Maybank GM Daily - 29 Apr 2016

FX

Global

      While Fed’s inaction did not move the dollar, the same cannot be said for the JPY. The latter jumped >3% after BOJ retained its policy mix and USDJPY was last seen around 108.  US data was mixed. 1Q GDP missed consensus with a print of 0.5%q/q though breakdowns revealed stronger underlying. Personal consumption grew 1.9%q/q while core PCE jumped to 2.1%q/q, well above the average forecast of 2.1%. Still, overnight sentiments soured with DJI, S&P 500, NASDAQ down around 1% each. That pretty much sets the tone for Asia open.

      While the DXY index was dragged lower by the JPY strength, Asian currencies were well boosted. MYR and KRW still lead the pack, up +0.4% and +0.3% respectively. Ahead of a quieter week, expect positioning to favour the Asian currencies. 

      In the day ahead, US has personal income, real personal spending, Mar Core PCE and Univ of Mich. Sentiment. Europe has CPI estimate and GDP for 1Q

Currencies

G7 Currencies

      DXY – Will Apr Low Hold? DXY fell back to 2016 lows. Move lower in the dollar index was mainly led by the decline in USDJPY as markets’ hopes for BoJ monetary easing were not met yesterday. Against other majors such as EUR, GBP, AUD, the USD was less weak. USD/AXJs were broadly weaker, led by USDJPY moves.  In data released overnight, 1Q GDP was slightly below market expectation (+0.5% q/q vs. 0.7% Cons) but core PCE jumped to 2.1% q/q (vs. 1.3% prior). We continue to reiterate our long-held view of 2 hikes in 2016 – one in Jun and another hike in Dec. DXY was last seen at 93.70 levels. Bullish momentum on daily chart is waning and stochastics is falling. Next support at 93.60 (Apr low) before 92.20 (38.2% fibo retracement of 2014 low to double top in 2015). Resistance at 95.70 (5 0DMA). Day ahead brings Fed's Kaplan Speaks, Personal Income, Real Personal Spending (Mar), PCE Core (Mar), U. of Mich. Sentiment (Apr F) on Fri.

       EURUSD – Upside Risk. EUR continues to inch higher within a muted range of 1.1290 – 1.1370. EUR was last seen at 1.1360 levels. Bearish momentum on daily chart is waning and stochastics is rising. These suggest upside pressure. Monthly and weekly momentum and oscillator indicators are bullish bias. Key resistance at 1.15 levels. A break to the upside on daily/weekly close basis could see an extension towards first objective of 1.1850 (38.2% Fibonacci retracement of 2014 high to 2015 low), before the final objective of 1.2260 (50% fibo). Support at 1.12 (50 DMA), 1.1070 (100, 200 DMAs). Day ahead brings FR GDP (1Q A), EC CPI Estimate, GDP (1Q A) on Fri.

        GBPUSD – Testing 1.4670 Resistance Again. GBP continued to push higher again amid broad USD weakness overnight. Monthly, weekly, daily momentum and stochastics are all bullish bias. Resistance at 1.4670 (2016 high). Break above on daily/weekly close basis could see an eventual move towards 1.4880 (200 DMA). Support at 1.4470 (76.4% fibo retracement of 2016 high to low), 1.4350 (61.8% fibo), 1.4250 (50% fibo). Day ahead brings GfK Consumer Confidence (Apr), Mortgage Approvals (Mar) on Fri.

       USDJPY – Limited Downside. Markets’ hopes for BoJ easing were disappointed as BoJ kept monetary policy stance unchanged with no additional easing. This was not in line with market expectation but in line with our expectation – we expect BoJ to stand pat till upper house elections are done in Jul; and expect jawboning in the meantime. USDJPY extended its decline this morning – lows seen at 107.75 levels. And USDJPY weakness is taking USD/AXJs lower as well. Monthly, weekly, daily momentum indicators are bearish bias. Next support at 106.90 levels (38.2% fibo retracement of 2016 low to 2015 high). Break that on weekly close should see an extension of the decline towards 101 levels (50% fibo). Resistance at 112.60.

      NZDUSD – Upside Risk. NZD extended its upmove from yesterday amid broad USD weakness. Last seen at 0.6980 levels. The pair continues to trade well-within the upward sloping trend channel - lower bound at 0.6745; upper bound at 0.7130. Bearish momentum on daily chart is waning while weekly momentum is bullish bias.  Could see further upside risk.

