Maybank GM Daily - 20 Apr 2016

FX

Global

      US stocks ended mixed. The Dow and S&P finished at the year highs while the NASDAQ lagged. Oil gains, on the back of news that the strike in Kuwait will drag on, continued to fuel positive sentiments and commodity-linked currencies were led higher. Dollar was rather soft overnight, weighed by lower housing starts for Mar as well as lower building permits.

      Asia gained against the USD yesterday with USDSGD making a fresh year-low of 1.3352 before rebounding above the 1.34-figure this morning. KRW also made new highs, the outperformer for Tue and continues strengthened this morning, up +0.6%. Amongst the G7, NZD and NOK were the outperformers, up >1% against the USD. CAD, GBP and AUD had remarkable gains yesterday. JPY was possibly the only laggard, weighed by risk-on sentiments in the region.

      The day ahead has Mar CPI out of Malaysia. Elsewhere, UK has labour report due followed by US existing home sales for Mar. We think risk proxies could continue to benefit from the current environment, barring any major upset in oil prices. 

Currencies

G7 Currencies

      DXY – Soft. The DXY index slumped on Tue and was last seen around 94.10. Weaker housing starts and building permits in Mar triggered more dollar offers, not helped the least by firm risk appetite. Daily momentum and stochastics shows little bias though the downtrend is still strong. Barrier is seen at 94.90 (21 DMA), before 96 (50 DMA). Support at 94 levels before 92.50.  Week ahead brings 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 1.1360. While momentum indicators still flag downside risks, the modest uptrend looks set to hold and support is seen around 1.1260(76.4% fibo retracement of the Oct-Dec sell off) before 1.1188 (50 DMA). We remain bias to accumulate on dips targeting a move towards 1.15, 1.18. The ZEW survery of the current situation slipped more than expected though expectations improved from 4.3 to 11.2, exceeding consensus. Week ahead brings GE PPI (Mar) on Wed; ECB Meeting on Thu; EC, GE, FR Flash PMI (Apr) on Fri.

      GBPUSD – Sell on Rally. GBP rallied yesterday in the absence of dollar strength and ahead of the speech by Carney at the parliament. A high of 1.4419 was seen before the pair tapered off to levels around 1.4388 as we write. This pair now approaches the 100-DMA at 1.4445 and we still look to sell on rallies. Daily momentum and stochastics indicators have tilted higher. Resistance is seen at next at 1.4480 (100 DMA) before 1.45-figure. The 50-DMA at 1.4230 has turned into a support before the next at 1.4150 (38.2% fibo retracement of Feb high to low), 1.4030 (23.6% fibo) before 1.3830 (Feb low). PM Carney warned that Brexit would make funding UK’s CAD more expensive and woujld lead to extended uncertainty as well as significant asset price effect. 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 Labor Report (Feb) on Wed; Retail Sales, public finances (Mar) on Thu.

      USDJPY – Limited Downside. USDJPY slipped lower to around the 109-handle amid dollar weakness overnight with the majors sold off against the JPY this morning. The large trade surplus in Mar is also weighing on the pair. Still, with the Nikkei futures pointing higher, tracking global equities, this suggest possible upside pressures intraday that could limit the pair’s downside. Last seen around 109.10-levels, pair is now exhibiting very mild bullish momentum and stochastics is climbing higher from oversold levels. Monthly and weekly momentum indicators though are all still bearish bias. With risks tilted very slightly to the upside, further downmoves could be limited. Resistance remains around 109.73 (15 Apr high); 110.40 (61.8% Fibo retracement of the 2014 low to 2015 high; 21DMA).  Support is seen around is at 107.63 (2016 low); 106.73 (76.4% Fibo). Remaining week has PMI Mfg (Apr F) on Fri. In his appearance in parliament this morning, BOJ governor reiterated the central bank’s belief that the economy is recovering moderately and inflation will hit around 2% in 1H FY2017. He also again warned that the BOJ would not hesitate to add further easing measures if needed.  He also asserted that negative interest rate is exerting its intended effects on the market. Trade data just released showed exports contracting by 6.8% y/y in Mar vs. estimates of -7%, while imports fell less than expected by 14.9% (vs. cons.: -16.6%). This resulted in the largest trade surplus since of JPY755bn in Mar vs. Feb’s JPY242.2bn and cons.: JPY834.6bn.

