Maybank GM Daily - 21 Apr 2016

FX

Global

      Dollar made a recovery overnight on better housing data. Existing home sales for Mar came in better than expected at 5.33m vs. previous at 5.07m, beating the average forecast of 5.28m. NZD, CHF and JPY took the brunt of the dollar gains and other commodity-linked currencies were remarkably resilient, CAD, AUD and to a lesser extent GBP, lifted by the overnight crude rally. Oil bulls charged on the back of news of a potential oil producers meeting in May. Also, US oil production declined by 24,000bbls a day to 3.95mn, the lowest level since Oct 2014.

      The dollar upmove overnight saw MYR playing “catch up” though weakness was limited by oil gains. SGD was also dragged a tad lower. Early trades reveal a rather mixed bag for USDAXJs and risk sentiments seem to be a cautious ahead of two central bank meetings. Bank Indonesia decides on its policy rate today. This will be the first time that the central bank will announce the 7-day repo rate which will be used as the policy target rate from 19 Aug onwards. Before then, the policy reference rate is still the base rate and we are not looking for a move by the central bank. Expect the 7-day repo rate to remain at 5.5%, as indicated by the last auction.

      ECB meets as well and we too do not expect a move by Draghi. Other data include CFNAI, Philly Fed, FHFA house price out of the US. UK has retail sales. Other than the BI meeting, the event calendar is rather quiet in Asia.

Currencies

G7 Currencies

      DXY – A Technical Rebound Is Needed. The DXY index rebounded as markets found better existing house as a good excuse to buy the greenback. The 94-figure is a tough support to crack and remains to be for the near-term. While we are looking for further downside, the time is overdue for a technical rebound in order for bears to gain more mileage. Barrier is seen at 94.90 (21 DMA), before 96 (50 DMA). Support at 94 levels before 92.50.  Week ahead brings CFNAI (Mar); Philly Fed (Apr); FHFA House Price (Feb) on Thu; PMI Mfg (Apr P) on Fri.

      EURUSD – Tracking the 21DMA. EUR was still unable to flee far from the 21-DMA, last seen around 1.1300. The downside risks flagged by momentum indicators have unfolded 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 slipped a tad overnight, weighed by the dollar strength and just pulling back from the 100-DMA (1.4436). The GBPUSD just printed 1.4325. Daily momentum and stochastics indicators continue to point north. 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). The main underpinning of our call is still Brexit concerns which should continue to weigh on the currency until referendum takes place on 23 Jun. Week ahead brings retail Sales, public finances (Mar) on Thu.

      USDJPY – Limited Downside. USDJPY is retracing slightly this morning after touching a high of around 109.88 earlier amid a firmer dollar. However downside could be limited given that the Nikkei futures have advanced in line with the gains in US equities that could put upside pressure on the pair. As well, we are seeing a sell-off in most of the majors against the JPY this morning. Last seen around 109.80-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. The downmoves this morning could be limited and could find support around 108.60 (15 Apr low). Resistance remains around 110.40 (61.8% Fibo retracement of the 2014 low to 2015 high; 21DMA).  Remaining week has PMI Mfg (Apr F) on Fri.

      NZDUSD – Remains Confined within the Trend Channel. NZD edged lower and was last seen around 0.6970 as we write. The upward sloping trend channel still holds. With momentum indicators showing increasing bullish steam, this pair may stick in the upper half of the trend channel, marked by the 21-DMA (0.6864) and 0.7070 (upper bound of the 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 inched lower and was hovering around the 0.78-figure at last sight. 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. The RBA was seen as dovish after the recent speech by Stevens. Week ahead brings NAB Business Confidence (1Q) on Thu; RBA FX Transactions (Mar) on Fri.

      USDCAD - Downtrend. CAD was the outperformer yesterday and was last seen around the 1.2650. Focus is clearly on oil rather than the dollar, Downtrend is strong in this one and momentum indicators also tilt south. Support at the 1.2660 (5 Jun 2015 high) has been broken and the next is seen at 1.2574. 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 0.27 above the implied mid-point of 1.3502. We estimate the top end at 1.3232 and the floor at 1.3771.

