Maybank GM Daily - 5 May 2016

FX

Global

      Another session of cautious risk sentiment overnight. Global equities ended moderately lower. US data was a mixed bad – ADP missed estimates while services PMI, ISM non-mfg and factory orders beat expectation. Commodity prices including copper and brent were lower. The latter was due to increase in DOE stockpiles. OPEC’s scheduled meeting in Jun will not discuss about production freeze.

       In FX markets USD strength was more felt in AXJs and commodity-linked currencies. USDMYR broke above 4-handle this morning (off the back of softer oil prices and firmer USD) while CAD lost more than 1%. While USD was firmed, low yielding currencies like EUR and JPY generally held stable. Put together with the sell-off in AXJs and risk proxies, it feels like an unwinding of carry-trades amid “sell the May and go away”. We continue to hold on to our tactical bias to stay long EUR vs AXJs, including AUD, MYR, KRW, PHP. USDCNY fix was adjusted higher by 185pips again today (6.5128 vs. 6.4943).

      On data for the day ahead, focus on Fed’s Kashkari, Bullard, Kaplan speak later in the evening. For Europe/ UK, ECB Economic Bulletin; EC Retail PMI, UK Services PMI  (Apr). Little data to note for Asia today. A handful of markets are closed in the region today – Japan, Korea, Indonesia and Thailand. Cautious of thin liquidity.

Currencies

G7 Currencies

      DXY – Cautious at Oversold Conditions; Consolidate. Broad USD strength overnight amid softer risk appetite and weaker than expected ADP employment. Other data were better than expected – services PMI, ISM non-mfg and factory orders. DXY was last seen at 93.28 levels. Bearish momentum on daily chart is waning while stochastics is showing signs of rising. We reiterate that support at 92.20 (38.2% fibo retracement of 2014 low to double top in 2015) should hold and we remain cautious of USD at oversold conditions. Resistance at 94.15 (21 DMA), 95.70 (50 DMA). Week remaining brings Fed’s Kashkari, Bullard, Kaplan speak on Thu; Fed's Bullard, Kaplan, Lockhart, Williams speak; NFP, unemployment, wages (Apr) on Fri.

      EURUSD – Still Favor EUR Longs vs Risk Proxies, AXJs. EUR was slightly softer despite broad USD strength elsewhere. This is in line with our bias to stay long EUR vs risk proxies, AXJs – somewhat feels like a carry trade unwinding amid “sell the May and go away”. EUR was last seen at 1.1490 levels. Daily momentum indicators remain bullish bias; stochastics is showing signs of falling – put together slowing bullish momentum. We had previously mentioned that a break beyond 1.15 resistance could see an extension of the rally. Next resistance at 1.17 (Aug 2015 high), before 1.1850 (38.2% Fibonacci retracement of 2014 high to 2015 low), before the final objective of 1.2260 (50% fibo). Support at 1.1230 (50 DMA), 1.1100 (100, 200 DMAs). Week remaining brings ECB Economic Bulletin; EC Retail PMI (Apr) on Thu; GE, FR Retail PMI (Apr) on Fri. We prefer to strip away the USD, and express our EUR long view against AXJs (including SGD, MYR, PHP) and risk proxies.

      GBPUSD – Waning Momentum Continues. GBP fell amid broad USD strength and weaker than expected construction PMI (effects of Brexit fear weighing on investment and construction plans). Pair was last seen at 1.45 levels. Bullish momentum on daily chart is waning and stochastics is turning lower. Support at 1.4470 (76.4% fibo retracement of 2016 high to low), 1.4350 (61.8% fibo), 1.4250 (50% fibo). Resistance at 1.4670 (2016 high). Week remaining brings Services PMI (Apr) on Thu.

      USDJPY – Bias Still Bearish. Onshore markets remain closed for holidays and re-open on Fri. USJPY is back above the 107-handle this morning as the JPY was sold off against the majors amid continued dollar strength. Market whispers continue to whirl of intervention that could keep the pair supported though. Last seen around 107.10 levels, monthly, weekly, daily momentum indicators remain bearish bias. Immediate resistance is at 107.25 (38.2% Fibo retracement of end-2012 – when PM Abe came into power - to 2015 high) ahead of the next at 108.81 (21DMA). Support is at the year’s low of 105.55. Fri has monetary base, PMI (Apr).

      NZDUSD – Unwinding of High Yielders Continue. NZD remains on a back foot amid broad USD strength. Pair was last seen at 0.6880 levels; still trading well-within the upward sloping trend channel - lower bound at 0.6820; upper bound at 0.7130. Daily momentum is turning mild bearish and stochastics is falling. Could see an extension of the decline given the break below 0.69 (21 DMA) towards 0.6810 (50 DMA) intra-day.

