* While US markets were out overnight, European equities slipped into red amid renewed concerns on UK’s seemingly imminent departure from the European Union.

FX

Global

      While US markets were out overnight, European equities slipped into red amid renewed concerns on UK’s seemingly imminent departure from the European Union. Banking stocks underperformed after Italian PM Matteo Renzi said he is ready to inject public funds into the banking system as a last resort should the industry fall into distress. Not only that, he has rallied for a referendum to change the political system. The referendum is becoming an worrying trend for investors. Elsewhere, Pro-Brexit campaigner Nigel Farage resigned as the leader of UKIP.

      Risk sentiments are likely to remain cautious as suicide bombers hit three Saudi cities and killed at least 4 officers. Elsewhere, Australia resumes vote counting but prospect of a hung parliament is likely to weigh. RBA meets today and we do not expect any rate move. However, uncertainties ahead could mean that the central bank is likely to sound cautious and may reinstate its easing bias back in the statement.

      Some flights to safety were already apparent with USDSGD seen around 1.3470, USDJPY pulled back towards 102.30, 50 pips off overnight highs. US markets open for the week tonight and we watch ISM NY print for Jun, durable and factory orders for May. Singapore releases its Jun PMI today. Philippines’ CPI is also due.

Currencies

   G7 Currencies

      DXY – Bullish Momentum Showing Tentative Signs of Waning. USD was a touch firmer this morning after a quiet session overnight (due to US holidays). Talks of slight risk aversion due to Saudi bombings earlier this morning. DXY was last seen at 95.60 levels. Daily momentum remains bullish bias but showing signs of waning while stochastics is showing signs of falling from near-oversold conditions. Key resistance 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 ISM NY (Jun); Durable, Factory Orders (May); Fed’s Dudley speaks on Tue; Trade (May); Fed’s Tarullo speaks; services/composite PMI (Jun); ISM non-mfg (Jun); FOMC minutes on Wed; ADP employment change (Jun) on Thu; NFP; hourly earnings; unemployment rate (Jun) on Fri. US markets closed for holidays on Mon.

      EURUSD – Sell on Rallies. EUR traded in subdued range of 1.11 – 1.1160 overnight amid quiet session. News report of Italian PM Renzi potentially defying the EU and preparing to “act alone” to rescue the Italian banking system threatens the credibility of the Euro-bloc’s newly implemented banking rule book. This also reinforced our fear of EU contagion risk following UK’s fallout – that more could follow. Monte Di Paschi with a market cap of EUR1bn has NPL worth EUR48bn.  EUR was last seen around 1.1130 levels. We retain our call to sell EUR on rallies towards 1.1150 – 1.12 levels for a move back below 1.10-handle. Daily momentum is 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 ahead brings Services/composite PMI (Jun); Retail sales (May) on Tue; EC retail PMI (Jun) on Wed; ECB Minutes on Thu; EU sovereign debt to be rated by Moody's on Fri.

      GBPUSD – Sell Rallies. GBP saw renewed weakness as first forward looking survey – construction PMI (released yesterday) reminded markets that upcoming data point post-Brexit could start to look alarmingly bad. Construction PMI slumped into contractionary territories of 46.0 vs. 50.7 expected (vs. 51.2 prior). Overnight FT reported that Standard Life has been forced to stop retail investors selling out of one of of it largest property funds after rapid cash outflows sparked by fears of falling real estate values. The fund may need to sell real estate to raise cash before redemption. On technical, 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 1.30-handle. Resistance at towards 1.3570 (23.7% fibo retracement of that 2 day decline of 1.5018 – 1.3121), 1.3840 (38.2% fibo). Price action suggests a potential bearish flag formation in the making (1.3220 – 1.3570). Break below 1.3220 should see a bigger push lower. Week ahead brings Service/ Composite PMI (Jun); BoE Financial Stability Report on Tue; IP (May); House Prices (Jun) on Thu; Trade (May) on Fri.

