With the anticipated Fed move still weeks away, it seems likely that the USD may see another correction before the next leg up. Overnight move was notably choppy with the EURUSD headed towards the mid-1.085 at one point before a complete reversal towards the 1.09 thereafter. GBPUSD was also whipped around with a test below 1.21 at one point before r

FX

Global

       With the anticipated Fed move still weeks away, it seems likely that the USD may see another correction before the next leg up. Overnight move was notably choppy with the EURUSD headed towards the mid-1.085 at one point before a complete reversal towards the 1.09 thereafter. GBPUSD was also whipped around with a test below 1.21 at one point before rebounding a big-figure higher, last seen around tapering around 1.2170. Overall, the DXY index seems broadly softer by the end of the session, weighed also by the weaker Oct confidence and disappointing earnings report.

       Australia’s 3Q CPI came in firmer than expected at 1.3y/y vis-à-vis the expected 1.1% which was already firmer than the previous 1.0%. That has unwound rate cut bets for Nov and AUDUSD sprung higher towards the big 0.77-figure. The trimmed-mean met expectations at 0.4%q/q, 1.7%q/q. With the headline inflation still out of the 2%-3% inflation target range. With Philip Lowe still wanting to guard against inflation heading too low, we suspect that the current run-up may run out of steam in no time.  We anticipate this pair to be capped at 0.7750 (Aug high).

       The day ahead seems quiet in terms of data release with only US new home sales for Sep and PMI numbers due for Oct. Singapore has industrial production due for Sep and Thailand will release its custom trade numbers. Asian equity indices are off on a soft start. Anticipate equity-related outflows to keep USDAXJs supported on dips.

Currencies

G7 Currencies

       DXY – Speed Bumps. A combination of weaker than expected US consumer confidence (possibly due to upcoming Presidential Elections uncertainty) and softer earnings put the brakes on USD rally. DXY high was seen at 99.10 before turning lower. Last seen at 98.70 levels. Momentum on daily, weekly charts remains bullish bias. But daily stochastics shows signs of turning from overbought conditions. Risk of pullback towards 98-levels (76.4% fibo retracement of 2016 high to low). Bigger support remains at 97.50, 96.80 (61.8% fibo), 95.90 (200 DMA, 50% fibo). Interim resistance at 99.10 (yest high). Our bias remains to buy USD on dips. Week ahead brings New Home Sales (Sep); Services, Mfg PMI (Oct) on Wed; Durable, Capital Goods Orders (Sep prelim); Kansas City Fed Mfg activity (Oct); Pending Home Sales (Sep) on Thu; GDP, Core PCE (3Q); Uni. Of Michigan Sentiment (Oct) on Fri.

       EURUSD – 1.0780 – 1.0940 Range. ECB Draghi defended ECB’s easy money policies; stresses commitment to low rates until inflation target is met; monetary policy is working but low interest rates are not costless. EUR consolidation seen after making 7-month lows. Last seen at 1.0880 levels amid pullback in USD strength. Weekly, daily momentum indicators remain bearish bias but daily stochastics is at oversold conditions. This could signal that a rebound could be due. And a move towards 1.0940 levels should not be ruled out.  We now expect a range of 1.0850 – 1.0940 (previous support turned resistance, with bias to lean against strength. Bigger support at 1.0780 (76.4% fibo retracement of Dec low to 2016 high) before 1.06. Week ahead brings M3 Money Supply (Sep); ECB’s Mersch speaks on Thu; ECB’s Coeure speaks; Consumer, Economic, Industrial Confidence (Oct) on Fri.