      USDSGD – Capped By 21-DMA.  USDSGD is back on the uptick this morning on the back of a resurgent dollar but remained below the 1.35-handle. Last seen around 1.3475 levels, pair is showing waning bullish momentum and stochastics is tentatively turning lower. Further upside this morning should be capped by the 21-DMA at 1.3530 as the pair has been for the past two sessions. Support around the 1.34-handle (50% Fibo retracement of 2014 low to 2016 high).

      AUDSGD – Grinds. This cross ticked higher on the back of SGD bears and a rather resilient AUD. Last priced at 1.0500, next resistance is still seen at 1.0510 (23.6% Fibonacci retracement of 1.18-double top in 2014 to double bottom formed at 0.97 levels). Bullish target is seen at 1.0760 (50% fibo). We still hold on to our 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 – Mild Bullish Tilt. SGDMYR is inching higher this morning on the back of the relative weakness in the MYR, even as oil prices stayed firm. Cross was last seen around 2.8920-levels. Daily momentum and stochastics are still mildly bullish bias. Immediate resistance is seen around 2.8965 (21DMA) before the next around 2.9040 (23.6% Fibo retracement of the Jan high to Apr low). Any slippages should find support around 2.8670 (15 Apr low) ahead of the year’s low at 2.85-handle.

      USDMYR – Mild Bullish Tilt Constrained By Firmer Oil Prices. USDMYR is bouncing higher this morning, playing catch-up with its regional peers. Downside though could be limited given the firmer oil prices overnight. Brent and WIT both rose by 4.0% to USD45.80/bbl and USD44.18/bbl respectively overnight. Pair was last seen around the 3.8920-levels with momentum and stochastics both still mildly to the upside. Immediate resistance is seen around 3.8990 (61.8% Fibo of May-Sep 2015 upswing) before the next at 3.9225 (21DMA). Any retracement should find support around the year’s low of 3.8442 levels (2016 lows) before 3.7610 (76.4% Fibo). Any rebound should meet resistance around 3.9270-levels (21 DMA) is being tested before the next at 4.00. Headline inflation rate eased to 2.6% y/y in Mar vs. Feb’s 4.2% with the main drag on prices from lower transport cost. Core inflation remained steady at 3.6% y/y, reflecting sustained prices increases in other goods and services. Year-to-date, headline inflation averaged 3.4% y/y while core inflation was at 3.6%. Our economic team maintains its 2016 headline inflation forecast at 3.0-3.5% for 2016.

      1s USDKRW NDF – Edging Higher. 1s NDF bounced higher this morning amid a firmer dollar and global oil prices overnight. BoK had held rate steady at 1.5% as expected on Tue, but cut its outlook for the domestic economy to 2.8% from 3% previously and inflation to 1.2% from 1.4%. The downgrade in both growth and inflation outlook leaves more room for the BOK to possibly cut borrowing cost further. Last seen around 1137.65, the NDF has lost most of its bullish momentum and stochastics is still bearish bias. Resistance at 1151 (21 DMA). Support is around 1125 (19 Apr low).

      USDCNH – Watch the 6.45-6.54 Range. Pair bounced this morning and was last seen around 6.4864, still capped by the 50-DMA at 6.5055. Upside momentum seems to be waning. Barrier is now seen at 6.5014 (50-DMA), ahead of the next at 6.5379. We continue to observe that PBOC uses the DXY index and the RMB index to guide the USDCNY. USDCNY was fixed 224 pips lower at 6.4803 (vs. previous 6.4579). CNYMYR was fixed 4 pips lower at 0.5965 (vs. previous 0.5969). RMB index continued to make fresh lows with the latest fixing, estimated by us at 97.34. 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.

      1s USDINR NDF –200-DMA support Eyed. 1M NDF slipped yesterday and was last seen around 66.60. The 200-DMA at 66.53 has been broken but could remain a line of pivot in the absence of stronger market cues. Immediate barrier at 67.175 before the next at 67.50 (100-DMA). The next support is seen at 65.98 (76.4% Fibonacci retracement of the Oct-Mar rally). Foreign investors bought U$156.1mn of equities and U$227.3mn of bonds on Apr 18th.