      AUDUSD – Bearish Bias; Retail Sales on Tap. AUD continues to fall, on the follow-through of RBA rate cut on Tue and broad USD strength.  Moody’s said Australia budget leaves public finances vulnerable; previously they warned about the risk of Australia potentially losing its triple A rating if budget disappoints. AUD was last at 0.7460 levels. Bearish momentum on daily chart remains intact. We reiterate that a break below the key support at 0.7550 (50 DMA, upward-sloping trend-line support from Jan and Mar lows) on daily close basis could open doors for further downside towards 0.7450 (38.2% Fibonacci retracement of Jan low to Apr high), 0.7330 (50% fibo, 100 DMA). Firmer support seen near 0.7260 (200 DMA). Resistance remains at 0.7720 before 0.7835 (2016 high). Week remaining brings Retail Sales, Trade balance (Mar) on Thu; RBA Statement of Monetary Policy on Fri.

Asia ex Japan Currencies

      The SGD NEER trades 0.08% below the implied mid-point of 1.3563 with the top end estimated at 1.3291and the floor at 1.3834.

      USDSGD – Limited Downside; Buy On Dips.  USDSGD inching lower this morning despite the continued firmness in the dollar and amid a sell-off in the MYR against the SGD. Last seen around 1.3575 levels, daily momentum indicators remain bullish bias. This suggests that further downside moves could be limited. Resistance is at 1.3620 levels (50DMA) ahead of 1.3650 (38.2% Fibo retracement of 2014 low to 2016 high).  Support is at 1.3500 (21DMA). Favour buying the pair on dips.

       AUDSGD – Eyeing Support at 200 DMA. AUDSGD was little changed from yesterday’s levels. Last seen ar 1.0140 levels. We reiterate that a sustained close below 1.0150 (200 DMA) - 1.0180 (23.6% fibo retracement of 2014 high to 2015-16 double bottom) area of support temporarily negates our long bias (previously looking for a move towards 1.05, 1.07). Next support is at parity. Daily momentum Is indicating a bearish bias for now while stochastics is entering oversold conditions.

       SGDMYR – Nearing Overbought Conditions. SGDMYR traded higher tracking the decline in the Ringgit; last seen at 2.95 levels. While we shared that price action shows a potential rising wedge in the making (bearish reversal), the cross appears to have broken above the wedge. We watch price action today – if cross broke higher – negating our rising wedge call. That said stochastics shows the pair at overbought conditions. Momentum is bullish bias. Resistance at 2.9350 (50 DMA), 2.98 levels (100 DMA). Support at 2.8980 (21 DMA), 2.85 (2016 lows).

      USDMYR – Technical Rebound Underway. USDMYR continues to trade higher amid USD strength, soft oil prices, and cautious risk sentiment. Last seen at 4.0050 levels. Daily momentum remains mild bullish bias. Stochastics is entering near-overbought conditions. Next resistance at 4.0720 (38.2% fibo retracement of 2016 high to low). Support at 3.9100 (21 DMA), 3.8440 (2016 low). Week remaining brings trade and FX reserves data on Fri.

      1s USDKRW NDF – Upside Risks. Local markets are close for holidays today. 1s USDKRW NDF rose amid another session of cautious risk sentiment and USD rebound. Pair was last seen around 1167 levels. Bullish momentum on daily chart remains intact. Resistance at 1171 (38.2% fibo retracement of 2016 high to low, 50 DMA) before 1176 (200 DMA). Support at 1148 (21 DMA).

      USDCNH – Upside Risk. USDCNH rose amid rebound in USD, cautious sentiment. USDCNY fix was adjusted higher by 185pips again today (6.5128 vs. 6.4943). USDCNH was last seen at 6.5180 levels. Caixin Apr services PMI was weaker than previous month (51.8 vs. 52.2 in Mar). Daily momentum remains bullish bias. Next resistance at 6.5370 (100 DMA). Support at 6.4690 (200 DMA) should continue to hold firm. Week remaining brings Current account (Fri).

      1s USDINR NDF – Rangy. 1s USDINR NDF is back above the 67-handle this morning amid a firmer dollar. The 1s NDF was not helped by slower services PMI, which had slipped to 53.7 in Apr from 54.3 in Mar. Pair was last seen at 67.02 levels. Daily momentum remains bullish and stochastics is climbing higher. Immediate resistance is at 67.11 (50DMA) ahead of 67.45 levels (100DMA). Support nearby is around 66.80 levels (21, 200 DMAs) before 66.25 (Apr lows).  In the news, Finance Minister was sanguine about the economy’s prospects, commenting that above 7.6% growth of last year was achievable if growth was underpinned by an improvement in private sector, agriculture sector and continued structural reforms. He also pooh-poohed talks about a banking crisis, calling such concerns exaggerated.

