US equities pared back early gains as large decline (of over 5%) in oil prices to near 2-year lows dented sentiment into NY close.

FX

Global

      US equities pared back early gains as large decline (of over 5%) in oil prices to near 2-year lows dented sentiment into NY close. The decline was due to slower than expected drawdown in oil inventories. USD was modestly firmer, across the board into NY close. NZD was also firmer after RBNZ deputy Governor Spencer’s comments on new housing investor limits by year end and opinion on OCR cuts saw fading rate cut expectation for Aug meeting.

      In overnight news, Theresa May and Andrea Leadsom are now in the final run-off to be Britain’s second female Prime Minister. In Australia vote count progress, local media reported that LNP has 73 seats in the House of Reps and the Labor Party has 66 seats; crossbench has 5 seats (4 for independents and 1 for the Greens) while 6 seats remain too close to call. The coalition needs 76 seats to gain an absolute majority and that would give incumbent PM Malcolm Turnbull the mandate.

      Focus today on US payrolls, following the better than expected ADP and jobless claims data overnight. Consensus expects +180k for NFP (vs. +38k prior); +0.2% m/m (unchanged from prior) for hourly earnings and 4.8% (vs. 4.7% prior) for unemployment rate. A stronger than expected and upward revision on NFP, coupled with upside surprise in hourly earnings could see a re-pricing in USTs and the USD. UST yields and USD could extend its gains. Data calendar for Asia today is quiet. Expect FX markets to trade in subdued ranges in the lead-up to US payrolls data (830pm SG/KL time).

Currencies

   G7 Currencies

      DXY – NFP Eyed. USD was modestly firmer into NY close, as decline in oil prices dented sentiment.  DXY was last seen at 96.20 levels. Daily momentum remains bullish bias while stochastics is entering near-overbought conditions. Key resistance remains at 96.50 (200 DMA). Only a break above on daily close basis could see an extension of the rally towards 97.96 (76.4% fibo retracement of 2016 high to low). Support at 95.20 (100 DMA). Week ahead brings NFP; hourly earnings; unemployment rate (Jun) on Fri - consensus expects +180k for NFP (vs. +38k prior); +0.2% m/m (unchanged from prior) for hourly earnings and 4.8% (vs. 4.7% prior) for unemployment rate. A stronger than expected and upward revision on NFP, coupled with upside surprise in hourly earnings may see USD extend gains.

      EURUSD – Sell on Rallies. EUR drifted lower amid EU contagion/spill-over fears and modest USD strength overnight. ECB minutes (released overnight) show concerns over Brexit spill-over in Eurozone. The minutes noted that a vote for Brexit could generate “significant, although difficult to anticipate, negative spill-overs to the euro area via a number of channels, including trade and the financial markets,” Last seen at 1.1075 levels. We retain our call to sell EUR on rallies towards 1.1150 levels for a move back below 1.10-handle. Daily momentum remains mild bearish bias. Support at 1.1070 (50% Fibonacci retracement of Dec low to May high), 1.0940 (61.8% fibo), 1.0780 (76.4% fibo). Resistance at 1.1230 (100 DMA). Week remaining brings EU sovereign debt to be rated by Moody's on Fri.

      GBPUSD – Sell Rallies. GBP saw a brief run up above 1.30-handle before paring gains. GBP was last seen at 1.2940 levels. On GBP technical, we have said that the broader trend (weekly and monthly momentum indicators) remains bearish and could see a larger decline and we still favour the trade from the short-side as uncertainty on separation remains, but prefer to sell on rallies. Daily momentum remained bearish and GBP could test lower towards 1.2720 levels.  Price action suggests a potential bearish flag formation in the making (1.3220 – 1.3570).  Resistance at 1.3120. Day ahead brings Trade (May) on Fri. On the Tory leadership race, Theresa May and Andrea Leadsom are now in the final run-off to be Britain’s second female Prime Minister.

      USDJPY – Capped. USDJPY is inching slightly higher ahead of the MOF, FSA and BOJ meeting this morning to discuss financial markets, heightening risks of possible intervention and/or further BOJ easing moves. However, intervention will put the country at odds with the US and risk being cited as a currency manipulator in the US Treasury semi-annual report on currency manipulation. Instead look for further jawboning until at least after the Upper House election this Sun. The ruling LDP and its coalition partner is headed to winning a majority in the Upper House election on 10 Jul (Sun) but a large win (2/3 majority) could shift Abe’s focus from economics to security and constitutional issues. This could see the USDJPY drift ahead. In the nearer term, Nikkei futures are higher suggesting that upside could be supported intraday. Last seen around 100.90 levels, pair’s mildly bearish bias remains intact though waning and stochastics is turning lower. Weekly stochastics remains near oversold conditions and risk of a technical rebound still cannot be ruled out. Immediate resistance at 101.95 (23.6% Fibo retracement of May-Jun downswing); 103.80 (38.2% Fibo; 21DMA). Support remains at 100-figure (lower bound of the trench channel) before 99-figure (year’s low). Further reduction in confidence in Abenomics could see a move towards the 95-handle.

