FX
US equities bounced on the back of better-than-expected payroll numbers
although the dollar did not benefit. Feb NFP came in at 242K, well above the
consensus forecast of 195K. Jan’s print was also revised higher to 172K. As a
result, unemployment rate steadied at 4.9%. Average hourly earnings slipped
-0.1%m/m in Feb, keeping the greenback under pressure. Equities took heart that
rate tightening would not come so soon and risk proxies including AUD and NZD
strengthened more than 1% each by the end of the session.
Risk sentiment was less positive this morning after China releases its
2016 targets at the start of the NPC on Sat. The GDP target was announced as
expected, at 6.5-7.0%, underscoring growth uncertainties this year. The
government pledged to increase fiscal and monetary stimulus to support
short-term growth while also striving to reduce industrial overcapacity. Oil
remained firm this morning with WTI and Brent at around USD36 and USD39
respectively. That lifted the MYR by 0.7% against the USD. SGD weakened -0.2%
in early trades.
The week ahead is likely to see markets in consolidation mode ahead of
central bank meetings this week including BNM (Wed), ECB, BOK, RBNZ (Thu). ECB
is expected to lower deposit rate by another 10% to 0.4% and to further expand
its monthly asset purchase. Technical adjustment to the QE program is
required. Failing which, ECB will risk running out of assets to purchase even
if they increase QE. BOK and RBNZ are not likely to move. We see risks of
another 50bps cut to SRR and maintain our call for OPR to remain unchanged at
3.25%.
Other data we are watching for the week - FX reserves data for the Asian
region (Mon); China Feb trade; Euro-area 4Q GDP; RBA Lowe speaks (Tue); China
Feb CPI, PPI data; Japan Feb PPI; Philippines Jan exports (Thu); Malaysia Jan
IP (Fri); China’s Feb IP, retail sales and FAI (Sat).
Currencies
G7 Currencies
DXY – Consolidate. US NFP came in better than expected (+242k
for Feb with +30k upward revision in previous 2 months) but earnings growth
(-0.1% m/m) disappointed. Talks of survey being done early in Feb and may have
missed out capturing the full results. Broad USD weakness continues as risk
proxies (led by AUD, NZD) rallied. DXY was last seen at 97.35 levels. Bullish
momentum continues to wane and stochastics is falling from overbought
conditions. Resistance remains at 98 (61.8% fibo retracement of Jan high to Feb
low), 98.75 (76.4% fibo). Support at 97-levels (21, 200 DMA, 38.2% fibo). Week
ahead brings Feb labor market conditions index; Fed’s Fisher and Brainard
speaks (Mon); Feb NFIB small business optimism (Tue); Jan wholesale inventories
(Jan); initial jobless claims (Thu); Feb import prices (Fri).
EURUSD – Bias to Sell Rallies. EUR turned higher amid broad USD weakness
last Fri but the move higher stalled at 1.1050 (200 DMA). EUR is a touch weaker
this morning. Last seen at 1.0990. Bias remains to sell EUR on rallies. We
expect further easing in the form of 10bps cut to -0.4% on the deposit rate and
a further expansion of monthly asset purchase. Technical adjustment to the QE
program is required (for details please refer to our tech weekly dated 4 Mar).
Bearish momentum continues to wane and stochastics is rising from oversold
levels. Look for opportunities to lean against strength. Resistance at 1.1050
(200 DMA) before 1.1070 (21 DMA), 1.11 (50% fibo). Support at 1.0950 (23.6%
fibo retracement of Dec low to Feb high) before 1.0830(Mar low). Week ahead brings
EU summit (Mon); GE Jan factory orders; Euro-area investor confidence (Mon);
Euro-area 4Q GDP; GE Jan IP; FR Jan trade; EU Finance Ministers meet in
Brussels (Tue); ECB Meeting; GE Jan trade; FR Jan IP (Thu); GE Feb CPI (Fri).
GBPUSD – Sell Rallies. GBP rose amid USD weakness. We reiterate
that GBP downside risk appears to have been priced in to some extent - Brexit
risks are somewhat priced in (although not entirely as a real exit could see a
larger sell-off) while BoE rate hike expectations have been pushed back further
2017. Broad USD weakness could continue to see weak GBP shorts getting
squeezed. That said we continue to caution that the pair remains biased to the
downside amid Brexit concerns over the next few months. Pair was last
seen at 1.4220 levels. Daily momentum has turned mild bullish and
stochastics is rising from oversold conditions. We look for opportunities to
sell towards 1.4250 (50% fibo retracement of Feb high to low), 1.4350 (61.8%
fibo). Support at 1.38, 1.35 levels. Week ahead brings Jan consumer credit
(Mon); Feb PMI Mfg (Tue); Feb construction PMI (Wed); Feb house prices, FX
reserves, services and composite PMI (Thu).
