit. Recent ICM polls showed 43% polled to leave the EU while
only 41% polled to stay. 15% remain undecided. GBP was last at 1.4120. Daily momentum and stochastics are
bearish bias. Support 1.4030 (23.6% fibo retracement of Feb high to low) before
1.3830 (Feb low). Resistance at 1.4250 (50% fibo), 1.4350 (61.8% fibo).
Week ahead brings BoE Financial Policy Committee Statement on Tue; Consumer
confidence (Mar); BoE Gov Carney speaks; GDP (4Q) on Thu; House Price (Mar);
PMI Mfg (Mar) on Fri. UK is out for hols on Mon.
USDJPY – Upside Risk.
USDJPY was bid in the past week amid a firmer USD. Gross short position was
reduced and is now at the smallest short since before Abe was elected as PM in
2012. Key news over the past week included Japan government’s downgrade of its
assessment of its economy and on private consumption, though it was more upbeat
on business investment. Late on Sunday, there were headlines that PM Abe is
planning a stimulus package before G7 Summit on 26-27 May. As well, there is
increasing speculation that PM Abe may announce in May to delay the planned
consumption tax hike. The key remains if market loses confidence on Abenomics,
though current polls are showing a 1.7ppt increase in support for the Abe
cabinet. Rising doubts will lead to collapse in confidence and trigger sell off
in Nikkei and force large unwind of JPY-hedges and risk USDJPY falling further.
USDJPY was last at 113.50 levels. Daily momentum and stochastics are bullish
bias. Next resistance at 114.70 (50 DMA), 115 (38.2% Fibo retracement of Jan
high to Mar low). Support at 111 (triple bottom formed in 2016). Week ahead
sees BOJ Governor Kuroda appearance before Parliament later this afternoon;
jobless rate; retail trade (Feb) on Tue; industrial production (Feb) on Wed;
Tankan (1Q); Mfg PMI (Mar) on Fri.
NZDUSD – Bearish Divergence. NZD continued to inch lower amid USD
strength. Market appears to price in 35bps cut over the next 12 months; but no
cut appears to be priced in for Apr or Jun meeting (which could present
downside risk for NZD should market positioning adjusts). Price action shows
signs of bearish divergence. Daily momentum and stochastics are mild bearish
bias. Support at 0.6620 (50% fibo retracement of Dec high to Jan low), before
0.6550 (38.2% fibo). Resistance at 0.6680 (61.8% fibo), 0.6760 (76.4% fibo)
before 0.6880 (triple top). Week ahead is relatively quiet with markets
closed on Mon for hols. Week ahead brings Building Permits (Feb) on Wed;
Business Confidence (Mar) on Thu.
AUDUSD – Consolidate; Downside Risks. AUD bulls were stopped in its tracks as resurgence in
USD strength saw AUD retraced some gains. With RBA Governor Glenn Stevens expressing
confidence in Australia’s adjustment to lower commodity prices and its room for
fiscal and monetary policy maneuvers. There were also reports out in the
weekend that the Big 4 banks in Australia are considering increasing mortgage
rates. AUD was last at 0.75 levels. Supports are seen around 0.7500 (21 DMA),
0.7350. Beyond the near-term, we take note of the golden cross and expect
retracements to remain shallow. Resistance at 0.7680 (Mar high) before 0.7850
(38.2% fibo retracement of Jun 2014 – 2016-low). Week ahead brings New home
sales, private sector credit (Feb) on Thu; House price, commodity index (Mar)
on Fri. Australia is out for hols on Mon.
USDCAD – Bulls Gain Momentum. USDCAD was last seen around 1.3270 as oil
prices remained under pressure. This pair has gained bullish momentum and the
200-DMA at 1.3335 is within reach, boosted by strength. Support is seen at
1.3159 (Mar low), 1.2978 (61.8% Fibonacci retracement of the May-Jan rally)
before 1.2832 (last Oct low). Week ahead brings Jan GDP on Thu before Mar PMI
on Fri.
Asia ex Japan
Currencies
The SGD NEER trades 0.15% below the implied
mid-point of 1.3711. We estimate the top end at 1.3436 and the floor at 1.3986.