        AUDUSD – Within The Upward Sloping Trend Channel. AUD bears need to clear the 50-DMA at 0.7540 for greater extension.  Right now, the pair was last seen around 0.7640. Momentum indicators are bearish but we see risks to the upside given the depressed USD tones, AUDUSD still within the upward sloping trend channel and general Asian strength thanks to BOJ.  Support is seen at 0.7500 but that could be largely out of reach. Rather, we are more bias towards  a revisit of the resistance at 0.7720 (Mar high) before the next at 0.7850. RBA Debelle Gives Speech on today. More news on the upcoming budget as PM Turnbull plans to launch smart cities to boost infrastructure funding and improve housing affordability.

      USDCAD – Keep The Trend Your Friend. The pair was last printed 1.2540 and interim support is seen at 1.2574 (76.4% fibo retracement of the 2015 rally) has been broken. Daily momentum and stochastics are not indicating a clear bias so we would prefer to keep the trend our friend. IP, GDP data  are due tonight. Clearance of the 1.2574-support  opens the way towards the 1.24-figure. Rebounds to meet barrier at 1.2830 (21-DMA).

     Asia ex Japan Currencies

      The SGD NEER trades 0.37% above the implied mid-point of 1.3468 with the top end estimated at 1.3200 and the floor at 1.3737.

       USDSGD – Break of 1.34 Suggests Further Downside.  USDSGD fell amid the decline in USDJPY and lower than expected USDCNY fix this morning. Pair was last seen at 1.3415. Momentum remains bearish bias. Next support at 1.3405 (50% fibo retracement of 2014 low to 2016 high). Break on weekly close basis puts 1.3160 in sight. Resistance remains at 1.3650 (38.2% fibo, 50 DMA). 

       AUDSGD – We Are Bias Upside. AUDSGD waffled around 1.0250 as we write this morning. Weekly, daily stochastics have eased from overbought conditions and momentum on daily chart has started to tilt lower. Support is seen at 1.0180 (100-DMA) but similar to our AUD view, we are bias upside. Resistance at 1.0380 (previous high).

       SGDMYR – Consolidate with Bias to Downside. SGDMYR was little changed. Cross was last seen around 2.8970 levels. Bullish momentum shows very early signs of waning while stochastics is showing tentative signs of falling. Resistance remains 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 – Inching Lower into 3.85 – 3.91 Range Intra-day. Decent demand from 7y MGS auction yesterday (b/c ratio of 2.04x). USDMYR fell amid USDJPY weakness and gains in oil prices. Pair was last seen at 3.8840 levels. Monthly momentum remains bearish. Mild bullish momentum on daily chart is showing signs of waning. Next support at 3.8440 (2016 low); below that puts 3.80 in sight. See further downside pressure intra-day in the range of 3.85 – 3.91. No key data for release this week.

       1s USDKRW NDF – Downside Pressure Intra-day. 1s USDKRW NDF reversed gains following BoJ no-move on monetary policy which saw USDJPY taking a dive. Pair was last seen around 1135 levels. Bullish momentum on daily chart is waning again.  Support remains at 1126 levels (50% fibo retracement of the up-move from 2014 low to 2016 high), before 1100. Resistance at 1147 (21 DMA).

       USDCNH – Strongest Yuan Fixing Since The 2005 Revaluation. USDCNH hovered around 6.4770 after the big tumble this morning. Upside momentum has waned. Barrier is now seen at 6.5400 (100DMA) with the interim at 6.4990 (21DMA) Support is seen at 6.4766 (200DMA). We continue to observe that PBOC uses the DXY index and the RMB index to guide the USDCNY. The DXY index’s decline (no thanks to JPY rally) has invoked the strongest yuan fixing since  2005 revaluation. USDCNY was fixed 365 pips lower at 6.4837 (vs. previous 6.4882). CNYMYR was fixed 2 pips higher at 0.5993 (vs. previous 0.5991). The stronger fixing has weakened the RMB index. 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. In news, Ministry of Industry and Information Technology assured that the government will reduce excessive steel capacity in the next 5 years.

      SGDCNY – Further Pullback Likely. SGDCNY inched lower from its open and closed above the 21-DMA at 4.8047.  Momentum indicators suggest further decline ahead. Support is first seen at 21-DMA at 4.7943 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 – Range-trade. 1M USDINR hovered around 66.80 this morning. Bias is still slightly 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. 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$65.9mn of equities and U$69.1mn of debt on the 27^th of Apr. 