      NZDUSD – Remains Confined within the Trend Channel. NZD touched the top of the upward sloping trend channel with its overnight high of 0.7054 before pulling back, still nicely within the trend channel and was last seen at 0.7020. With momentum indicators showing increasing bullish steam, this pair may break out of our upward sloping trend channel. Beyond that, next barrier is seen at 0.7126 (61.8% fib retracement of the Apr-Aug fall). 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. AUD retained its bullish steam as we expected but prices seem to be correcting  from its overnight highs. Last seen around 0.7790, this pair still has bullish momentum and next barrier is seen at 0.7850. Support is still at 0.7720 before the next at 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. Overnight RBA Governor highlighted in a speech at New York that ignoring asset-price moves is dangerous and the fact that monetary policy alone is not enough to spur growth. 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 slipped on the back of oil gains and broad dollar weakness before making a strong reversal and was last seen around 1.2690. Downtrend is strong in this one and momentum indicators also tilt south. Next support at the 1.2660 (5 Jun 2015 high), 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 0.34 above the implied mid-point of 1.3446 with the top end estimated at 1.3178 and the floor at 1.3714.

      USDSGD – Limited Downside.  USDSGD slipped lower breaking past 1.3415 overnight to touch a new low year-to-date of 1.3352 following the unwinding of long positions amid weak US housing data. Pair has surrendered all the gains that had followed the MAS neutral policy announcement. Pair is rebounding slightly, possibly from position adjustments after the overnight moves amid a mildly firmer dollar this morning. Last seen around the 1.3390-levels, pair has lost most of its bullish momentum and stochastics is now bearish bias. With risks tilting to the downside, further upticks could be capped. Look for barrier around 1.3535-levels (21DMA). New support is at 1.3450-levels before the next around the 1.32-figure (61.8% Fibo retracement of 2014 low to 2016 high).

      AUDSGD – Grinds. This cross ground lower as SGD bulls won the tug of war with AUD bulls (in a rare instance) and was last seen around 1.0440 this morning. 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 – Gapped Lower. Pair gapped lower at the opening this morning to 2.8751 from yesterday’s close of 2.8799. Relative MYR strength amid overnight dollar weakness and firmer global oil prices is pressuring the cross lower. Cross was last seen around 2.88-levels. Daily momentum and stochastics are mildly bullish bias. Further downside should find support the year’s low-to-date around 2.85-figure. Resistance at 2.8980-levels (21 DMA) ahead of 2.9040 (23.6% Fibo retracement of the Jan high to Apr low).

      USDMYR – Gapped Lower On Firmer Oil And Lower Concerns Of 1MBD Default. USDMYR gapped lower at the opening this morning to 3.8605 from yesterday’s close of 3.8755 amid firmer global oil prices and dollar softness overnight. Jitters over the possibility of a default on payment of interest on 1MDB bonds were allayed by the President of 1MDB who asserted that the state investment fund had ample liquidity to pay the USD50mn of interest due on Mon (there is a grace period of five-days for making it) and had a surplus 11 times that amount should it need to make payment. Negotiations with Abu Dhabi’s sovereign wealth fund, IPIC, are ongoing and 1MBD hopes an amicable solution can be found. The comments by the President of 1MDB has calmed markets for now and there could be a few weeks of leeway for interest payments, but further uncertainty could potentially see mild volatility on the MYR and domestic bond markets. Pair was last seen around the 38580-levels. Momentum remains to the upside with stochastics showing mild bullish bias. Further downside should find support around 3.8442 levels (2016 lows) before 3.7610 (76.4% Fibo of May-Sep 2015 upswing) and 3.54 (May 2015 lows). Any rebound should meet resistance around 3.9270-levels (21 DMA) is being tested before the next at 4.00.

      USDCNH – Watch the 6.45-6.54 Range. Pair bounced this morning and was last seen around 6.4720, 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. USDCNY was fixed 121 pips lower at 6.4579 (vs. previous 6.4700). CNYMYR was fixed 52 pips lower at 0.5969 (vs. previous 0.6021). RMB index continued to make fresh lows with the latest fixing, estimated by us at 97.51. 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. Economic Daily News cited PBOC Ma Jun saying that monetary policy operations should take into consideration macro risks in the future.

      1s USDINR NDF – Back from Holiday, 200-DMA support Eyed. 1M NDF slipped yesterday and was last seen around 66.60. The 200-DMA at 66.53 had been tested in the absence of onshore market but this pair continues to remain close to it. 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. In news, RBI had rejected the Trade Ministry’s pitch for weaker rupee.