USDSGD – Bullish. Onshore markets re-opened this morning after a long-weekend. USDSGD
rose amid USD strength in the past week. Daily momentum and stochastics are
showing mild bullish bias. Next resistance at 1.3850 (38.2% Fibo retracement of
Jan high to Mar low). Support remains at 1.3480 (Mar low). We noticed there is
a death cross in the making where 50DMA cuts 200 DMA. This is typically a
bearish signal. This is in conflict with other technical signals. Budget 2016
announced last Thu was prudent and crafted to guide the economy to a new phase
of development for future growth. The three key thrusts of the budget were
adopting an expansionary fiscal spending; Industry Transformation Programme
(ITP) and supporting people through demographic, cyclical and structural
changes. A budget surplus of SGD3.4bn (+0.8% of GDP) was envisaged in FY2016
with FY2015 projected deficit at SGD4.9bn (-1.2% of GDP).
AUDSGD –Rangy. AUDSGD remained stuck around the 1.03-figure. With AUD
on the backfoot and SGD bulls unlikely to gain any traction before the MPC
meeting, two-way trades are likely to dominate this week albeit with downside
pressure. Beyond the 1.03-figure les the 1.0250-support (23.6% fibo retracement
of Feb low to Mar high). We do not rule out deeper retracements towards next
support at 1.0170 (38.2% fibo). These are taken as shallow retracements
before our ultimate target at 1.0540 to be reached.
SGDMYR – Bearish Bias. SGDMYR continued to drift higher after
trading a 1-month low of 2.9170 (last Wed). We had flagged a bearish flag in
the making last week and it played out. Cross was last at 2.94 levels. Daily
momentum and stochastics remain bearish bias. 21 and 50 DMAs have cut 200 DMA
to the downside – a death cross formation typically associated with bearish
bias. We continue to see further downside. First objective at 2.90 before
2.82-2.84 levels. Retracement may revisit 2.9650 (38.2% fibo of Jan high to
low). Better sellers on rally.
USDMYR – Potential Pullback but
Death-Cross to be Respected. USDMYR rebounded back above 4-figure
after traded a low of 3.96 levels last week. The move higher came amid softer
oil prices and firmer USD. Malaysia Feb CPI (released Fri) rose further to
+4.2% YoY in Feb 2016 (Jan 2016: +3.5% YoY) while core inflation remained
elevated at +3.6% YoY 2016 (Jan 2016: +3.6% YoY). Our Economists maintained
2016 inflation forecast at 3 – 3.5%. On technical, we observed a death-cross in
the making where 50 DMA cuts 200 DMA to the downside. This is typically bearish
in nature. The last time when 50 DMA cuts 200 DMA was in Nov-2014 and that time
50 DMA cuts 200 DMA to the upside (golden cross) – bullish signal, and the pair
rose from 3.27 levels to above 4.40 and never looked back! This death cross
should be respected, in our opinion. Short-term, there appears to be a
falling wedge in the making – potential upside risk. We remain bearish bias in
the medium term.
1s USDKRW NDF – Upside Risks. 1s USDKRW rebounded amid broad USD
strength and soft risk sentiment. Pair was last at 1173 levels. Bearish
momentum on daily chart is waning and stochastics is showing signs of rising
from oversold conditions. Resistance at 1174 (200 DMA), 1188 (100 DMA). Support
remains at 1153 (Mar low). Day ahead could see some upside bias in the range of
1165 – 1180. Week remaining brings Mar consumer confidence (Tue), Feb IP (Thu).
USDCNH – Upside
Risks. The pair was last seen around 6.5280. CNH trades at a discount
to CNY against the USD ahead of onshore open. The upper bound of the
6.4200-6.5200-range is being tested. A break there exposes the next barrier at
6.5452(50-DMA). Dollar retains strength and we anticipate PBOC to continue to
maintain CNY’s strength against the basket. USD/CNY was fixed 9 pips higher
at 6.5232 (vs. previous 6.5223). CNY/MYR was fixed 16 pips higher at 0.6182
(vs. previous 0.6166). China industrial profit rose 4.8%y/y in Jan-Feb, a
rebound from a year of contraction seen in 2015. In other news, Wuhan city has
reduced the quota on housing fund loan with effect from 26 Mar. Also on real
estate, Shanghai has started to increased risk supervision on mortgage loans.
The government urged banks to implement “differentiated credit policy”.
The week ahead has Mar PMI numbers due.
SGDCNY – Short-term Downside. This cross closed at 4.7533 on Fri.
Uptrend is still intact though this cross has been retracing towards the
support at 4.7400. This cross seems have settled into range-trading within
4.7400-4.8000 for now, biased to the downside. Bullish momentum on the weekly
chart suggests that the cross could be supported on dips and next barrier is
seen at 4.8100.
