Maybank GM Daily - 26 Apr 2016

FX

Global

      Dollar started the week softer as market players took profit after the lift from USDJPY, ahead of FOMC meeting. The broad-based dollar retreat extended in early Asian trades today with NZD as the outperformer as crude prices remained supported on dips. Even as oil held above the USD40-level, risk sentiment was cautious. Data released yesterday did not affirm the recent optimism. US new home sales missed expectations while the German IFO business climate, current assessment and expectations for Apr were lower than the average forecasts as well. JPY strengthened towards the 111-figure, against the USD.  US stocks also closed in mild red ahead of the Fed meeting this week.

      Australia and NZ have returned from ANZAC day. Data calendar for Asia gets a bit busier with the release of South Korea’s 1Q GDP this morning. The print of 2.7% matched expectations. Next up is Singapore’s industrial production before Philippines’ Feb trade numbers. Beyond Asia, US has Mar durable goods order due along with Apr Services PMI.

      We hold our call for a technical rebound for USD against most AXJs, in particular SGD, MYR, KRW, THB. We also expect USD to trade firmer against most G7s including EUR, AUD, NZD in the lead-up to FOMC meeting (28 Apr).

Currencies

G7 Currencies

      DXY – Focus this Week on FOMC (Thu). Modest USD weakness overnight amid declines in oil prices and equities. Focus this week on FOMC meeting (Thu 2m SG/KL time). While the Fed is not expected to hike interest rate at this meeting, focus will be on the language and tone of the accompanying statement. We think there is a possibility that the upcoming meeting could potentially be similar to the FOMC meeting in Oct which was then interpreted as slightly more hawkish than expected and in Sep and eventually paved the way for a 25bps rate hike in Dec. For the upcoming meeting, we expect the language of the statement to be more balanced with more acknowledgement of improvement and expansion of activities in the economy. The recent release of the Fed’s Beige Book has already noted increase of consumer spending, increased manufacturing activity, improvement in credit conditions and modest rise in prices and input cost pressures. This should keep the USD supported while month-end USD/AXJ sell flows may also cap the USD strength to some extent. We continue to hold to our long-held view of 2 hikes in 2016 – one in Jun and another hike in Dec. DXY was last seen at 94.70 levels.  Daily momentum and stochastics are indicating a mild bullish bias. Next resistance at 95.50 (38.2% Fibo retracement of Mar high to Apr low), before 96 levels (50% Fibo). Support at 94.80 (23.6% Fibo). Week ahead brings Durable Goods Orders (Mar P), Markit US Services PMI (Apr P), Consumer Confidence Index (Apr) on Tue; Pending Home Sales (Mar), FOMC Rate Decision (Apr 27) on Wed; GDP, Personal Consumption, Core PCE (1Q) on Thu; Fed's Kaplan Speaks, Personal Income, Real Personal Spending (Mar), PCE Core (Mar), U. of Mich. Sentiment (Apr F) on Fri.

      EURUSD – 1.1220 – 1.1320 Range Expected. EUR rebounded amid USD weakness. Little action overnight with focus on FOMC and BoJ meetings on Thu. German Finance Minister Schaeuble said Greece review “will succeed” in the end, following his earlier comments that no Greece debt relief as long as debt is sustainable. EUR was last seen at 1.12700 levels. Daily momentum is mild bearish bias while stochastics is showing early signs of rising from near-oversold conditions. Support at 1.1220 (38.2% Fibo retracement of Mar low to Apr high), 1.1150 (50% Fibo). Firmer support at 1.1070 (61.8% Fibo, 100 and 200 DMAs). Resistance at 1.1315 (23.6% Fibo). Week ahead brings GE GfK Consumer Confidence (May), FR Consumer Confidence (Apr) on Wed; EC Economic Confidence (Apr), GE CPI (Apr P) on Thu; FR GDP (1Q A), EC CPI Estimate, GDP (1Q A) on Fri.

      GBPUSD – Watch 1.4470 Resistance. GBP continues to prod higher amid USD weakness and helped by “Obama intervention on Brexit” on his recent trip to London as markets reduced Brexit bets. The Pound has traded 1.40 – 2.00 range for the past 25 years with occasional spikes below and above those ranges. From a strategic/ medium-term perspective, GBP is a buy on dips near or below 1.40 especially in the event the referendum results point to “Remain in UK”. Our preliminary fair value estimates based on interest rate differentials adjusted for inflation, current account differentials and reflation puts GBP at 1.58 levels. GBP was last seen at 1.4490 levels. Daily momentum and stochastics indicators continue to indicate a bullish bias. Resistance is seen at next at 1.4470 (76.4% Fibo retracement of Feb high to Mar low). A close above on daily/weekly basis may expose the pair towards 1.4670 levels (2016 high). Support remains at 1.4350 (61.8% Fibo), 1.4250 (50% Fibo).  Short-term may see downside risks on GBP amid possible USD strength in the lead-up to FOMC meeting mid-week.  Week ahead brings GDP (1Q A) on Wed; Nationwide House (Apr) on Thu; GfK Consumer Confidence (Apr), Mortgage Approvals (Mar) on Fri.

