Tuesday, April 19, 2016

Maybank GM Daily - 19 Apr 2016

FX
Global
*      The disappointment in the Doha outcome dissipated by late Asia as oil prices made a rebound above the USD40-level on news of a strike on Sunday that affected more than 50% of Kuwait’s crude production.  Commodity-linked currencies followed suit as AUD made a clean break of the key-0.7720-barrier, taking NZD along, last seen within striking distance of the key 0.70-figure. Dollar softened under the 94.50-level again. JPY on the backfoot as market players ditched the “safe haven” for better yielding currencies. Early Asian trades see THB and SGD strengthened against the greenback.
*      With dollar making a retreat overnight, we anticipate another stronger CNY fixing against the USD. The strength of the CNY is likely to be offset by retreats against the AUD, NZD, SGD, MYR and EUR. Overall, RMB index is likely to weaken further. Eyes are on whether the 97-level is the new floor. We think there is no floor at this point as the dollar environment allows an adjustment in CNY REER which has been long deemed as overvalued via its daily cross CNY fixings. Strong CNY fixing against the USD, could also provide some anchor for regional currencies against the USD as well.
*      The data calendar starts to get busier today with Mar housing starts and building permits due out of the US. The German ZEW survey for Apr is also due. Earlier today. RBA released the Minutes of its Apr meeting today followed by a speech by Governor Stevens tonight. Elsewhere in the UK, BoE Carney speaks in parliament. Nearer to home, Philippines releases BOP data. BOK left  its key interest rate at 1.5% as we had expected.