       GBPUSD – 3Q GDP on Tap Today GBP had initially tested lower overnight (Bloomberg printed a low of 1.2083) amid broad USD strength. But regained losses and turned higher towards sub-1.22 levels after BoE Carney’s comments. He said BoE is “not indifferent to moves in the Pound”. In his testimony to the House of Lords Economics Committee, he noted that recent move in GBP appears to relate to market perceptions of adjustment to supply and demand in future; not a targeter of exchange rate but not indifferent to the level of the exchange rate. On CPI, he said there are limits to MPC willingness to look through CPI overshoot; MPC discussed earlier that GBP depreciation was going to lead to inflation around 2.5% over 2-3 years of the forecast horizon. GBP was last seen at 1.2170 levels.   Daily momentum is not providing a clear indication while stochastics is showing signs of mild rise – rebound risks remain. Resistance now at 1.2490 (21 DMA). Support at 1.20. Week ahead brings GDP (3Q); CBI Sales (Oct) on Thu; S&P Rating Decision of UK Sovereign Debt on Fri.

       USDJPY – Retracing; Opportunity To Accumulate On Dips.  USDJPY slid back towards the 104-handle overnight amid a retracement in the dollar. Nikkei futures are also lower this morning, adding some downside pressures on the pair as well. Pair nevertheless remains in consolidative mode within 103-105 ahead of the BOJ meeting at the end of the month. Still, comments last week by BOJ governor that the JPY80tn bond buying target might not be necessary in the future and market belief that the new policy framework signalled a tapering should still weigh on the pair. On the monetary policy front, we expect the BOJ to remain on hold until Dec 2016. Nevertheless, risk remains that the BOJ could surprise the market with a cut to the rate interest to -0.3% to spur reflation efforts. As well, the deadline for achieving the 2% inflation target could be pushed back further to FY2018.  Pair was last seen around 104.04 levels. Daily momentum indicators are very mildly bullish bias and stochastics is falling. Weekly chart though is showing bullish bias. We remain bias to long in the pair for a move toward 105.60; 108 levels. Thus, further dips towards the 103 levels (100DMA), 102 levels (50DMA) remain opportunities to buy into. Remaining week has CPI, jobless rate, overall household spending (Sep) on Fri. Yesterday, the government reiterated its assessment for the economy that it is on a moderate recovery track. Soft spots including sluggish consumption remain though.

       NZDUSD – Lean against Strength. NZD was a touch softer this morning despite USD pullback. Expectations for rate cut in Nov remains, with implied probability from OIS showing more than 80% chance of cut. NZD was last seen at 0.7150 levels.  Bias remains to lean against strength. Resistance at 0.7240 (50 DMA). Support at 0.7070 (upward sloping trend-line support from the lows in Jan and Jun). We see range bound between 0.7070 – 0.7240. Only a break below the support paves the way for a move towards 0.6960 (200DMA). Week ahead brings Trade (Sep) on Thu.

       AUDUSD – Unwind Rate Cut Bets on the RBA. AUDUSD bounced higher this morning, on the back of the upside surprise in the inflation report for 3Q. RBA rate cut bets were unwound thereafter but we suspect not for long as the trimmed mean measure steadied from the previous print of 1.7%. Pair was last seen at 0.7680 levels. We see upmoves to be capped by 0.7750 before the next resistance at 0.7835 (year high). With pair likely to remain within range, we see more room for a downmove towards the 0.7570-figure.  Week ahead brings RBA CIO Girn speaks on Wed; Export, Import Prices (3Q) on Thu; New Home Sales (Sep); PPI (3Q) on Fri.

       USDCAD – Breaking Higher. USDCAD hovered around 1.3360 as we write this morning after choppy moves seen in the first half of this week. Daily momentum and stochastics indicators are pointing to a bullish bias. Sustained price action above 1.3310 (38.2% fibo retracement of 2016 high to low) could see the pair higher towards 1.3575 (50% fibo). Support at 1.33 levels before 1.3190 (21 DMA). In news at home, Prime Minister Justin Trudeau said that it is “difficult to imagine” Canada rejecting the Trans Pacific Partnership.