      USDJPY – BOJ In Focus. USDJPY continued its swing lower as caution rein ahead of the FOMC and BOJ meetings later this week. Demand for haven assets are also in play amid softer global oil prices. As well, Nikkei futures remains in the red, signalling potential for further downside risks to the pair and the majors were mostly sold off against the JPY this morning. Consensus is expecting the BOJ to add to its easing measures but we think that the BOJ will stand pat on policy for now. They are likely to take this opportunity to evaluate the impact of negative interest rates on the economy, while remaining mindful of the Upper House election in early summer. Last seen around 111.05-levels. Daily momentum and stochastics are now bullish bias. Monthly and weekly momentum indicators though are still bearish bias. Bullish risk remain but for now is capped by 50-DMA at 111.80 levels. A clean break on a daily basis here could see the pair headed towards 113.30-levels. (50% Fibo retracement of the 2014 low to 2015 high). Support at 110.40 (61.8% Fibo; 21DMA). Onshore markets are closed for a holiday on Fri and remaining week has CPI (Mar), retail sales (Mar), industrial production (Mar), BOJ Policy Decision on Thu. BOJ governor Kuroda appears in parliament later this afternoon.

      NZDUSD – RBNZ the Focus this Week. NZD rebounded amid broad USD weakness. Focus this week on RBNZ (Thu 5am SG/Kl time). Implied probability from OIS for a rate cut is now higher at 45% (vs. 33% a week ago) but a touch lower than yesterday (47%). We expect the RBNZ to keep OCR unchanged at 2.25%, following the 25bps cut last month. Rebound in 1Q CPI gives RBNZ some breathing room. That said we expect RBNZ to remain dovish and reiterates that NZD remains too strong and easing bias remains. NZD was last at 0.6870. Daily momentum and stochastics are showing a mild bearish bias. Next support at 0.6750 (lower bound of the upward sloping trend channel and 38.2% Fibo retracement of 2015 high to low). Resistance at 0.6935 (50% Fibo). Week ahead brings Mar trade (Wed); RBNZ meets on decision (Thu); Mar building permits and business confidence (Fri).

      AUDUSD – Bears Lack Conviction. The daily chart has turned less bearish on the AUD and overall, there is a lack of conviction on either side for this pair. Last seen around 0.7720, AUD had inched higher as market players sold the USD ahead of the FOMC meeting. However, the rebound in AUD was rather muted and we think bears probably still have legs. The 4-hourly chart seems to be pointing north and we see potential retracement towards the 0.7770-level within the day. Thereafter, bears could re-assert towards the 21-DMA at 0.7668 before the next at the 50-DMA at 0.7500. Resistance is seen at 0.7835 (previous high). In news, Treasurer Scott Morrison said that the upcoming budget on 3 May is an economic plan for growth and jobs. Week ahead is quieter in terms of data with only the release of the ANZ Roy Morgan Weekly Consumer Confidence Index (Apr 24), CPI (1Q) on Thu; RBA Debelle Gives Speech on Fri.

      USDCAD - Consolidate. The short-term bottom around 1.26 levels held overnight and should continue to remain intact. Last seen at 1.2670, daily momentum and stochastics are not indicating a clear bias. We continue to see the pair consolidate within 1.26 – 1.29 (21 DMA).  Week ahead brings IP, GDP data on Fri.

     Asia ex Japan Currencies

      AUDSGD – Overbought Conditions. AUDSGD steadied around the 1.0430 as we write this morning. Weekly, daily stochastics are at overbought conditions and bullish momentum on daily chart continues to wane. In addition, bearish divergence suggests further pullback towards 1.0350 levels (21 DMA). Resistance at 1.0520 (previous high). 

       SGDMYR – Mild Upside Risks. SGDMYR was little changed from yesterday levels. Cross was last seen around 2.8870 levels. Daily momentum and stochastics are mild bullish bias. Resistance at 2.9165 (23.6% Fibo retracement of 2015 high to 2016 low), before 2.95 (38.2% Fibo). Support remains at 2.85 (2016 low).