USDJPY – Interim Double-Bottom Watched. Interim
bottom around 111-levels has held-up well. USDJPY rebounded to a high of 114.56B (2 Mar) before
easing back towards the 113 levels on 4 Mar on disappointing US wage growth
print. Pair remains pressured by a soft dollar this morning with the pair last
seen around the 113.65 levels. Still, risks are to the upside with daily
momentum continuing to indicate mild bullish momentum. Any downside is likely
to be limited. Further upmoves could revisit 115 levels (38.2% Fibo retracement
of the Jan-Feb downswing) and then towards 116.30 levels (50% Fibo, 50DMA).
Support remains around 111 levels. Week ahead has BOJ Kuroda speaking in Tokyo
this morning and then in parliament later in the afternoon; final 4Q GDP; Jan
current account (Tue); Feb machine tool orders; Feb money stock (Wed); Feb PPI
(Thu). BOJ governor Kuroda told parliament that he was not considering lowering
interest rates at this time, but he reiterated that he would not hesitate to
take action as needed.
NZDUSD – False Break? Kiwi turned higher amid broad USD
weakness. Focus this week on RBNZ meeting (Thu). We do not expect RBNZ to cut
rate below historical low of 2.5% at the upcoming meeting. We believe RBNZ will
adopt and wait and watch approach – for more data flows and what other central
banks may do. Expect RBNZ to talk down NZD. Our bias remains for RBNZ to cut policy
rate by 25bps at the Apr or Jun meetings, should growth momentum fails to pick
up. Maintain bearish outlook due to a combination of factors including
RBNZ explicit bias for further easing and weaker NZD (as export prices remain
soft), benign inflation outlook, challenging dairy market dynamics, high risk
of current account deficit widening, further downside risk to growth outlook.
NZD was last at 0.6790. Daily momentum and stochastics are indicating a bullish
bias. Key resistance at 0.6760 (76.4% fibo retracement of Dec high to Jan low,
previous highs in Feb) appears to have been broken. Is this a false break or a
clean break? A clean break could see a sustained move higher towards 0.6890
(previous highs in Oct and Dec 2015). Bias remains to sell rallies. Support at
0.6650 (50, 100, 200 DMAs), 0.6620 (50% fibo of Dec high to Jan low, 21 DMA),
before 0.6550 (38.2% fibo). Week remaining brings 4Q Mfg activity (Tue); Feb
card spending (Wed); RBNZ meeting; RBNZ Wheeler speaks (Thu); Feb BusinessNZ
Mfg PMI; Feb food prices (Fri).
AUDUSD – Upside Bias. AUD broke above the 0.74-figure
and hovered around the level this morning. Profit taking eased the pair this
morning from Fri highs of 0.7440. In spite of the retreat, upside momentum is
still strong. Next resistance to watch will be at 0.75 levels. Support is now
seen at 0.73 (23.6% Fibonacci retracement of the Jan-Mar rally). Week
ahead brings Feb FX reserves (Mon); Feb NAB Business Conditions; RBA’s Lowe
speaks (Tue); Westpac consumer confidence; Jan investment lending (Wed);
consumer inflation expectations (Thu).
USDCAD – Eyes on 200-DMA. USDCAD hovered around 1.3340 as we write this morning
as oil prices remained firm. Daily momentum and stochastics remain bearish bias
although we observed stochastics at oversold levels. We still favor USDCAD
shorts. Support at 1.33 (200 DMA) and a break there brings 1.2830 into view.
Resistance at 1.3540 (61.8% fibo of Oct low to Jan high), 1.3660 (100 DMA).
Asia ex Japan
Currencies
The SGD NEER trades 0.10% below the implied mid-point
of 1.3755. We estimate the top end at 1.3475 and the floor at 1.4030.
USDSGD – Downside Pressure. USDSGD saw sharp moves over the past week
breaking below the 1.38-handle. Pair touched low not seen since Oct 2015 at
1.3734 on Fri before rebounding slightly. Positive sentiments amid an oil price
rebound, and a softer dollar as well as a return of foreign funds into
government debt (yields were down across the board by around 0.25-9.81bp except
for the 3M and 6M last week) had weighed on the pair. Pair was last seen around
1.3767. Daily chart and stochastics are mild bearish bias. Portfolio inflows on
continued positive sentiments could pressure the pair further lower. Immediate support
is now at 1.3730 (Oct 2015 low) before the next at 1.3645 (61.8% Fibo
retracement of the Jun 2015-Jan 2016 upswing). Rebounds should meet barrier
around 1.3800 (50% Fibo) and then 1.3950 (38.2% Fibo).