Currencies
G7 Currencies
*      DXY – Soft. The DXY index inched lower on Fri and was last seen around 94.50. Fed Rosengren warned that market’s projection of the rate increases “would likely result in an overheating that necessitates the Fed raising interest rates more quickly than is desirable”. Earlier, Fed Dudley had a more cautious note for the markets, cited saying that “the monetary-policy adjustments are likely to be gradual and cautious”. Risk appetite made a comeback in late Asia yesterday and capped the greenback. Daily momentum and stochastics continue to indicate mild bullish bias though the downtrend is still strong. Market is keen to sell on rallies and barrier is seen at 94.90 (21 DMA), before 96 (50 DMA). Support at 94 levels before 92.50.  Week ahead brings Housing starts, building permits (Mar) on Tue; Existing Home Sales (Mar) on Wed; CFNAI (Mar); Philly Fed (Apr); FHFA House Price (Feb) on Thu; PMI Mfg (Apr P) on Fri.
*      EURUSD – Tracking the 21DMA. EUR edged higher and was last seen around 1.1310. While momentum indicators still flag downside risks, the modest uptrend looks set to hold and support is seen around 1.1220 (38.2% fibo retracement of mar low to Apr high), 1.1180 (50 DMA). We remain bias to accumulate on dips targeting a move towards 1.15, 1.18. Week ahead brings ECB current account (Feb); ZEW Survey (Apr) today; GE PPI (Mar) on Wed; ECB Meeting on Thu; EC, GE, FR Flash PMI (Apr) on Fri.
*      GBPUSD Sell on Rally. GBP inched higher, lifted by the improvement in risk sentiments, last seen around 1.4290. This pair has been swivelling around the 50-DMA and we still look to sell on rallies. Daily momentum and stochastics indicators have tilted higher. Resistance is seen at next at 1.4350 (61.8% fibo) and then, at 1.4480 (100 DMA). Support at 1.4150 (38.2% fibo retracement of Feb high to low), 1.4030 (23.6% fibo) before 1.3830 (Feb low). We reiterate that Brexit concerns should continue to weigh on the currency until referendum takes place on 23 Jun. Brexit was warned to be the biggest risk to domestic financial stability; cited Deloitte’s survey of CFOs as a sign that referendum is weighing on demand; hiring and investment intentions may already be dipping. Week ahead brings BoE Carney speaks in parliament on Tue; Labor Report (Feb) on Wed; Retail Sales, public finances (Mar) on Thu.
*      USDJPYBullish Tilt. After yesterday’s risk-driven selling of the USDJPY below the 108-levels, the pair has rebounded back above the 109-levels this morning. The upmove was on the back of an improvement in risk appetite amid a mild rebound in the WTI overnight that sent US equities higher. This morning the Nikkei futures are also on the uptick that should provide support to the pair as would the sell-off in the JPY against the majors. Last seen around 109.10-levels, pair has lost most of its bearish momentum and stochastics is climbing higher from oversold levels. Monthly and weekly momentum indicators are all still bearish bias. This suggests further upticks could be capped. Resistance remains around 109.73 (15 Apr high); 11 is at 107.63 (2016 low); 106.73 (76.4% Fibo). We have nationwide dept sales (Mar) on today; Trade, Machine Tool Orders (Mar) on Wed; PMI Mfg (Apr F) on Fri.
*      NZDUSD – Remains Confined within the Trend Channel. NZD ground higher yesterday, still nicely within the trend channel and was last seen at 0.6980 (within striking distance of the key 0.70). 1Q CPI surprised to the upside with a print of 0.2%q/q vs. the expected 0.1%. Year-on-year, CPI picked pace to 0.4% from previous 0.1%. The 0.6680- marks the lower bound and the 0.7030-level marks the upper bound. Daily momentum and stochastics signal very mild bullish bias. Resistance at 0.6930 (50% Fibo retracement of Apr 2015 high to low) has been broken and the pair now eyes the 0.7030-level (upper bound resistance). Support at 0.6750 (50 DMA, 38.2% Fibo) before 0.6680 (lower bound of the trend channel). Week ahead brings ANZ Consumer Confidence (Apr); credit card spending (Mar) on Thu.
*      AUDUSD – Strength Ahead. As oil made a swift recovery within a day after Doha, so did the rest of commodity-linked currencies including the AUD. Last seen around 0.7770, it has made a clean break of the key 0.7720-barrier and this has possibly turned into a support level. Next support is seen around 0.75 (50% Fibonacci retracement of the May-Jan sell off) before 0.7429(50DMA) and then 0.7282 (100 DMA). We still hold on to our bullish target at 0.7850 (76.4% Fibonacci retracement of the May-Jan sell off) before the big 0.80. Today has the release of the Apr Minutes, followed by a speech by RBA Glenn Stevens tonight. Week ahead brings Westpac Leading Index (Mar) on Wed; NAB Business Confidence (1Q) on Thu; RBA FX Transactions (Mar) on Fri.
*      USDCAD - Downtrend. The pair gapped up at first on Mon before making a strong reversal and was last seen around 1.2780. Downtrend is strong in this one and momentum indicators also tilt south. Support at 1.2830 has been broken before the 1.2660 (5 Jun 2015), then at 1.2574. Rebounds to meet barrier at 1.2980 (61.8% fibo retracement of the May-Jan rally). Week ahead has retail sales for Feb due on Fri, along with Mar CPI. Consensus expects a firmer print for the latter at 0.5%m/m vs. previous 0.2%.