      USDIDR – Bearish Bias. USDIDR continued to slip lower this morning, playing catch-up with its regional peers amid dollar softness and firmer global oil prices overnight. Last seen around 13130-levels, is showing signs of turning lower. Support remains around the 13000-handle. Resistance is around 13200(21DMA) ahead of 13250 (50DMA). Support is seen around the 1300-handle. The JISDOR was fixed lower yesterday at 13150 from Mon’s 13204. Positive risk sentiments yesterday saw foreign funds purchasing a net USD11.63mn in equities. They had also added a net USD2.66mn to their outstanding holding of debt on 15 Apr (latest data available). Week ahead has just BI meeting tomorrow 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. In the news, the government is planning to announced its 12^th policy package after President Jokowi’s visit to the EU on 17-23 Apr. No details about the package were released.

      USDPHP – Limited Downside.  USDPHP is edging lower this morning, tracking the USDAsians broadly lower. Last seen at 46.090 levels, near-term risks are to the upside given bullish momentum on both the MACD and stochastics. The 50-DMA has crossed the 200-DMA lower and we see more risks to the downside in the medium-term. Support remains around the year’s low of 45.900. Barrier is seen around 46.180 (21DMA) ahead of 46.410 (23.6% Fibo retracement of the Jan-Mar downswing). Risk appetite waned yesterday with foreign investors selling a net USD15.30mn of equities on yesterday.

Rates

Malaysia

      Government bonds mostly softened in price, amid thin trading liquidity, as market cheapened the curve ahead of the next auction, which is a reopening of the 7y MGS 8/23. We expect a size of MYR3.5b for the auction. Trades centered on the 7y MGII 7/23 again with a total of MYR680m trades done.

      In MYR IRS market, risk-on sentiment drove away payers and receivers dominated. The 5y IRS was dealt at 3.71%, 2bps lower than previous close. 3M KLIBOR stayed at 3.70%.

      PDS market was fairly quiet as bids remained wide. Dana 24s widened 2bps to 4.20% (G+40bps/ Z+21bps), while JKSB 25s widened 1bp to 4.28% (G+39bps/Z+24bps). AAA space saw Telekom 24s and KLCC 24s trading 1bp wider. Investors’ focus was in the AA space, as long end JEPs traded 8-9bps tighter and YTL Power tightened 1bp further to 4.23% (G+90bps/ Z+60bps). The space was feeling better bid as investors sought higher yields on improved risk sentiment.  

Singapore

      With the recovery in risk sentiment overnight, SGS prices were down at the open, but dip buyers pushed prices back to previous levels. The continued decline in USDSGD pushed funding lower, keeping SGS yields supported. Investors shifted interest to the short end as MAS 1m and 3m bill auctions saw very low cutoffs and SGS yields lowered by as much as 5bps at the front end of the curve, while the 30y benchmark yield rose 2bps. SGD IRS also bull steepened in the same manner with the front end 1-2bps lower.

      In Asian credit market, Malaysian papers continued to underperform with TIAMK 22s down 3-4points and MALAY CDS widened. Meanwhile, INDON cash bonds had good buying interest, with INDON 26 at 107.8, INDON 46 at 113.2 and INDOI 26 at 103. Most papers added +60cts to 1point higher.

 Indonesia

      Indonesia bond market closed positive with the 2y yield decline the most despite the long end price hike was relatively minimal. Indonesian government conducted their Sukuk auctions yesterday and received incoming bids of Rp15.31 tn bids versus its target issuance of Rp4.00 tn or oversubscribed by 3.8x. However, DMO only awarded Rp6.19 tn bids for its 5mo, 2y, 5y, 7y and 16y bonds. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.189%, 7.389%, 7.641% and 7.689% while 2y yield shifts down to 7.100%. Trading volume at secondary market was seen moderate at government segments amounting Rp13,454 bn with FR0056 as the most tradable bond. FR0056 total trading volume amounting Rp2,881 bn with 73x transaction frequency and closed at 107.062 yielding 7.389%.

      Corporate bond trading traded heavy amounting Rp760 bn. BTPN02ACN1 (Shelf registration II Bank BTPN Phase I Year 2013; A serial bond; Rating: AAA(idn)) was the top actively traded corporate bond with total trading volume amounted Rp280 bn yielding 8.721%.