AUDSGD – Maintain Long Bias. AUDSGD retreated from weekly highs of
1.0250 towards the 1.02-figure. AUD strength will still continue to underpin
this cross. Next barrier is seen at 1.0350 (double top in Nov and Dec) before
1.05 (our ultimate objective).
SGDMYR – Still Watching 200 DMA. SGDMYR traded a touch lower but still
seen supported above the 200 DMA at 2.96 levels. We continue to watch the
support at 200 DMA. Daily momentum is flat for now. We reiterate a break below
200 DMA is needed for further downside move to materialise. Next support level
at 2.9380 (23.6% fibo retracement of Jan high to low) before 2.8940
(previous low). Resistance at 3.0090 (61.8% fibo retracement of Jan high
to Jan low), 3.03 (50 DMA).
USDMYR – Bearish Bias. USDMYR traded lower amid broad USD
weakness and continued interest in local bonds. USDMYR gapped in the open today
to an intra-day low of 4.0712 before rebounding. Last seen at 4.08 levels.
Daily momentum is mild bearish with stochastics falling. Key support at
4.08 (Oct low) before 4.05. Resistance at 4.14 (200 DMA). Week ahead brings FX
reserves (Mon); BNM meeting (Wed); IP, manufacturing sales (Fri). We see risk
of SRR 50bps cut and maintain our stand for OPR to be held steady at 3.25%
1s USDKRW NDF – Downside Pressure to Persist. 1s USDKRW briefly dipped below 1200 on Fri
amid broad USD weakness and risk-supported sentiment. Pair was last seen at
1201. Daily momentum and stochastics are bearish bias. Next support at 1183
(100 DMA). Resistance at 1208 (50 DMA). BoK meets on Thu. We expect BoK to keep
policy rate on hold at record lows of 1.5% while waiting for Fed meeting in mar
(week later) and further domestic data before making the decision to ease
further or not.
USDCNH – 100-DMA broken. The slip
below the 100-DMA at 6.5085 saw USDCNH around 6.50 as we write. CNH is now
trading at a slight premium to the CNY against the USD. Next support for the
USDCNH is seen at 6.4858 (61.8% Fibonacci retracement of the Oct – Dec rally,
Feb low). We think this pair could remain in consolidation within 6.48-6.58
given the lack of momentum. Stochastic is also rising from oversold
conditioions. USD/CNY was fixed 171 pips lower at 6.5113 (vs. previous
6.5284). CNY/MYR was fixed 8 pips lower at 0.6300 (vs. previous 0.6308).
The National People Congress started on Sat and concludes on 13 Mar. As
expected, GDP target was kept at a range of 6.5-7.0%, underscoring growth uncertainties this year. The
government pledged to increase fiscal and monetary stimulus to support
short-term growth while also striving to reduce industrial overcapacity.
We expect (risk) markets to be relatively stable during the meetings that
continue. More details are waited on how the government will reduce housing
stocks, lower corporate and government debt as well as to ease existing bottlenecks.
The projected budget of 3% of GDP for 2016 is a record high since 1949.
SGDCNY – Pressured Higher. This cross rallied to a high of 4.7422 ( a double top)
before closing around 4.7267 on Fri. This cross has made a double top and a
failure to breach the 4.75-figure could see a sharp reversal towards the 4.6260
(50-DMA). However, a break there could see next barrier targeted at 4.7600.
1s USDINR NDF – 100-DMA eyed. Pair hovered around 67.35 this morning
and pressure is still to the downside. The 100-DMA at 67.22 supports
downside and a break there opens the way towards the 200-DMA at 66.20. Our
target for USDINR to correct towards the 67-figure has been met last Fri,
re-initiated on 18 Feb. Bounces in the 1s USDINR NDF could meet
barrier around the 68-figure (50DMA). Foreign investors bought USD164.7mn of
equities but sold USD19.4mn of debt on 3 Mar. Over the weekend, PM Modi asked
Finance Minister Arun Jaitley to keep “middle class sensitivities in mind” (ET)
after the latter announced plan to tax pension withdrawals at his budget
speech.
USDIDR – Pressured Lower. USDIDR
continues to slip lower as it did over the past week to below the 13000-handle
before rebounding. Portfolio inflows over the past week amid an improvement in
risk appetite weighed on the pair. Foreign funds had purchased a net
USD171.06mn of equities. This was despite them removing a net IDR1.12tn from
their outstanding holdings of government debt on 29 Feb-3 Mar (latest data
available). Improving macroeconomic fundamentals, political stability, and the
Jokowi government’s push for infrastructure building and investment amid low
oil prices and supportive monetary policy continues to be supportive of the
IDR. Pair is currently seen around 13018 with daily chart exhibiting increasing
bearish momentum and stochastics remains at oversold levels. This suggests the
potential for a rebound in the near term. Support nearby is seen around 12980
(76.4% Fibo retracement of the Jan-Sep 2015 upswing) before the next around
12570 (Feb 2015 low). Rebound should meet resistance around 13335 (61.8% Fibo).
