Maybank GM Daily - 31 May 2016

FX

Global

      With US and UK out for holidays, the overnight session was rather quiet. The risk sentiment in early Asia trade is positive. Dollar traded on the backfoot. The initial hours of trading saw AUD, NZD and SGD on the rally against the USD. Perhaps the only outlier is USDMYR this morning, still elevated around 4.11.

      USDJPY fell to levels around 110.80. Industrial production surprised to the upside with a print of +0.3%m/m for Apr vs. the expected -1.5%. In addition, Prime Minister Shinzo Abe, Finance Minister Taro Aso has agreed to delay scheduled consumption tax increase to 10% from 8% to October 2019 from April without dissolving the Lower House according to a local press.

      This could be a day of retracements for the USD/AXJs (to the downside). Decent risk appetite to lend strength to the Asian currencies. In addition, technical charts show overbought conditions for a number of USD/AXJs. Nonetheless, the data due beyond Asia could be watched for cues.Euro-area May consumer confidence is due tonight. Out of the US, PCE Core (Apr); S&P/CS HPI (Mar); Chicago Purchasing Manager, Dallas Fed Mfg Activity, Consumer Confidence (May) are due tonight.

Currencies

G7 Currencies

      DXY – Data Flow Heavy Starting Today. Quiet session overnight as US was out for Memorial Day holidays. This morning saw mild USD weakness against most currencies amid thin market liquidity conditions. DXY was last at 95.60 levels. Technicals are mixed - Bullish momentum remains intact. 21 DMA appears to cut 50 DMA to the upside soon – upside risk in short term. But stochastics is showing signs of falling from overbought conditions.  Resistance at 95.90 (50% fibo retracement of 2016 high to low), 96.60 (200 DMA). Support at 94.90 (38.2% fibo retracement of 2016 high to low), 93.80 (23.6% fibo). Week ahead is heavy in terms of data starting with PCE Core (Apr); S&P/CS HPI (Mar); Chicago Purchasing Manager, Dallas Fed Mfg Activity, Consumer Confidence (May) on Tue; ISM Mfg, new orders; Mfg PMI (May); Construction spending (Apr) on Wed; ADP (May); ISM NY (May); Fed’s Beige Book; Fed’s Kaplan speaks on Thu; NFP, unemployment rate, hourly earnings, services PMI (May); Factory orders, durable goods, cap goods orders (Apr Final); Fed’s Evans, Mester, Brainard speak on Fri.

      EURUSD – Sideways. The move below 1.11 was shallow yesterday; lows of 1.1098 printed before turning higher in quiet trading. EUR was last at 1.1150 levels this morning. Bearish momentum remains intact but daily stochastics is at oversold conditions and is showing signs of turning around. Support remains at 1.11 (200 DMA) before 1.1010 (76.4% fibo retracement of Mar low to May high). Resistance at 1.1220 (50% fibo), 1.1310 (50 DMA). Expect 1.11 – 1.12 range intra-day. Week ahead brings CPI estimate, core (May) on Tue; EC PMI Mfg (May) on Wed; ECB meeting; PPI (Apr) on Thu; EC retail sales (Apr); Services/Composite PMI (Apr) on Fri.

      GBPUSD – Range-Bound. A quiet session overnight as GBP traded a subdued range of 1.4588 – 1.4642 amid local markets out for bank holiday. GBP was last at 1.4655. Daily momentum and stochastics is not indicating a clear bias. Could see continue to see range-bound trade in the range of 1.46 – 1.4750 amid thin market liquidity conditions. Week ahead brings PMI Mfg, Nationwide House prices (May) on Wed; Construction PMI (May) on Thu; Services/Composite PMI (May) on Fri. UK markets are closed on Mon for Bank holiday. We still see GBP being caught up in 2-way directional swings in the lead-up to referendum day.

      USDJPY – Retracement. USDJPY took a breather after its climb towards the 111-levels overnight with the US and UK markets closed for a market break. The pair appears to be taking its cue from the Nikkei futures which are down this morning. Downside pressure is also coming from the better-than-expected data releases this morning with the industrial production rising by 0.3%m/m vs. cons. -1.5% and Mar’s +3.8% as well as the smaller-than-expected drop in overall household spending in Apr by -0.4% y/y vs. cons. -1.3% and Mar’s -5.3%. Jobless rate was stable at 3.2% in Apr. The stronger data lessens the need for further easing measures by the BOJ or supplementary budget by PM Abe. Upmoves though could be mitigated by increasing speculation that PM Abe will push ahead with the consumption tax hike delay and without calling for an election to seek a renewed mandate for this action. USDJPY was last seen at 110.90 levels. Daily momentum remains bullish bias while stochastics is back at overbought conditions. With the upper bound of the trench channel taken out on a daily basis, we now watch for a close on a weekly basis to confirm further upmoves. Failing which, we could see the pair back into the trend channel. Resistance is at 111.70 (38.2% Fibo retracement of the Jan-Mar downswing); 113.60 (50% Fibo). Week ahead brings 1Q Capex, May PMI on Wed; BOJ Sato speaks on Thu; Apr cash earnings, May Nikkei PMI Services on Fri.