      USDIDR – Gapped Higher. USDIDR gapped higher this morning at the opening to 13180 from yesterday’s close of 13144 as the pair plays catch-up with its regional peers. Firmer oil prices overnight could help cap further upmoves in the pair. Last seen around 13184, pair is showing mild bullish momentum and stochastics is bullish bias. Upside capped around 13200 (21DMA) before 13245 (50DMA). Support remains around the 13000-handle. The JISDOR was fixed lower again yesterday at 13133 from Tue’s 13150. Positive risk sentiments continued with foreign funds purchasing a net USD14.82mn in equities. They had however removed a net USD1.15mn from their outstanding holding of debt on 18-19 Apr (latest data available). BI policy decision is due later this afternoon 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 – Sell Into Rallies.  USDPHP gapped up this morning, on the back of the strong USD. Last seen at 46.37, this pair is at the brink of breaking out of the recent range of 45.90-46.40, to the upside. Momentum on both the MACD and stochastics are bullish. Barrier is seen at 46.410 (23.6% Fibo retracement of the Jan-Mar downswing) before the 50-DMA at 46.70. The 50-DMA has crossed the 200-DMA lower and we see more risks to the downside in the medium-term. Hence this recent upmove  could be one to sell into. Support is seen at year low of 45.900. Risk appetite waned yesterday with foreign investors selling a net USD15.30mn of equities on yesterday.

Rates

Malaysia

      Government bonds traded mixed, with strong foreign buying seen on the 7y benchmarks MGS 8/23 and MGII 7/23 which ended -3bps and -1bp respectively. This was despite being ahead of the upcoming re-tap auction on MGS 8/23. Large flows also went through on front end MGS 17s and 18s as foreign parties added ASW trades. On economic data, Mar CPI came in lower than expected at 2.6% YoY compared to a consensus of 3.5%.

      MYR IRS rates fell 2-4bps under pressure from the lower Mar CPI figure, with foreigners leading the strong receiving interest. Trades that went through include the 2y at 3.58/57%, 3y at 3.61/60%, 5y at 3.69% and 7y at 3.83%. 3M KLIBOR still flat at 3.70%.

      In local PDS market, short-dated Cagamas papers were actively traded, possibly on foreign flows who are familiar with the credit as the company has foreign currency issuances. Cagamas papers traded +2bps to -9bps. GG and AAA spaces were muted, though GGs saw some bidding interest following the weaker than surveyed Mar CPI number. PASB 2/23 traded 1bp tighter at 4.11% (G+45bps/Z+25bps), while PASB 2/26 traded unchanged at 4.33% (G+40bps/Z+29bps). The AA space was also muted with mostly crosses.

Singapore

      Activity in the SGS market remains subdued and market is largely directionless. SGS was slightly constructive early in the day but turned neutral as the declining momentum in USDSGD dissipated. SGS yields largely remained flat and so did SGD IRS. We expect front end bonds to remain supported, while the long end is susceptible to profit taking.

      Asian credits saw a correction as players lightened positions. Credit spreads widened 2-3bps, with China names seeing slightly more widening as the spike in China onshore rates slowed down local buying of offshore debt. In EM sovereign cash space, INDON and INDOI were better bid but prices were down by 30-60cts. PHILIP space was quiet and prices stayed flat. Malaysia opened books yesterday for 10y and 30y USD bonds. Order book amounted to over USD5b, with interest skewed to the 30y bonds and final price guidance came in at T10+135-140bps and T30+145-150bps.

 Indonesia

      Indonesia bond market closed with IGS closed slightly higher. DMO conducted debt switch yesterday which received bids worth of Rp1.83 tn however, DMO only awarded Rp0.47 tn. Government official in the media stated that the 12th economy policy package would be released once the President landed back after a 5 days state visit to EU. It would quite an interesting and positive result if the President manages bringing back several FDI’s post his EU visit. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.171%, 7.371%, 7.640% and 7.678% while 2y yield was noted to be unchanged at 7.100%. Trading volume at secondary market was seen heavy at government segments amounting Rp15,189 bn with FR0053 as the most tradable bond. FR0053 total trading volume amounting Rp2,868 bn with 26x transaction frequency and closed at 104.625 yielding 7.171%.

      Corporate bond trading traded heavy amounting Rp769 bn. FIFA02BCN3 (Shelf registration II Federal Internasional Finance Phase III Year 2016; B serial bond; Rating: idAAA) was the top actively traded corporate bond with total trading volume amounted Rp300 bn yielding 9.129%.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%.