      USDJPY – Range. USDJPY is drifting lower this morning but is still within a tight range of 101-103.5 as global risk appetite wane, dragging the equity market lower. Nikkei futures are down, signalling potential for further downside to the pair ahead. Despite the drop in Abe’s cabinet approval rating, the ruling LDP and its coalition partner still is poised to win a majority in the Upper House election. As we had written in our FX Monthly, a win could shift Abe’s focus from economics to security and constitutional issues. This could see the USDJPY drift ahead. Pair was last seen around 102.30 levels. Daily momentum continues to show waning bearish bias and stochastics showing no strong bias in either direction. Weekly stochastics remains near oversold conditions. Risk of a technical rebound still cannot be ruled out. Resistance at 103.77 (38.2% Fibo retracement of May-Jun downswing); 104.77 (21DMA); 105.25 (50% Fibo). Support remains at 101.95 (23.6% Fibo); 99-figure (year’s low). Further reduction in confidence in Abenomics could see a move towards the 95-handle. Week ahead has PMI (Jun) on Tue; BOJ Kuroda speaks on Thu; Trade balance (May), Cash Earning (May) on Fri.

      NZDUSD – Tactical sell on Rally. NZD rally failed to gather further momentum.  Last seen at 0.7210 levels.  Weekly momentum remains bullish bias. But 4-hourly technical shows signs of bearish bias. We suggest selling at current levels (spot ref of 0.7210) for a move towards 0.7130 first objective before 0.7070 (21 DMA), 0.6930 (50% fibo retracement of Apr 2015 high to low). Stop loss above 0.7250. Week remaining brings Government Financial Statement; Business Opinion Survey on Tue.

      AUDUSD – Resilience In Times of Uncertainty. The vote counts resume today but investors seem unperturbed as yet. What we find worrying is the fact that other parties with more extreme interests like One Nation have gotten a pretty strong mandate. A minority government could lead to policy paralysis. Prospect of a hung parliament weighed as the fate of Australia’s most prized AAA sovereign rating hang in the balance. AUD remained fairly supported, around 0.7520 at last sight. Pair has drifted back to the 0.7514 level and a break there could bring the pair towards the 0.7450 (38.2% fibonnaci retracement of the Jan-Apr rally) before the next at 0.7593(23.6%). Next support at 0.7150. Barrier is seen around 0.7593. RBA meets today and we do not expect any rate move. However, uncertainties ahead could mean that the central bank is likely to sound cautious and may reinstate its easing bias back in the statement. Building approvals for May slipped more than expected by -5.2%m/m from a growth of 3.0% previously. Week ahead has RBA Meeting; Retail Sales, trade balance (May) on Tue, RBA Debelle speaks on Wed, FX Reserves (Jun) on Thu.

      USDCAD – Rangy. This pair drifted lower and was last seen around 1.2880, still within the 1.2660-1.3160. Interim support is now seen around 1.2886 (50-DMA). Canadian manufacturing index for Jun came in weaker than expected at 51.8 vs 52.1 previously. Jun labour report is due on Fri. Consensus expects unemployment rate to inch up to 7.0% from previous 6.9%. Net change in employment is estimated to be around 6.5K vs. previous 13.8k.

Asia ex Japan Currencies

      The SGD NEER trades 1.00% above the implied mid-point of 1.3597 with the top estimated at 1.3327 and the floor at 1.3866.

      USDSGD – Rangy Ahead of Public Holiday Tomorrow.  After a week on the slide, USDSGD is edging higher this morning as global risk aversion returned with equity markets in Europe closing mostly in the red. However, trades could be muted as onshore markets will be closed tomorrow for a public holiday and re-opens on Thu. Liquidity is likely to be thin in ASEAN as a few of the other markets in the region will also be closed from tomorrow and this could exacerbate currency swings. Last seen around 1.3470 levels, pair has lost most of its mild bullish momentum and stochastics is showing no strong bias. Weekly momentum remains slightly bearish bias. 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). Week ahead brings Jun Nikkei PMI on Tue; Jun FX reserves on Thu; 2Q Adv. GDP due sometime between 7-14 Jul.