The JISDOR was fixed lower at 13159 to end the week last Fri from 13260 on
Thu. Quiet week ahead with just Feb foreign exchange reserves on tap later
today.
USDPHP – Bearish Bias.
USDPHP remained on the
downtrend for the past week, helped by portfolio inflows amid positive risk
sentiments. Foreign funds had bought a net USD29.66mn in
equities. Last seen around 46.790, pair is now exhibiting increasing bearish
momentum and stochastics is at oversold levels. This suggests the potential for
a rebound ahead. For now, risk remains on the downside. Support nearby is around 46.755 (50% Fibo retracement
of the Oct 2015-Jan 2016 upswing) before the next at 46.570 (200DMA). Rebound
should meet resistance is around 47.065 (38.2% Fibo) ahead of the next at
47.275 (100DMA). Week ahead has Feb foreign exchange reserves (Mon); Jan
exports (Thu); Jan unemployment rate (Fri).
USDTHB – Still Eyeing 35.200-Levels. USDTHB has been on the downmove towards the 35.320 levels
last week, breaking below the 200DMA-support level as positive sentiments
lifted portfolio inflows. Foreign funds purchased a net THB13.14bn and THB6.58bn in equities and government debt last week. Last seen around 35.390, pair is now exhibiting mild
bearish momentum on the daily charts, and stochastics remains bearish bias. Weekly charts remain bearish bias. With the daily break of the support level at 200DMA
on 4 Mar, pair could revisit the year’s low of 35.210 and then 35.130 (Oct 2015
low). Any rebound should meet resistance around 35.500 (23.6% Fibo retracement
of the Jan-Feb downswing); 35.673 (38.2% Fibo). Quiet week ahead with just 4 Mar
foreign reserves on tap on Fri.
Rates
Malaysia
Local government bonds took a breather after posting gains in the last
couple of days. Yields ended the day virtually unchanged with lower volume.
However, 3y benchmark GII saw strong interests with more than MYR600m nominal
exchanged hands. Overall, markets remained biddish and positive sentiments
still seen in the Ringgit alongside regional currencies.
IRS market was quiet with no trades reported. The curve ended a tad
higher. 3M KLIBOR was unchanged at 3.73%.
The PDS market saw better buyers on selected names especially at the
front end of the curve. Caga was better bid, tightening 1-5bps. Caga 19s traded
5bps lower at 4.01% (G+48.5/Z+22.9). Aman 21s were traded around 4.21-4.23%
(G+70.5/ Z+44.9) in good volume. GGs faced some profit taking. PASB 23s was given
at 4.23% (G+58.6/z+33.9) which offers some value. In general, trading volume
during the week increased WoW although prices moved sideways.
Singapore
SGD rates fell as the massive selloff in spot USDSGD pushed short date
forwards further to the left, implying lower SOR fixing. IRS curve slid under
keen offering interests and ended the day lower by 5-6bps. Trading in SGS was
however lackluster as players were sidelined ahead of NFP. Intermittent selling
by profit takers capped the gains in SGS causing swap spreads to narrow during
the day. Late buying towards market close when UST futures ticked higher helped
prices to end the day higher. SGS yields closed lower by 3-6bps.
In Asian credit, positive tone still prevailed ahead of the NFP. Indon
curve flattened along the 10-30y (Indons 26 +25 cents, belly 20y higher by
1.5-2.0points, Indon 46 +1 point,). Japanese TLAC continued to grind tighter by
2-3bps, while Phillies gained 37.5 cents.
Indonesia
Indonesia bond market closed with yield curve bull flattening as yield
for tenor above 5yr dropped by an average of more than 20bps. This situation
however is caused by inflows to the bond market amid ahead of US labour data
publication post market close. Chances for the IGS prices to reverse remains
specifically if the US labour data came out to be better than expected. 5-yr,
10-yr, 15-yr and 20-yr benchmark series yield stood at 7.633%, 7.861%, 8.244%
and 8.246% while 2y yield shifts down to 7.683%. Trading volume at secondary
market was seen heavy at government segments amounting Rp16,426 bn with FR0056
as the most tradable bond. FR0056 total trading volume amounting Rp2,915 bn
with 121x transaction frequency and closed at 103.635 yielding 7.861%.
Corporate bond trading traded moderate amounting Rp504 bn. BNGA02SB
(Subordinated II Bank CIMB Niaga Year 2010; Rating: AA(idn)) was the top
actively traded corporate bond with total trading volume amounted Rp70 bn
yielding 10.078%.
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