       USDMYR – Upside Pressures. USDMYR traded higher amid broad USD strength. Pair was last at 3.9150 levels. Daily momentum and stochastics are bullish bias. Resistance at 3.95 before 3.9850 (23.6% Fibo retracement of 2016 high to low). Support at 3.8440 (2016 low). No key data for release this week.

       1s USDKRW NDF – Mild Bullish Bias. 1Q GDP (released this morning) was in line with estimates at +0.4% q/q and 2.7% y/y. 1s NDF largely ignored the GDP data; last at 1150 levels. Daily momentum and stochastics indicators are exhibiting mild bullish signals. Resistance at 1153.70 levels (23.6% Fibo retracement of Mar high to Apr low) before 1171 levels (38.2% Fibo). Support at 1140 levels. Week ahead brings Business Survey; IP on Fri.

       USDCNH – Watch the 6.45-6.54 Range. USDCNH bumped into resistance around 6.5150 and hovered around 6.5030, sticky around the 50-DMA at 6.5014. Momentum remains on the upside. Barrier is now seen at 6.5400 (100DMA). Support is at 6.4845 (21DMA) ahead of the next at 6.4575 (200DMA). We continue to observe that PBOC uses the DXY index and the RMB index to guide the USDCNY. USDCNY was fixed 238 pips lower at 6.4882 (vs. previous 6.5120). CNYMYR was fixed 20 pips higher at 0.5994 (vs. previous 0.5974). 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.

       SGDCNY – Further Pullback Likely. SGDCNY closed at 4.8049 on Mon and momentum indicators suggest further pullback ahead. Support is first seen at 21-DMA at 4.7920 before 4.7513 (23.6% Fibo retracement of the Nov-Apr rally). Next support is seen at 50-DMA at 4.7389. Resistance at recent high of 4.8408.

       1s USDINR NDF – Risks to the Upside. USDIDR was hardly changed yesterday and was last seen around 67.06. Bias is to the upside with first resistance seen at 67.175 (50% Fibo retracement of the Oct-Feb rally). Daily momentum and stochastics are showing mild bullish bias but this pair has proven to be sticky around the 200-DMA at 66.70 and could remain a line of pivot in the absence of stronger market cues. We eye the FOMC meeting this week. Next barrier at 67.50 (100-DMA). The 50-DMA has crossed the 100-DMA from above and we could see more risks to the downside in the medium-term. Foreign investors bought U$29.3mn of equities and sold U$176.1mn of boodns on the 22 Apr.

       USDIDR – Mild Bullish Bias. USDIDR continued its climb higher, tracking its regional peers higher. Portfolio inflows into Indonesian assets though are likely to cap upside. Positive risk sentiments yesterday led foreign funds to purchase a net USD8.96mn in equities yesterday. They had also added a net IDR2.01tn to their outstanding holding of government debt on 21 Apr (latest data available). These have inflows have helped to keep the IDR supported. The 50DMA should continue to cap the pair’s upmove as it has since end-Mar. Last seen around 13210 levels, pair is showing increasing bullish momentum and stochastics is turning higher. Immediate resistance is at 13225 levels (23.6% Fibo retracement of the Jan-Mar downswing); 50DMA) before the next at  13373 (38.2% Fibo). Support nearby is at 13190 (21DMA) ahead of the 13000-handle. The JISDOR was fixed higher at 13235 yesterday from Fri’s 13169. No data of importance due this week. In the news, BI governor Agus Martowardojo expects IDR560tn of funds to be repatriated should the tax amnesty bill be passed by parliament. He also recommended that a heavy tax penalty be imposed for those who do not seek amnesty with the amnesty period. He further highlighted that this tax amnesty can help to deepen local financial markets as demand for bonds and money market instruments are likely to rise as offshore funds come onshore.

       USDPHP – Limited Downside.  After gapping higher for the past three sessions, USDPHP is seeing some relief this morning as possible profit-taking is in play. Still, uncertainty regarding the economic positions of the front-runner – Davao Mayor Rodrigo Duterte - could weigh on foreign investors’ decision and on the PHP as well. Pair was last seen around 36.815. Daily momentum is bullish bias and stochastics is fast approaching overbought conditions. This suggests further downside could be limited. Look for support around 46.730 (38.2% Fibo retracement of the Jan high to Mar low). Immediate resistance is seen around 46.985-levels (50% Fibo ). The 50-DMA has crossed the 200-DMA lower and further downside risks are possible in the medium-term. Positive risk appetite saw foreign investors buying a net USD0.28mn of equities yesterday. Imports and trade balance (Feb) are on tap later today.