      NZDUSD – Lean Against Strength. Kiwi was probably the biggest mover this morning (relatively speaking) as NZD rose 0.4% from 0.6690 to an intra-day high of 0.6718. Apr building permits data and ANZ business confidence (released this morning) surprised to the upside. NZD was last seen at 0.6715 levels. Bearish momentum on daily chart remains intact (although showing signs of waning) while stochastics is at oversold conditions. Resistance at 0.6720 (100 DMA), 0.6780 (21 DMA). Support at 0.6620 (200 DMA). Bias remains to sell on rally. Week ahead brings Terms of Trade (1Q); House Prices (May) on Wed; 10-month Government Financial Statement; ANZ Commodity Price (May) on Fri.

      AUDUSD – Sideways. AUDUSD inched back towards the 0.72-figure as dollar retreated this morning. Directional bias is lacking at this point. Support is seen at recent low of 0.7145 and a break there exposes the next at 0.7064 (76.4% Fibo of the Jan-Apr upswing). Barrier is still at the 200-DMA, 0.7254 ahead of the next at 0.7350. The 200-DMA should continue to be retested on the way up towards the next barrier at 0.7340 (100DMA). Upticks are likely on short leash and could be seen as opportunities to sell. Week ahead Building approvals, private sector credit (Apr); Current account (1Q) on Tue; GDP (1Q); Commodity Index (May) on Wed; Trade (Apr) on Thu; Retail Sales (Apr) on Fri.

      USDCAD – Retracements. This pair is still stuck within the 50 and the 100-DMA, last seen around 1.3040. Overbought conditions are flagged by the stochastics and suggest that bias could be to the downside in the near-term. Resistance at 1.3070 (100-DMA). In the longer-term, we are more wary of downside trades as we notice a bearish cross over of the 100-DMA on the 200-DMA chart. Support is seen at 1.2920 (50-DMA) before year low of 1.2460. Week ahead has Mar 1Q GDP is due on Tue, RBC Canadian manufacturing (May) on Wed.

Asia ex Japan Currencies

      The SGD NEER trades 0.05% below the implied mid-point of 1.3800 with the top end estimated at 1.3524 and the floor at 1.4076.

      USDSGD – Buy On Dips.  USDSGD has given up the gains from yesterday and more amid thin market liquidity following yesterday’s markets closure in UK and US. Pair continued to test but failed to break above the 100DMA resistance at 1.3820. A break above the 100DMA resistance should expose the next barrier at 1.39-handle (50% Fibo retracement of the Jan-Apr downswing). Last seen around 1.3790 levels, pair has lost most of its bullish momentum and stochastics continues to fall from overbought conditions. Dips should find support around the 1.3725 levels (21DMA). We continue to favour buying on dip. Pair should continue to trade range-bound within 1.3650-1.3850 ahead. Quiet data week ahead with just May PMI on Thu and May Nikkei PMI on Fri.

      AUDSGD – Range. AUDSGD was last seen around 0.9930,  still retaining a heavy tone. Similar to AUDUSD, daily MACD is near to zero and stochastics show tentative signs of climbing higher from oversold levels. Bearish bias is likely to hold but we would not sell at this point as there is a risk of correction. Upticks should meet resistance around parity, while any correction puts next support at 0.9830. Rebounds to meet first barrier around 1.0005 (21-DMA) before the next at 1.0150 (100-DMA).

      SGDMYR – Upside Pressure within the Trend Channel. SGDMYR inched higher, well-within the upward slopping trend channel (formed since mid-Apr 2016). Cross was last seen at 2.98 levels.  Bullish momentum on daily chart remains intact while stochastics is near overbought conditions. Resistance remains at 2.99 (50% fibo retracement of 2016 high to low). Support at 2.9570 (38.2% fibo, 100 DMA, lower bound of uptrend channel). Break outside of range on weekly close puts next support at 2.92 levels (50 DMA). But short-term could see upside pressure (21 DMA about to cut 100 DMA to the upside) towards 2.99 levels.