       USDIDR – Range-Bound. USDIDR inched lower and was last seen around 13180 this morning. This pair has been in a range for a while and momentum indicators flag little bias. Foreign funds had sold off a net U$38.0mn in equities yesterday. They had however added a net U$115.2mn of debt on 26 Apr. Support is seen at 13000-handle. Resistance is at 13225 levels (23.6% Fibo retracement of the Jan-Mar downswing; 50DMA). The JISDOR was fixed higher yesterday at 13204 from Wed’s 13173.  Expect a lower fixing today given the strength in regional peers. No data of importance due this week.

       USDPHP – Capped by the 100-DMA.  USDPHP inched higher from its open and was last seen around the 46.800-levels. Markets are likely positioning ahead of the 9 May presidential and general elections though the 100-DMA seems to be capping eager bulls for now, aided by strong JPY and weak dollar. There is increasing uncertainty regarding the economic positions of presidential candidates particularly that of the front runner Davao Mayor Rodrigo Duterte that is weighing on foreign investment decision and on the PHP as well. Daily momentum remains bullish bias and stochastics is now at overbought conditions. This suggests the potential for a retracement in the near term and could keep the pair rangy. Look for support around 46.730 (38.2% Fibo retracement of the Jan high to Mar low); 46.625 (50DMA).  Barrier is 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. BNP Tetangco said that Apr inflation may range between 0.7% to 1.5%y/y.

Rates

Malaysia

       Government bonds traded weaker despite a reasonably strong bid/cover of 2.04x seen on the 7y MGS 8/23 re-tap. Pre-auction, the bond traded to a low of 3.78% but failed to sustain the momentum after auction, ending at 3.81%. The current 10y MGS benchmark has been gradually cheapening which is a healthy move ahead of the new 10y benchmark auction slated for next month. Players look to US 1Q GDP number.

      MYR IRS initially opened lower, but edged back up in the afternoon on some hedging flow. The 2y was reported to have traded at 3.57% and the 5y at 3.70% and 3.73%. 3M KLIBOR was the same at 3.69%.

       With the unchanged FFR, EM rallied including the local PDS market with bids coming in tighter for AAAs and GGs. Both Oct and Nov tranches of Caga 20 tightened 4bps to 4.05% (G+55-56bps/Z+30-31bps). GGs tightened 1-2bps at the belly and long end, with Dana and MDV among those traded. AA space had some widening as MMC and TBEI widened 2-3bps at the belly and long end.

Singapore

      SGS was bullish bias tracking the surge in UST prices as FOMC left rates unchanged. Buying was seen in the 3y-5y sector despite SGD IRS moving lower on paying interest. The surprise inaction by BOJ drove USDSGD much lower in the afternoon which fueled more demand for SGS. But profit taking interest capped price rise and yields ended 3-7bps lower. Market seems segmented as the 9/24 yield of 2% is higher than the 6/25’s 1.98% yield. For now, we expect to see profit taking on the 7y issue. SGD IRS lowered by 3-5bps.

      Asian credit market perceived the FOMC statement as dovish which resulted in a twofold effect. UST yields lowered and spreads tightened as there was a quick rush towards any decent pick up, especially in the low beta space. High beta was off 1-2bps. JD.com underperformed again, still wider by 5bps. INDON and PHILIP rose up 75cts and 50cts respectively, while PERTIJ 44 broke above $101 a level last seen around Jun 2015.

 Indonesia

      Indonesia bond market closed slightly lower during the day amid neutral statement post FOMC meeting yesterday. We see that the decline today was mostly due to an announcement by the MoF that 2016 budget deficit may widen to 2.4% - 2.5% of GDP. However, what bond investor have missed is the additional issuance would most probably be through global bond issuance or bilateral loan and the use of proceed would be for infrastructure spending. Hence, we continue to believe that IGS prices would continue to move higher ahead. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.333%, 7.584%, 7.792% and 7.779% while 2y yield shifts up to 6.998%. Trading volume at secondary market was seen heavy at government segments amounting Rp15,749 bn with FR0056 as the most tradable bond. FR0056 total trading volume amounting Rp2,622 bn with 67x transaction frequency and closed at 105.599 yielding 7.584%.

       Corporate bond trading traded heavy amounting Rp1,044 bn. BNII01SB (Subordinated I Bank BII Year 2011; Rating: idAA+) was the top actively traded corporate bond with total trading volume amounted Rp135 bn yielding 9.894%.