     Asia ex Japan Currencies

       The SGD NEER trades around 1.07% below the implied mid-point of 1.3742 with the top estimated at 1.3464 and the floor at 1.4020

       USDSGD – Back Below 1.39-Handle; Still Bias To Buy On Dips.  USDSGD found some relief overnight amid a retracement in the USD and the slide in the USDJPY. The MAS’ Macroeconomic Review (MR) continue to suggest that the neutral policy stance will continue into 2017 as no major deterioration in the macroeconomic environment is expected though growth is expected to remain lacklustre and core inflation on a slow ascent only. Moreover, to offset the cyclical nature of the slowdown, fiscal policy by the government cannot be ruled out even as MAS maintains its neutral policy stance for an extended period. Focus will now be on industrial production for Sep and 3Q unemployment prints later this afternoon and tomorrow respectively for further clues about the economic environment. Weak prints would keep the pair bounce back above the 1.39-levels. Pair was last seen around 1.3895 levels. Daily and weekly momentum indicators are still bullish bias. Stochastics though remains at overbought conditions, suggesting the potential for a pullback in the near term. We remain bullish bias in the pair though and are bias to accumulate on dips for a move towards the 1.4010 (61.8% fibo retracement of the 2016 high to low). Should support at 1.3880 (50% fibo) be taken out on a daily close, next support is seen at 1.38-levels (21DMA) before 1.3750 (38.2% fibo, 21DMA), 1.3670 (200DMA). The MAS’ MR presented a subdued outlook for the economy. The economy is currently in a cyclical downturn and the subsequent recovery is unlikely to be “decisive” with another year of sub-par growth expected in 2017, just slightly higher than 2016 where growth is expected at the lower end of the 1-2% forecast range. The MR re-emphasized the gradual ascent in inflationary pressures given the lack of demand-induced pressures. Thus, the MAS inflation outlook remains intact with core inflation expected to come in around 1% and 1-2% in 2016 and 2017 respectively. Consequently, the MAS has assessed it necessary to adopt a neutral policy for “extended period” to facilitate the closing of the output gap and ensure medium term price stability. Thus, a hurdle for further easing by the MAS is high, unless a material deterioration in the macroeconomic environment materializes. Just as important, aside from accommodation monetary policy, fiscal policies could also be enacted to lift some of the slack that is emerging in the economy.

       AUDSGD – Retracement Risks. AUDSGD swung higher this morning, led by the strong AUD. Last seen at 1.0680 levels. We still see a potential short term pause from recent rally but uptrend remains intact and should continue to go higher. Our objectives are at 1.0750 (50% fibo retracement of high in Sep 2014 to 2016 low), 1.10 (61.8% fibo), 1.12 medium term. Meanwhile pullback can re-visit support at 1.05 (38.2% fibo, trend-line support), 1.0350 (50 DMA). Accumulate on dips.

       SGDMYR – Lean against Strength. SGDMYR remained soft below 3-figure amid MYR gains (on recent Budget – which displayed commitment to fiscal discipline and consolidation, supporting domestic demand via corporate income tax cuts, infrastructure spending). Cross was last seen around 2.9880 levels. Our second objective at 2.99 (50% fibo retracement 2015 high to 2016 low) was met. We reiterate our bias to lean against strength, targeting next objective at 2.9780 (200 DMA). Resistance at 3.0230 (61.8% fibo), 3.0450 levels (interim double top).

       USDMYR – Bearish. Ringgit continued to hold on to gains helped largely by recent Budget Statement  which displayed commitment to fiscal discipline and consolidation, supporting domestic demand via corporate income tax cuts, infrastructure spending amid USD pullback. USDMYR was last seen at 4.15 levels. Daily momentum and stochastics continue to indicate a bearish bias. Key support at 4.1430 levels (50% fibo retracement of 2016 high to low) before 4.1150 (50 DMA). Resistance at 4.1650 (21 DMA), 4.21 levels (61.8% fibo).

       1s USDKRW NDF – Interim Top at 1140. 1s USDKRW fell amid USD pullback. Last seen at 1132 levels. Bullish momentum on daily chart is waning and stochastics has fallen from overbought conditions. Interim resistance seen at 1140 (mini-double top) before 1144 (50% fibo retracement of Jun high to Aug low). Support at 1129 (100 DMA) before 1121 levels (21 DMA). In data release this morning, consumer confidence rose to 101.9 (vs. 101.7 prior) while households inflation expectation for next 12 months was unchanged from prior levels of 2.5%.