     Asia ex Japan Currencies
*      The SGD NEER trades 0.02% below the implied mid-point of 1.3496. The top end is estimated at 1.3226 and the floor at 1.3766.
*      USDSGD – Limited Downside.  USDSGD has slipped back towards the 1.35-levels as global risk sentiments improved. The moves lower over the past three sessions have seen the pair surrendering almost all the gains that had followed the MAS neutral policy announcement. Pair was last seen just hovering around the 1.35-handle. Daily momentum remains bullish bias but stochastics is showing no strong bias. With risks still tilted to the upside, further down moves could be limited. Next support is around 1.3415 (2016 low). Any upticks should meet resistance around 1.3550 (21DMA); 1.3650 (38.2% Fibo retracement of 2014 low to 2016 high).
*      AUDSGD – Upside Momentum. This cross was elevated around 1.0495 this morning. Daily momentum indicators exhibit increasing bullish signals. Next resistance at 1.0510 (23.6% Fibonacci retracement of 1.18-double top in 2014 to double bottom formed at 0.97 levels). Next bullish target is seen at  1.0760 (50% fibo). A word of caution - weekly stochastics is entering into overbought conditions – that may suggest some pullback towards 1.04 levels. We maintain our call to hold long AUDSGD and to buy AUDSGD on dips.
*      SGDMYR – Retracements. After yesterday’s bounce higher, USDMYR is retracing this morning in line with the relative strength of the MYR as oil prices make a recovery. Cross was last seen around 2.8930 levels. Daily momentum and stochastics are bullish bias. Immediate resistance at 2.9000 levels (21 DMA; 23.6% Fibo retracement of the Jan high to Apr low). Support is seen at 2.85-figure (2016 lows).
*      USDMYR – Bounce From Oil Price Gains. USDMYR slipped lower this morning amid a rebound in oil prices following news of a labour strike in Kuwait. Pair was last seen around the 3.9100-levels. Upside momentum continues to gain for this pair despite a bounce in prices. Stochastics is still rising from oversold levels. Resistance at 3.9470 levels (21 DMA) is being tested before the next at 4.00. Support is seen at 3.8442 levels (2016 lows) before 3.7610 (76.4% Fibo of May-Sep 2015 upswing) and 3.54 (May 2015 lows). That said, we reiterate the USDMYR downtrend is far from over.
*      1m USDKRW NDF – Upside Bias. Moves lower in the past two sessions were stalled this morning, rebounding to around the 1146-levels. BoK kept its policy rate unchanged at 1.5% as expected at its MPC this morning. We see a higher likelihood of a cut by at least one in 2Q when the new MPC convenes in May. This is because 3 out of the 4 new members are perceived as dovish. With the MPC out of the way, focus will be on the BoK’s updated economic outlook due later today (previously BOK projected GDP growth at 3% and inflation at 1.4% for 2016). Daily momentum remains mild bullish bias but stochastics is turning lower. Resistance at 1153 (21 DMA), 1162 (23.6% Fibo retracement of Mar high to low), 1177 (200 DMA and 38.2% Fibo). Support is around the year’s low at 1136.
*      USDCNH – Upside Bias within 6.45-6.54. Pair softened yesterday and was last seen around 6.4820, still capped by the 50-DMA at 6.5055. Upside momentum seems to be waning. Barrier at 6.5040 (50-DMA) should hold ahead of the next at 6.5370 (100-DMA). We continue to observe that PBOC uses the DXY index and the RMB index to guide the USDCNY. As of 18 Apr, USDCNY was fixed 121 pips higher at 6.4787 (vs. previous 6.4908). CNYMYR was fixed 67 pips higher at 0.6049 (vs. previous 0.5982). Our model signals a fixing at 6.4735. We think there that given the primary concerns on capital outflows had ebbed and an outstanding overvaluation of its REER, PBOC would be less concern of a weaker RMB against the basket and seek to adjust the fixing in order for its REER lower in episodes that the dollar is weak. This is again, in line with our observations that the RMB index is positive correlated to the dollar. Another tranche of MLF was conducted yesterday (18 Apr) with PBOC injecting CNY162.5bn of liquidity.
*      1s USDINR NDF – Holiday Today, 200-DMA support To Hold. 1M NDF slipped yesterday and was last seen around 66.80. The 200-DMA at 66.53 is still the viable support that has been intact for the past couple of weeks. It should not be broken today as it is a holiday in India.  Immediate barrier at 67.175 before the next at 67.50 (100-DMA). Should the 200-DMA (66.56) break, the next support is seen at 65.98 (76.4% Fibonacci retracement of the Oct-Mar rally). Foreign investors bought U$111.6mn of equities and U$58.6mn of bonds on Apr 13th.
*      USDIDR – Titled Lower. USDIDR slipped lower this morning, tracking most of its regional peers lower amid a rebound in global oil prices. Pair was last seen around 13145-levels. Daily momentum is showing mild bullish bias and stochastics has continues to climb higher from oversold levels. Resistance is around 13225 (23.6% Fibo retracement of the Jan-Mar downswing) ahead of 13260 (50DMA). Support is seen around the 1300-handle. The JISDOR was fixed higher at 13204 on Mon from Fri’s 13166. Risks sentiments improved yesterday with foreign funds purchasing a net USD25.0mn in equities. They had however added a net USD3.40mn to their outstanding holding of debt on 14 Apr (latest data available). Week ahead has just BI meeting on Thu and we expect the central bank to remain on hold for the time being until the new policy rate – the 7-day reverse repo – is in place on 19 Aug.
*      USDPHP – Limited Downside.  USDPHP inched lower this morning as risks sentiments improved. Last seen at 46.120, near-term risks are to the upside given bullish momentum on both the MACD and stochastics. Barrier is seen around 46.37 before the next at 46.410 (23.6% Fibo retracement of the Jan-Mar downswing). Beyond the near-term, the 50-DMA has crossed the 200-DMA lower and we see more risks to the downside. Support remains around the year’s low of 45.900. Risk appetite rebounded yesterday with foreign investors buying a net USD4.04mn of equities on yesterday. Quiet week ahead has just BOP overall (Mar) on Tue.
*      USDTHB Rangy. USDTHB is on the uptick this morning and was last seen around the 35-handle. Daily momentum is showing no strong directional bias, though stochastics is fast approaching oversold levels. Resistance is around 35.155 (21DMA); 35.300 (50DMA). Support is seen around 34.950 (13 Apr low). Risk sentiments were mixed post-Songkran with foreign funds buying a net THB1.79bn in equities yesterday but selling a net THB0.20bn in government debt. Quiet data week with just 8 Apr foreign reserves on tap Fri.