      NZDUSD – Upside Risk. NZD jumped following RBNZ deputy Governor Spencer’s comments on housing market – that new housing investor limits are possible by year end; further OCR cuts could pose financial stability risk; CPI outlook will ultimately determine monetary policy. This saw fading expectation of rate cut in Aug. Implied probability of rate cut (from OIS) dropped to 46% from above-65%. NZD was last seen at 0.7250 levels.  Weekly momentum remains bullish bias. Resistance at 0.73 (Jun high). Support at 0.7170 (61.8% fibo retracement of Apr 2015 high to low) levels before 0.71 levels (21 DMA).

      AUDUSD – Range Ahead of US NFP. While AUD reversed early losses (post S&P downward revision to outlook yesterday), its move higher failed to push beyond its week high (0.7545). AUD then drifted lower into NY close overnight, tracking US equities which pared early gains due to the large decline (>5%) in oil prices to near 2-month low. AUD was last seen at 0.7510 levels this morning. Expect quiet trading in 0.7450 – 0.7540 range ahead of US NFP numbers tonight (830pm).  Daily momentum is flat.. Support at 0.7450 (21 and 100 DMA) before 0.74 levels (38.2% fibo retracement of Apr high to May low). Resistance at 0.7550 (week high). On vote count progress, local media reported that LNP has 73 seats in the House of Reps and the Labor Party has 66 seats; crossbench has 5 seats (4 for independents and 1 for the Greens) while 6 seats remain too close to call. The coalition needs 76 seats to gain an absolute majority and that would give incumbent PM Malcolm Turnbull the mandate.

Asia ex Japan Currencies

      The SGD NEER trades 1.04% above the implied mid-point of 1.3628. The top is estimated at 1.3358 and the floor at 1.3898.

      USDSGD – Range.  USDSGD is a tad softer this morning amid dollar weakness but continues to hover in range bound trades within 1.3400-1.3580for the past week. Brexit and global growth concerns as well as the threat of Australia’s Triple A rating are driving safe-haven flows to Asia’s only Triple-A rated economy. Pair is likely to trade range ahead of US NFP print later tonight. Pair is just a tad below the 1.35-handle at 1.3492 levels. Daily momentum remains very mildly bullish bias though stochastics continue to show no strong bias. Weekly momentum remains slightly bearish bias though. Interim support at 1.34-handle (50% Fibo of the 2014-2016 upswing). Break below this is likely to see bearish moves towards 1.3313 (year’s low) before 1.3160 (61.8% Fibo). Rebound should meet resistance around 1.3570 (6 Jul high) ahead of 1.3600 (50DMA). Range trades within 1.34-1.3580 should hold intraday. Note that 2Q Adv. GDP will be released on 14 Jul (Thu).

      AUDSGD – Choppy. AUDSGD slipped lower yesterday after S&P lowered Australia outlook to Negative, but is mildly rebounding this morning to hover around 1.0126 levels. MACD shows bullish pressure with stochastics still drifting higher. Cross remains capped by the 100-DMA at 1.0162 levels. A break here could see a move towards 1.0221 (38.2% Fibo retracement of the Feb-Apr rally). Moves should remain choppy ahead as the political and policy uncertainty could drag on with a hung parliament. Support is seen at 1.0050 (21DMA) before the 1.0000 levels.

      SGDMYR – Upside Risks. SGDMYR rebounded; last seen around 2.9930 levels. Daily momentum remains mild bearish bias but is waning and stochastics is showing signs of turning from oversold conditions. We reiterate our bias to lean against strength but caution for interim upside risks. Resistance at 3.0150 (21 DMA), before 3.0480 (trend-line resistance from the highs of Nov and Jan) and 3.0640 (76.4% fibo retracement of Oct high to Apr low). Support at 2.9720 (50 DMA) before 2.9570 (38.2% fibo, 100 DMA).

      1s USDMYR NDF – Supported on Dips. 1s MYR was mildly firmer in quiet trade; last seen at 4.04 levels tracking the decline in oil prices.  We remain cautious of sentiment and continue to see mild risks of rebound today. Daily momentum is flat but stochastics is showing tentative signs of turning higher from oversold conditions. Resistance at 4.0550 (21 and 50 DMAs), 4.0700 (38.2% fibo retracement of 2016 high to low). Support at 3.9850 (23.6% fibo retracement of 2016 high to low).

      1s USDKRW NDF – Upside Risks Intra-day. 1s KRW reversed losses and turned higher into NY close amid a pullback in risk sentiment.  Last seen at 1159 levels. We remain cautious on risk sentiment and expect subdued trading in the lead-up to US NFP tonight for further cues. Key technical levels to watch -  Support at 1152 (23.6% fibo retracement of 2016 high to low) before 1145 (trend-line support from the lows in Sep 2014 to Apr 2016). Resistance at 1162 (21 DMA), 1169 (50 DMA).