       USDMYR – Interim Upside Pressure. Our Fixed Income Strategists noted disappointing bid/cover ratio of 1.42x on 5.5y MGS new issue yesterday. Equity markets (KLCI) also closed in negative territories yesterday. Investor sentiment has been a touch weaker and is weighing on MYR despite oil prices still supported. USDMYR was last seen at 4.11 levels. Bullish momentum on daily chart remains intact while stochastics is near overbought conditions. Resistance remains at 4.14 (50% fibo retracement of 2016 high to low). Support at 4.08 (100 DMA), 4.0720 (38.2% fibo). 21 DMA looks on track to cut 100 DMA to the upside in coming days and could suggest upside pressure. We caution that a break above 4.14 on daily close could trigger stop-buy orders and expose the pair to 4.1880 (200 DMA).

      1s USDKRW NDF – Upside Risk.  1s USDKRW was little changed this morning. Pair was last at 1191 levels. Daily momentum remains bullish bias. Resistance 1200 (61.8% fibo retracement of 2016 high to low). Support at 1185 (50% fibo), 1177 (200 DMA). Expect 1185 – 1195 range intra-day. In data released this morning Apr IP surprised to the downside. Week remaining brings May CPI, Apr current account, May trade (Wed); 1Q GDP (Thu); May FX reserves (Fri).

      USDCNH – Upside Bias. USDCNH bounced towards the 6.5885-level, within the 6.55-6.60 range. Bullish momentum on the wane and stochastics shows signs of turning lower from overbought levels. Still correction could be shallow as this pair seems more determined to keep an upside bias. Eye the break of the 6.5912 (38.2% Fibonacci retracement of the Oct-Jan rally). A failure to break there could mean a potential mini double top there. Support is at 6.5590 (100-DMA). Resistance is at 6.5820 (19 May high). USDCNY was fixed 6 pips higher at 6.5790 (vs. previous 6.5784). CNYMYR was fixed 39 pips higher at 0.6232 (vs. previous 0.6193). Week ahead has the NBS PMI-mfg and PMI non-mfg on Wed along with Caixin PMI-mfg. Caixin PMI-services is due on Fri.

      SGDCNY – Sideways. This cross closed around 4.7656, hardly changed on Fri. This cross could head further north, beyond the 50-DMA at 4.7801. Next barrier is seen at 4.8101.  Stochastics indicate oversold conditions though so initial bias should be to the upside before the bearish reversal of the 2015-2016 rally resumes. Next support is seen at 4.6960.

      1s USDINR NDF - Retracements.  1M NDF hovered around 67.57 as we write this morning, on the upmove. Stochastics indicate overbought conditions are pressure is to the downside for now with next support at 67.175 ahead of the next at 66.94.  Barrier is seen at 67.59 before 67.71. The week ahead has 1Q GDP today, May PMI-mfg on Wed, and current account balance sometime in Jun. FinMin Jaitley told Bloomberg Television that India will maintain its “world beating” growth pace. At the same time, he also stressed that the inflation target is “extremely important” for India.

      USDIDR – Range-Bound. USDIDR is inching lower this morning, playing catch-up with its regional peers.  Still the pair remains elevated “due to seasonally large FX demand from corporate sector in 2Q” according to BI governor Augs Martowardojo. Also, the possibility of further BI easing (not our base case) following the dovish comments after the BI meeting on 19 May could limit downside moves. Pair was last seen around 13620 levels. Daily momentum shows waning bullish bias and stochastics remains at overbought levels. We could continue to see the pair trade in a wide range of 13500-13710 for the rest of the week. Support is at 13490 (50% Fibo retracement of the Jan-Mar downswing). Upside continues to be capped by 200DMA resistance at 13665 levels. We prefer buying on dips. The JISDOR was fixed higher at 13641 on Mon from 13575 on Fri. Sentiments remained positive with foreign investors buying a net USD42.31mn in equities yesterday. They had also added a net IDR2.77tn to their outstanding holding of government debt on 27 May (latest data available). Quiet data week with just May CPI on tap tomorrow. Our economic team expects headline inflation to climb slightly higher m/m ahead of Ramadan in May. As in previous years, foodstuffs prices rose ahead of Ramadan. But on a y/y basis, base effects are likely to see headline inflation moderate to 3.28% y/y. Core inflation is expected to increase m/m as well in May due to rising gold jewellery prices, car prices, and housing rent but remain relatively unchanged in May at 3.37% y/y (Apr: 3.41%).