      AUDSGD – Still Choppy. AUDSGD hovered around 1.0140 after a strong rally yesterday. MACD shows increasing bullish pressure though stochastics are drifting lower. The 200-DMA at 1.0128 has been broken on yesterday’s close. Moves should remain choppy ahead as the political and policy uncertainty could drag on with a hung parliament. Support is seen at 0.9900 (76.4% Fibonacci retracement of the Feb-Apr rally) before 0.9720.

      SGDMYR – Bearish but Could Be Supported Intra-day. SGDMYR rebounded slightly this morning; last seen around 2.9720 levels. Daily momentum remains mild bearish bias. We reiterate our bias to lean against strength. Next support at 2.9720 (50 DMA) before 2.9570 (38.2% fibo, 100 DMA). 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). But intra-day we caution for potential rebound. See range of 2.96 – 2.99.

      USDMYR– Risk of Rebound. USDMYR saw a mild rebound this morning ahead of the long weekend starting tomorrow. We are cautious of sentiment and see risks of rebound today. Pair was last seen at 4.0070 levels. Daily momentum remains bearish bias but 4-hourly stochastics is showing signs of turning higher from oversold conditions. Resistance at 4.04 (100 DMA), 4.0760 (21 DMA). Support at 3.9850 (23.6% fibo retracement of 2016 high to low). Day ahead brings Jun FX reserves.

      1s USDKRW NDF – Upside Risks Intra-day. 1s KRW remains on a rebound this morning amid cautious sentiment. Last seen at 1155 levels. While daily momentum is mild bearish bias, shorter term technical suggest upside risk.  Next resistance at 1162 (21 DMA), 1168 (50 DMA). Support at 1145 (trend-line support from the lows in Sep 2014 to Apr 2016).

      USDCNH – Mildly Firmer. The USDCNH edged higher this morning on the back of weaker risk appetite. Sentiments on the yuan are still bearish. Last seen around 6.6805. Barrier at 6.6820 could be tested. Continue to expect elevated trades with support around 6.6560. USDCNY was fixed 122 pips higher at 6.6594 (vs. previous 6.6472). CNYMYR was fixed 10 pips lower at 0.5985 (vs. previous 0.5995). 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. Week ahead has China’s Caixin services are due today followed by FX reserves for Jun on Thu and then CPI and PPI for Jun this Sun.

      SGDCNH – Levelling Off. SGDCNH remained elevated, last seen around 4.9600. Risk recovery has swung the SGDCNH back on the uptrend. Momentum indicators are now showing a mild decrease in bullish bias and stochastics at overbought levels. With our multiple resistance levels taken out, new barrier is at 4.9895 levels. Any dips should meet support at 4.9420 before 4.9290.

      MYRCNH – Supported. Moves in this cross have been rather muted, last seen around 1.6685 levels. Barrier is at 1.6800 (76.4% Fibonacci retracement of the 2015 sell-off, close towards Apr high) before 1.7155. Support is seen at 1.63-handle (21DMA) before the 1.6191 (100DMA). 

      1s USDINR NDF – Cabinet Shakeup. The 1M NDF was last seen around 67.60. MACD has slipped under the zero line and stochastic remains on the slide. Support is seen at 67.4343 (50-DMA) before 67.1030 (100-DMA). Barrier is penciled in at 68.22 (61.8% Fibonacci retracement of the Feb-Apr downswing) before the next at 68.68 (76.4% Fibo). Investors sold USD39.1mn of equity and bought USD60.9mn of debt on 1 Jul.  Week ahead has no tier one data of note. At home, a cabinet shakeup is in the making. PM will induct 19 new ministers today (at 11am) and remove 6.