      USDCNH – Soft. The USDCNH uptick appears to have stalled this morning amid dollar softness. Still, pair’s move lower could be limited after two researchers from the NDRC wrote a commentary that lending and deposit rates cuts cannot be ruled out if 2Q economic data underperforms expectations. This could strengthen CNH bears. Pair was last seen around 6.6985 levels. MACD show bullish bias remains intact thought waning slightly and stochastics is at overbought levels, suggesting the potential for a retracement ahead. Barrier remains at 6.7079 (possible double-top). Continue to expect elevated trades with support around 6.6640 before 6.6560. USDCNY was fixed 33 pips higher at 6.6853 (vs. previous 6.6820). CNYMYR was fixed 5 pips lower at 0.6012 (vs. previous 0. 6008). We continue to expect PBOC to use adhoc measures like pledged supplementary lending, medium term lending facility and standing lending facility to supply credit to the targeted sectors that require more liquidity support. Post-Brexit fears may build case for broad based RRR cuts but doing so may generate flows to assets that are prone to bubbles (real estate in the tier-one property sectors), undo deleveraging efforts in the economy and unhinge the CNY. CPI and PPI for Jun this Sun.

      SGDCNH – Still Levelling Off. SGDCNH remained elevated amid relative SGD strength this morning. Last seen around 4.9670 levels, risk recovery is still swinging the SGDCNH back on the uptrend. Momentum indicators are now showing waning bullish bias and stochastics at overbought levels, suggesting the potential for a retracement ahead. With our multiple resistance levels taken out, barrier remains at 4.9895 levels. Any dips should meet support at 4.9420 before 4.9290.

      MYRCNH – Still Supported. MYRCNH is on the uptick this morning but trades remain choppy even as onshore markets re-open today after a two-day break. Cross was last seen around 1.6590 levels. Barrier is at 1.6800 (76.4% Fibo retracement of the 2015 sell-off, close towards Apr high) before 1.7155. Support is seen a1.6385 (21DMA) before 1.6262 (50DMA). 

      1s USDINR NDF – Range. The 1s NDF is slipped lower this morning, last seen around 67.80 levels. MACD remains below zero line and stochastic remains on the slide towards oversold levels. Support is seen at 67.50 (38.2% Fibo retracement of the Feb-Apr downswing; 50-DMA) before 67.13 (200DMA). Barrier is penciled in at 68.22 (61.8% Fibonacci) before the next at 68.68 (76.4% Fibo). Investors bought USD41.81mn of equity and sold USD21.88 of debt on 5 Jul.

      1s USDIDR NDF – Onshore Markets Closed For The Whole Week. Onshore markets are closed for the whole week for the Ramadan holidays and trades, including 1s NDF, should remain muted. Liquidity is likely to remain thin and this could exacerbate currency swings. 1s NDF was last seen around 13245 levels. Daily has lost most of its bearish momentum and stochastics is still showing tentative signs of climbing out of oversold conditions. Support remains around 13100 levels (1 Jul low). A break of the 13100-levels could see the pair re-test the year’s low at 12295. Immediate resistance is at 13300 (21DMA); 13360 (38.2% Fibo).

      1s USDPHP NDF – Limited Downside.  1s NDF is a tad softer this morning amid dollar weakness. Last seen around 47.180, 1s NDF is showing waning bullish bias and stochastics is hovering just below overbought levels. Note that the 50DMA has cut the 100DMA from below, suggesting potential for upside technically. Moreover, the 21DMA has also cut the 50- and 100-DMAs from below. Markets are likely to trade range as it watches US NFP latter tonight. Any upticks should meet resistance around 47.47 (61.8% Fibo retracement of the Jan-Mar downswing). Dips should find support around 47-figure (200DMA); 46.87 (38.2% Fibo); 46.75 (50DMA). The stock market re-opened yesterday to a sell-off with foreign funds selling USD15.43mn of equities.

      USDTHB – Range.  USDTHB is edging lower again amid dollar weakness. Last seen around 35.210 levels, pair is now exhibiting very mild bullish momentum and stochastics is climbing gradually higher from oversold conditions. Technically, the 50DMA has cut the 100DMA from below, signalling the possibility of bullish risks ahead. Eyes will be on US NFP later tonight for directional cues. Resistance is around 35.270 (100DMA) ahead of 35.325 (50DMA). Support is seen around 35.122 (23.6% Fibo retracement of the Jan-Mar downswing); 35-handle. Expect range of 35.120-35.330 to hold intraday. Risk sentiment improved yesterday with foreign investors buying THB1.79bn and THB6.99bn in equities and government debt. 30 Jun FX reserves is on tap later today.

Rates

Malaysia

      Please note that there will be no fixed income write-up for Malaysia today as onshore markets were closed yesterday.

Singapore

      Please note that there will be no fixed income write-up for Singapore today as Malaysia’s onshore markets were closed yesterday.

Indonesia

      Please note that there will be no fixed income write-up for Indonesia this week as onshore markets are closed.