       USDCNH – 6.80 Within Reach. USDCNH edged higher after the downswing yesterday, last seen around 6.7790. Capital outflows are also weighing on the yuan. Market appears to be testing the Chinese government’s perceived tolerance for a weaker yuan following a slump in exports, sending the pair to a multi-year high of 6.7885. Pair has since come off to hover around 6.7876. We remain bias to long CNH against the NZD, SGD and EUR. USDCNY was fixed 39 pips higher at 6.7705 (vs. previous 6.7744). CNYMYR was fixed at 0.6115, 30 pips lower than the previous 0.6145.  Date-wise, it is a light week ahead with the spotlight on the 6^th party plenum currently underway. This plenum will be closely watched as President Xi is expected to consolidate his power by appointing his associates to the higher echelon of the party. His ability to do so will bode well for his push to deepen reforms, especially restructuring the economy. Focus is also on the anti-graft vendetta that Xi has started four year ago. Two sets of internal discipline measures will be officially enacted by the CPC Central Committee (China Daily). Aside from the ongoing party plenum that will end on Thu, week ahead has just industrial profits (Sep) on Thu.

       1s USDINR NDF – Upside Risks.  The 1s USDINR NDF is on the uptick this morning amid a firmer dollar tone. This NDF continues to be resilient to pressure on both sides and is in range trades within 66.80-67.40. Last seen at 67.17 levels. Daily momentum indicators remain bullish bias. Range-bound trades remain likely ahead within 66.80-67.40, though some upside risk remain given the broad USD strength. Foreign investors sold USD58.6mn of equities on 24 Oct, but purchased USD114.2mn of government debt. Quiet week ahead with no tier 1 data due.

       1s USDIDR NDF – Bearish Bias. 1s USDIDR NDF is on the slide amid a weaker USD overnight. Nevertheless, pair remains in range trades within 12995-13170 in the absence of fresh catalyst. Risks though are still to the upside given the potential for further USD strength as well as BI intervention risk to curb IDR strength as well as the possibility of further frontloading of rate cuts by the central bank. 1-month NDF was last seen at 13038 levels. Daily momentum remains bullish bias but is waning, though stochastics is falling. Weekly chart is now indicating mild bearish bias. Resistance is at 13160 (50DMA); 13225 (23.6% fibo of the 2016 high to low). Support at 12995, 12914 (year’s low on 27 Sep). The JISDOR was fixed lower at 13022 on Tue from Tue’s 13047. Risk sentiments remained supported with foreign investors purchasing USD9.12mn in equities yesterday. They had however removed IDR0.29tn from their outstanding holding of government debt on 24 Oct (latest data available). Quiet week ahead with no tier 1 data due.

       1s USDPHP NDF – Upside Bias Within Range. 1s USDPHP is trading higher this morning despite the weaker dollar overnight. Pair was last seen around 48.30 levels. Daily momentum indicators continue to show bearish bias and stochastic is fast approaching oversold conditions. This suggests that further upticks could be capped. 1-month NDF though remains supported by investor concerns about higher global oil prices, expectations of Fed rate hikes, US election concerns and more importantly, the government’s extra-judicial killings, policy flip-flops and the president’s unpredictable temperament. This is despite the strong domestic macroeconomic fundamentals such as balance of payment surplus and still healthy overseas remittances. Reflecting these concerns, foreign funds continued their sell-off of equities with USD6.73mn sold off yesterday. Interim resistance remains around 48.40 (21DMA) ahead of 48.70. Support remains around the 48-figure. Range trades with 48.00-48.70 should continue to hold intraday. Quiet week with no tier 1 data on tap.