      USDPHP – Still Trapped Between 50- and 100-DMAs.   USDPHP is finding some relief this morning after gapping higher yesterday as the pair tracks its regional peers broadly lower. Pair was last seen around 46.710 levels. Daily charts are showing no strong momentum in either direction, suggesting rangy trades are likely ahead.  Expect pair to trade range within the 50DMA support at 46.530 and 100DMA and 50% Fibo of the retracement of the Jan-Mar downswing resistance at 46.970. Foreign funds bought a net USD10.06mn in equities yesterday as risk sentiments remained supported. Data-quiet week ahead.

      USDTHB – Still Side-Ways.  USDTHB is inching lower this morning after climbing higher yesterday as momentum stalled in the absence of better cues. Nevertheless, pair continues to trade in a wide range (35.540-35.800). Pair was last seen around 35.720 levels. Daily momentum still shows waning bullish bias and stochastics is showing signs of falling from overbought conditions. Continue to expect range bound trades for the rest of the week as it waits for directional cues. Support nearby is at 35.670 (200DMA); 35.570 (50% Fibo retracement of Jan-Mar downswing). Resistance is at 35.850. Further dips could be opportunities to buy. Risk sentiments remained positive with foreign funds purchasing a net THB0.44bn and THB1.45bn in equities and government debt yesterday. Week ahead brings Apr trade, Apr BoP current account balance on today; May CPI on Wed; 27 May foreign reserves on Fri.

Rates

Malaysia

      Local government bonds traded softer on the back of weak auction on the new 5.5y MGS 11/21s with a BTC of 1.42x. The belly of the curve rose 4-7bps from previous close as players remain cautious ahead of the US FOMC.

      IRS levels moved higher by 2-3bps across the curve suffering from weakness similar to the MGS market. 5y IRS was traded at 3.74%. 3M KLIBOR was unchanged at 3.67%.

      In PDS, weak MGS auction led to a lack of bidding interest MYR credit. In GG, JCorp 22s traded at 4.10% (G+42.2/Z+22.9 bps) which seemed decent compared with other GGs with 1 year longer in maturity trading flat to this name, but less liquid. PASB 26s widened 1bp to 4.33% (G+43.6/Z+21.8 bps). AAA curve was muted and skewed towards the offer side. Rantau 22s traded at 4.26% (G+53.9/Z+36), almost flat to Telekom names. In AA segment, Imtiaz 16s traded 2bps wider, Sime Perp traded 9bps wider to 5.53% with MYR106m in volume. Long-end JEP and SEB continued to do well, tightening 1bp.

Singapore

      SGS prices opened lower on a higher USDSGD spot, biddish short-dated forwards and higher UST yields after the hawkish speech by Yellen. The long end continued to be sold off after Friday's sharp turnaround in sentiment on the back of a worse than expected 10y SGS auction. Yields were up 5-9bps by the close with the belly of the curve underperforming. Likewise, the IRS curve ended higher 6-10bps higher with the paying most pronounced in the 5y sector, driving the 2-5-10 butterfly higher by 4bps. Intermittent buying was seen but market players remained cautious and prices closed at the low end of the day's range.

      In the Asian credit market, activities were muted as the US and London markets were closed for the Memorial Day and Spring Bank Holiday respectively. CDSs were almost flat.

Indonesia

      Indonesia bond market closed lower backed by hawkish statement by Fed Yellen last week and absence of U.S. market. We do believe that bond investor may be cautious this week ahead of the U.S. labour data release at the end of the week. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.536%, 7.818%, 8.027% and 8.029% while 2y yield shifts up to 7.225%. Trading volume at secondary market was seen thin at government segments amounting Rp5,363 bn with FR0056 as the most tradable bond. FR0056 total trading volume amounting Rp704 bn with 35x transaction frequency and closed at 103.869 yielding 7.818%.

      DMO will conduct their bi-weekly sukuk auction today with five series to be auctioned which are SPN-S01122016 (Coupon: discounted; Maturity: 1 Dec 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-S01122016 (range: 5.70% – 5.80%), PBS006 (range: 7.50% – 7.60%), PBS009 (range: 7.70% – 7.80%), PBS011 (range: 8.00% – 8.10%) and PBS012 (range: 8.30% – 8.40%).

      Corporate bond trading traded thin amounting Rp449 bn. ASDF01CCN1 (Shelf registration I Astra Sedaya Finance Phase I Year 2012; C serial bond; Rating: idAAA) was the top actively traded corporate bond with total trading volume amounted Rp88 bn yielding 7.731%