       USDTHB – Bullish Tilt.  USDTHB is edging higher this morning but remains in consolidative mode within a wide range of 34.720-35.370. Upside pressure is likely to continue as foreign funds sell-off Thai assets ahead of FOMC and BOJ this Thu. Yesterday, foreign funds had sold off a net THB3.57mn and THB691.78mn in equities and government debt. Pair was last seen around 35.100-levels. Daily momentum is mildly bullish and stochastics continue to climb from oversold levels. Barrier is at 35.250 (50DMA) before the next at 35.370 (38.2% Fibo retracement of the Jan high to Mar low). Support is around 35-handle before 34.810 (19 Apr low); 34.720 (2016 low). Remaining week ahead has foreign reserves (22 Apr), trade (Mar), current account balance (Mar) on Fri. Exports continued to rise, up 1.30% y/y in Mar vs. Feb’s 10.27%; YTD 0.90%. Gold exports rose 262.50% as higher prices encouraged speculation. Excluding gold and oil, exports expanded by 1.40%, the 5th month of improvement. Imports fell by a milder 6.94% y/y in Mar compared to -16.82% in Feb. Taken together, this resulted in a trade surplus of USD2.97b in Mar from USD4.99b in Feb.

Rates

Malaysia

      Lackluster day for MGS. Govvies were overall defensive with wide bid/offer spreads seen as market awaited the announcement of the new BNM governor and the impending US FOMC meeting this week. Players also await the 7y MGS 8/23 re-tap auction which we expect a size of MYR3.5b.

      IRS only edged up slightly by 1-2bps, despite regional rates moving higher, as onshore parties’ interest to receive returned in the afternoon. The 5y traded at 3.73%. 3M KLIBOR stayed at 3.70%.

      PDS remain muted partly due to the upcoming US FOMC meeting. AAA space saw offers but bids were few, except for Plus which felt better bid with the 22s taken at 4.18% (G+59bps/ Z+35bps), while other Plus papers traded unchanged. Danga 20s tightened 2bps to 4.05% (G+57bps/Z+36bps). GG space saw some belly and long end papers being dealt at levels flat to MTM. AAs traded range bound on YTL Power, MMC and Gamuda. Liquidity in the market is still low and we suggest to selectively pick laggards that have good credit.

Singapore

      SGS market was very quiet due to the lack of catalysts ahead of the 7y reopening. Low trading volume and only the 30y benchmark yield moved up 1bp from previous close as the others stayed flat. SGD IRS rose 3-4bps from the belly onwards.

      Asian credits were slightly defensive. JD.com’s new issue, which was tightly priced, widened with the 5y worse by 11bps and the 10y by 15bps which suggests weak holders and no new buyers. EM cash bonds also moved lower by 25–40cts, while CDS widened. New MAYMK bucked the trend as it tightened 2bps at one point, but ended at CT5+256/252bps, right in between re-offer of +255bps.

 Indonesia

      Indonesia bond market closed lower during the first day of the week. Aside from lack of positive sentiment, the conventional auction which will be conducted today may have pause the IGS purchase by bond investor yesterday as they whom seek for a bulk size would demand it from the auction today. The chance for the tax amnesty bill to be passed by legislative seems potential. This would be positive for the IGS market in the future. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.314%, 7.610%, 7.833% and 7.830% while 2y yield shifts down to 6.965%. Trading volume at secondary market was seen thin at government segments amounting Rp8,617 bn with FR0056 as the most tradable bond. FR0056 total trading volume amounting Rp1,846 bn with 68x transaction frequency and closed at 105.412 yielding 7.610%.

      DMO will conduct their weekly auction with five series to be auctioned which are SPN12170106 (Coupon: discounted; Maturity: 6 Jan 2017), FR0053 (Coupon: 8.250%; Maturity: 15 Jul 2021), FR0056 (Coupon: 8.375%; Maturity: 15 Sep 2026), FR0072 (Coupon: 8.250%; Maturity: 15 May 2036) and FR0067 (Coupon: 8.750%; Maturity: 15 Feb 2044). We believe that the auction will be oversubscribe by 1.50x – 2.50x from its indicative target issuance while our view on the indicative yield are as follows SPN12170106 (range: 6.35% – 6.55%), FR0053 (range: 7.35% – 7.45%), FR0056 (range: 7.60% – 7.70%), FR0073 (range: 7.80% – 7.90%) and FR0073 (range: 8.20% – 8.30%).

      Corporate bond trading traded thin amounting Rp176 bn. BEXI02ACN7 (Shelf registration II Indonesia Eximbank Phase VII Year 2016; A serial bond; Rating: idAAA) was the top actively traded corporate bond with total trading volume amounted Rp40 bn yielding 7.728%.