1s USDINR NDF – Rebounds. Onshore markets
re-opened after closing for a long weekend. Pair hovered around 67.30 as we
write this morning, little changed from its moves before the long weekend.
There is little bias at this point on the daily chart but weekly chart shows
more bearish momentum. At this point, the 100-DMA at 67.50 deters
aggressive bulls, ahead of the next at the 68-figure. Weekly momentum is still
bearish. A break of the support at 66.64 opens the way towards the 200-DMA at
66.20. Risk appetite was good on 22 Mar with foreign investors buying
USD169.9mn of equities and USD125.4mn of debt. The week ahead has no tier-one
data of note.
USDIDR – Bullish Bias. Onshore markets re-opened after
closing for a long weekend. USDIDR climbed higher
for most of last week amid USD strength. Daily momentum and stochastics are
bullish bias. Pair is back above the 13300-levels. Resistance is around 13375
(38.2% Fibo retracement of the Jan-Mar downswing). Support is seen around 13225
(23.6% Fibo); 13190 (21DMA). The JISDOR was fixed higher at 13250 on Fri from
Thu’s 13167. Risk sentiments were positive with foreign funds buying a net
USD23.19mn in equities last week. They had also added a net IDR2.31tn to their
outstanding holding of government debt on 21-23 Mar (latest data available).
Week ahead has Mar PMI; Mar CPI (Fri).
USDPHP – Turning Bullish.
Onshore markets re-opened to gap higher at the opening to 46.475, playing
catch-up after closing since last Thu. Pair was last seen around 46.460. Pair has lost most of
its bearish momentum and stochastics is tentatively climbing higher from
oversold levels. Resistance is seen around 46.610 (23.6% Fibo retracement of
the Jan-Mar downswing); 46.690 (200DMA). Support is around 46.160 (Mar low). Risk
sentiments were positive yesterday with foreign investors buying a net
USD1.84mn in equities. As expected, the BSP stood pat on rates given the
strength of the economy amid stable inflation. Positive risk sentiments saw
foreign funds buying a bet USD22.72mn of equities last week. No data of note
for the week ahead.
USDTHB – Consolidation. USDTHB appears to be in consolidative mode since
mid-last week after trading higher earlier in the week on the back of a firmer
USD. Customs trade surprised on the upside with exports up 10.27% y/y in Feb
vs. estimates of -8.7%. This though was due to one-off factors, namely shipment
of military equipment back to Japan after a military exercise as well as gold
exports. Excluding gold, oil and military equipment, exports fell 2% y/y. Pair
was last seen around 35.320 levels. Daily chart and stochastics are now bullish
bias. Weekly charts remain bearish bias. There
appears to be a death cross in the making where 50DMA cuts 200 DMA, which
typically signals bearishness. Week ahead could be mixed. Immediate resistance
is around 35.370-levels (38.2% Fibo retracement of the Jan high to Mar low);
35.570 (50% Fibo). Support remains at 35.120 (23.6% Fibo). Investment
sentiments soured last week with foreign funds selling a net THB0.31bn and
THB8.35bn in equities and government debt. Feb customs trade and 18 Mar foreign
reserves are due tomorrow. Week ahead brings Feb trade; Feb BoP current account
(Thu); 25 Mar foreign reserves; Mar CPI (Fri).
Rates
Malaysia
§ Lackluster local government bond market. Trades were
mainly on the 3y MGII 5/18 with a total of MYR470m done. Malaysia February CPI
came in marginally higher than consensus at 4.2% YoY. This week, market will
focus on the 15y MGS 6/31 retap auction estimated to be MYR2.5b.
§ Quiet MYR IRS market as regional markets were out.
Nothing reported to have trade in the market. 3M KLIBOR remained at 3.71%.
§ PDS was also quiet. Some interest was seen for GG and
AAA names at the, with bids coming in 2bps tighter. Caga 12/22 tightened 5bps
to 4.25% (G+60bps/Z+36bps), Telekom 10/24 tightened 1bp to 4.42%
(G+60bps/Z+40bps) and Rantau 20 tightened 1bp to 4.10% (G+61bps/Z+35bps).
Market may start to take profit at current levels, but support should come from
real money demand as rates are not expected to rise yet.
Singapore
§ SGS market was closed for Easter holiday.
§ With most financial centers closed in view of the
Easter holiday, Asian credit market was muted.
Indonesia
The fixed income market was closed for Easter Holiday.
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