      1s USDIDR NDF – Onshore Markets Closed For The Whole Week. Onshore markets are closed for the whole week for the Ramadan holidays and trades are likely to be muted. 1M NDF should see quiet trades as a result. Liquidity is likely to be thin in ASEAN as a few of the other markets in the region will also be closed from tomorrow and this could exacerbate currency swings. 1M NDF was last seen around 13165 levels. Daily momentum remains bearish bias and stochastics is fast approaching oversold conditions, suggesting risk is still to the downside. 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 13245 (23.6% Fibo retracement of the May-Jun downswing); 13360 (38.2% Fibo).

      1s USDPHP NDF – Capped.  1M NDF is little changed this morning climbed as global risk appetite waned as reflected in the sell-off in European equities overnight. 1s NDF was last seen still below the 47-figure around 46.94 levels. was last seen around 46.96 levels. Daily chart is showing waning bullish bias and stochastics falling from overbought levels. With risks tilted to the downside, further upticks could be capped intraday. Note that the 50DMA has just cut the 100DMA from below, suggesting potential for upside technically. Look for upside to be capped around 47.20 (50% Fibo); 47.50 (61.8% Fibo). Any dips should find support around 46.87 (38.2% Fibo retracement of the Jan-Mar downswing); 46.75 (50 & 100DMA). Positive risk sentiment led foreign funds to buy USD10.97mn in equities yesterday. Remaining week has Jun FX reserves on Thu. Headline inflation rose by 1.9% y/y (May: 1.6%) in Jun, coming in within expectations, lifted by higher food prices. Core inflation rose by 1.9% y/y in Jun as well from May’s 1.6%.

      USDTHB – Bullish Bias.  USDTHB is back on the upswing as global risk aversion picked-up as reflected in the sell-off in European equities overnight. Pair was last seen around 35.100 levels. Daily momentum is showing very mild bearish bias and stochastics remains at oversold conditions, suggesting the potential for a rebound ahead. Technically, the 50DMA has cut the 100DMA from below, signalling the possibility of bullish risks ahead. Immediate resistance is around 35.120 (23.6% Fibo retracement of the Jan-Mar downswing); 35.200 (21DMA); 35.285 (100DMA). Support is seen around 34.8910; 34.720 (year’s low). Risk-supported sentiment led foreign investors to buy THB3.40bn and THB5.09bn in equities and government debt yesterday. Remaining week has 30 Jun FX reserves on Fri.

Rates

Malaysia

      In MGS market, flows were still seen despite the holiday shortened week. The yield curve lowered 1-6bps on the back of foreign name buying. 5y MGS 11/21 ended -6bps lower at 3.26% with a total of MYR66m trades done. There were some rollovers from the hefty MYR10b MGS 7/16s maturing middle of the month. The next large maturity will be in September of about MYR12b.

      MYR IRS market was quiet in spite of the firm Malaysian govvies, possibly due to the US holiday and short working week locally. Nothing was reported traded in the market. 3M KLIBOR remained the same at 3.65%.

      PDS market was also quiet with only MYR251m trades done. In the GG space, Prasa 19s traded unchanged at 3.65% (G+17bps/Z+14bps), while Dana 21s widened 2bps to 3.86% (G+52bps/Z+28bps). The former looks tight but the latter seems attractive as there may still be some upside for belly and long end GGs. Some AAAs also exchanged hands. Putra 23s tightened 2bps to 4.26% which seems wide against the benchmark curve.

Singapore

      SGS saw buying on dips at the open after SGD IRS curve moved higher in tandem with the USD curve. Whilst SGD IRS curve bear steepened, SGS saw good demand for the long ends. SGS benchmark yield curve closed +1bp/-1bp. SGD IRS ended flat to +2bps, even though USDSGD forwards moved to the left. Swap spreads widened by 1-2bps.

      Asian credits had a quiet start to the week on the backdrop of the US holiday. Spreads generally held firm. HRAM curve did well trading 3-5bps tighter with firm buying interest. The curve tightened 20-25bps from post-Brexit wides.

Indonesia

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