Rates
Malaysia
*      Local government bonds traded weaker, with yields higher by 1-3bps, after the oil production freeze talk in Doha failed. However, there was some support by real money accounts, especially at the belly. The 7y MGII 7/23 saw the most amount of volume traded totaling MYR670m.
*      MYR IRS rates tried to move higher but heavy receiving interest capped any rise. Nothing reported dealt in the market. 3M KLIBOR remained at 3.70%.
*      Muted PDS market against a backdrop of wider Malaysian CDS, higher MGS yields and USDMYR, with bids on GG and AAA names widening 3bps. Dana 25, PASB 19 and Danga 26 traded 1bp wider to 4.28%, 4.08% and 4.43% respectively. In the AAA space, Telekom 25s were taken at 4.38% (G+46bps/Z+31bps) unchanged from previous level, while Rantau 29s tightened 1bp to 4.63% (G+61bps/Z+41bps). The AA curve was bullish at the front end on yield seeking, while the rest of the curve was relatively unchanged.  

Singapore
*      SGS prices rose higher due to risk-off sentiment as oil prices fell after Doha talks failed with lower USDGSGD lending further support to the market. SGS yields ended 3-7bps lower, with the long end outperforming. Overall trading activity was light, though the 10y was still in demand. SGD IRS curve also lowered 2-6bps.
*      Slow day for Asian credit market. High beta oil names like ANTOIL, MIEHOL and VEDLN surprisingly remained supportive despite falling oil prices, trading flat to last Friday’s prices, possibly because of short covering. INDONs and INDOIs were flattish, while PHILIP 41 fell slightly by 25cts. In CDS space, Malaysian CDS widened 10bps due to the lower oil prices.

 Indonesia
*      Indonesia bond market closed mixed at the end of yesterday despite yield was lower during the first trading session. Minimum events globally as well as domestically have made a chance for a slight profit taking yesterday. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.229%, 7.424%, 7.648% and 7.682% while 2y yield shifts up to 7.158%. Trading volume at secondary market was seen thin at government segments amounting Rp7,877 bn with SR008 as the most tradable bond. SR008 total trading volume amounting Rp1,399 bn with 802x transaction frequency and closed at 102.072 yielding 7.501%.
*      DMO will conduct their bi-weekly sukuk auction today with five series to be auctioned which are SPN-S06102016 (Coupon: discounted; Maturity: 6 Oct 2016), PBS006 (Coupon: 8.250%; Maturity: 15 Sep 2020), PBS009 (Coupon: 7.750%; Maturity: 25 Jan 2018), PBS011 (Coupon: 8.750%; Maturity: 15 Aug 2023) and PBS012 (Maturity: 15 Nov 2031). We believe that the auction will be oversubscribe by 2.0x – 3.0x from its indicative target issuance of Rp4 tn while our view on the indicative yield are as follows SPN-S06102016 (range: 5.60% – 5.70%), PBS006 (range: 7.70% – 7.80%), PBS009 (range: 7.45% – 7.55%), PBS011 (range: 7.90% – 8.00%) and PBS012 (range: 8.20% – 8.30%).
*      Corporate bond trading traded heavy amounting Rp754 bn. FIFA02ACN3 (Shelf registration II Federal International Finance Phase III Year 2016; A serial bond; Rating: idAAA) was the top actively traded corporate bond with total trading volume amounted Rp305 bn yielding 8.450%.

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