       USDTHB – Upside Risks.  USDTHB is on the bounce higher despite the retracement in the USD overnight. The death of HM King Bhumibol and the year-long mourning period and some concerns about the royal succession had weighed somewhat on sentiments but the relative calm and stability that followed have mitigated some of the risks. This allowed the pair to slip back below the 35-handle as a result. Pair was last seen around 34.925 levels. Daily momentum indicators are bearish bias and stochastics is fast approaching oversold conditions. Range-trades remain likely for now, though there are some upside risks due to the potential for further dollar rally. Resistance is at 35-figure (21DMA), 35.160 (200DMA), 35.230 (38.2% fibo retracement of the 2016 high to low). With support at 34.950 (23.6% fibo, 100DMA) taken out, new support is at 34.825 (50DMA), 34.540. On shore markets re-opened yesterday mixed with foreign investors selling THB0.57bn in equities and purchasing THB8.24bn in government debt.

Rates

Malaysia

       MYR government bonds had better buyers as the curve ended 1-4bps lower from previous day. Trades mostly centered on the front end. The 20y MGS 5/35 got done at 4.28% (-1bp), while market awaits announcement of the issue size for the 20y reopening auction to start the WI session. We are anticipating a MYR1.5b size.

       IRS continued to see better receivers on the back of the stronger MYR spot and bond market. But there were no trades reported and the curve generally stayed the same. 3M KLIBOR unchanged at 3.40%.

       For corporate bonds, trading mostly focused on GGs. SME Bank opened book for its 5y and 7y notes, and in the pipeline there is also Bank Pembangunan next week which is looking at 10y bonds. SME Bank is hoping to raise MYR600m or less, and initial yield levels are guiding at 45-53bps above MGS for both notes. These levels seem a tad tight considering the low liquidity for the name.

 Singapore

       SGS market was muted and the government bonds traded range bound with yields ending unchanged to 1bp lower. It was also lackluster for SGD IRS market where levels closed the same as previous day.

       Asian credit spreads mostly flat to 1-2bps tighter. New MTRC tightened about 5bps, while Lippo Karawaci is 1.5pts higher. INDONs and PHILIPs pretty much flat. In primary, Danone is opening book for a 5-tranche EUR issuance, BOCOM Financial Leasing guided its 3y and 5y bonds at T3+150bps and T5+165bps respectively, and CBA is looking to issue again, this time around with a 3y bond and IPG at T3+90-95bps.

 Indonesia

       Indonesia bond market closed mixed backed by Indonesia finance ministry comments that the government would not be too aggressive to issue IGS in 2017 while hinder by lower expectation of 2016 GDP growth to 5% (according to Indonesia Finance ministry). 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 6.774%, 7.027%, 7.393% and 7.580% while 2y yield moved lower to 6.666%. Trading volume at secondary market was seen heavy at government segments amounting Rp18,412 bn with FR0059 as the most tradable bond. FR0059 total trading volume amounting Rp7,212 bn with 138x transaction frequency.

       Indonesian government conducted their conventional auctions today and received incoming bids of Rp15.32 tn bids versus its target issuance of Rp10.00 tn or oversubscribed by 1.53x. The bids were lower by approx. 41.1% compared to YTD average incoming bids during conventional auction amounting Rp26.02 tn. However, DMO only awarded Rp11.62 tn bids for its 8mo, 11y, 15y, 20y and 28y bonds. Incoming bids were mostly clustered on the FR0059 series. 8mo SPN was sold at a weighted average yield (WAY) of 5.99421%, 11y FR0059 was sold at 7.03968%, 15y FR0073 was sold at 7.40879%, 20y FR0072 was sold at 7.59937% while 28y FR0067 was sold at 7.73061%. No series bids were rejected during the auction. Bid-to-cover ratio during the auction came in at 1.17X – 3.36X. On total, Indonesian government has raised approx. Rp626.6 tn worth of debt through domestic and global issuance which represent 95.8% of this year target of Rp654.4 tn.

       Corporate bond trading traded thin amounting Rp551 bn. BEXI03ACN2 (Shelf Registration III Indonesia Eximbank Phase II year 2016; A serial bonds; Rating: idAAA) was the top actively traded corporate bond with total trading volume amounted Rp110 bn yielding 7.049%.