      1s USDIDR NDF – Limited Downside. Onshore markets are closed from today for public holidays and re-opens on Mon. 1s USDIDR NDF is on the slide this morning after yesterday’s sharp climb towards 13440 levels amid quiet trades. Pair was last seen around 13430 levels. Daily momentum is showing bullish momentum while stochastics is climbing higher. With risks still bias to the upside, further downticks should be limited. Look for upside to be curbed by 13530 (100DMA). Support is around 14235 (21, 50 DMAs). JISDOR was fixed at its highest levels since 31 Mar at 13246 yesterday from Tue’s 13162. Risk appetite remained weak with foreign funds selling a net USD27.61mn in equities yesterday. They had however added a net IDR0.07tn to their outstanding holding of government debt on 2 May (latest data available). 1Q 2016 GDP disappointed, coming in below market and our economic t*265eam’s expectations of 5.07% and 5.01% respectively at 4.92% y/y (4Q 2015: 5.04%). The drag on growth was from government spending, which moderated to 2.93% y/y in 1Q from 7.31% in 4Q 2015. Private consumption held up well, rising 4.77% in 1Q vs. 4Q’s 5.39%.

      USDPHP – Focus on Presidential Elections.  USDPHP remained above the 47-figure this morning underpinned by continued firmness in the dollar and amid political jitters as the presidential elections on 9 May approaches. 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. Duterte’s recent threats against the BSP and Anti-Money Laundering Council (AMLC) are likely to reinforce foreign investors’ concerns about his economic stewardship should he win. Last seen around 47.200 levels, daily momentum is bullish bias and stochastics remains at overbought levels. Weekly momentum indicators are also bullish bias. Having tested 47.240 (61.8% Fibo retracement of 2016 high to low), a clean break here on a daily close could see the pair headed towards 47.560 (76.4% Fibo). Any retracement should find support at 47.030 (100DMA). Risk sentiments continued to improve with foreign funds purchasing a net USD9.43mn in equities yesterday.

      USDTHB – Mild Upside Risk.  Onshore markets are closed from today for a super long weekend and re-opens on Mon. USDTHB is little changed this morning amid quiet trades. Pair was last seen around 35.150 levels with daily momentum indicators still mildly bullish. With risks tilted to the upside, any upticks should meet resistance at 35.230 levels (26 Apr high) before 35.370 (38.2% Fibo retracement of the 2016 high to low). Support is at 35.035 (21DMA) before 34.720 (year’s low). Risk sentiments were mixed yesterday with foreign investors selling a net THB1.37bn in equities and purchasing a net THB1.15bn in government debt yesterday.

Rates

Malaysia

      Government bond yields rose higher by 3-4bps on the back of the weakness in MYR. The 7y MGS benchmark continued to be actively traded, ending +4bps. Players turn their focus to the re-tap auction on 15y MGII 9/30.

      In IRS market, risk off sentiment was offset by the collapse in global yields overnight. Rates were unchanged, with the 5y IRS trading at 3.71%. 3M KLIBOR was unchanged at 3.68%.

      Sentiment in the PDS market still skewed towards the selling side, especially on the 5y and longer tenors. Trading volume remained thin. GG names saw bids at the short end (3y or lesser). AAAs were trading around 70-75bps above govvies which still offers good value to investors.

Singapore

      SGS prices opened higher in line with the movement in UST, but some locals were seen selling into the rally. There was little buying interest at the short end as the higher USDSGD pressured short end rates. That part of the curve largely unchanged while the long end lowered 1-2bps. SGD IRS curve bear flattened with the front end up 1-2bps and the 5y point onwards down 1bp.

      Asian credit market felt a bit stretched as red equity markets contributed to flight to quality. In China space, CDS continued to underperform the Asian broad based index, AMCs widened 5-8bps and tech names widened further with JD.com the worst hit. New Huawei 26 also widened, bringing the 26/25 spread back to 15bps. In sovereign cash space, INDON and PHILIP prices fell by about 20cts, though volume traded was very low. Philippine CDS remained under pressure, underperforming the rest of Asia. Of note, PETMK 25 was still in a gridlock due to the lack of a free float. The bonds were trading at -1.5% in the repo market.

 Indonesia

      Indonesia bond market closed lower at the end of yesterday session. During the day, Indonesia statistics issued the 1Q16 growth which only grew at a level of 4.92% YoY. This figure was far low compared to the consensus expectation of 5.07% YoY. This has caused negative sentiment to arise. The fact and the marketed story during the 1Q16 ironically were opposite. However, the positive point is, the growth picked up compared to 4Q15 growth of approx 4.7%. Aside from that, the decline in prices was also contributed by the long holiday. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.379%, 7.697%, 7.872% and 7.871% while 2y yield shifts up to 7.147%. Trading volume at secondary market was seen thin at government segments amounting Rp10,137 bn with FR0056 as the most tradable bond. FR0056 total trading volume amounting Rp2,469 bn with 60x transaction frequency and closed at 104.765 yielding 7.697%.

      Corporate bond trading traded thin amounting Rp296 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 Rp50 bn yielding 9.120%.