* Indonesia bond market moved mixed during the day as FOMC left the reference rate unchanged at 0.5% - 0.75% and did not guide on the next hike. U.S. Labour data which will be release post market close today would be the last significant data release this week. However, the result would i

FX

Global

      Likely to See Range-Bound Trades Ahead of US NFP. Mixed fortunes for the USD overnight – firmer against EUR, GBP while softer against most currencies, including AXJs (KRW, TWD) and commodity-linked currencies (AUD, CAD).  Focus today on US payrolls, after the massive upside surprise in ADP  employment data on Wed. Consensus is expecting 180k increase in Jan NFP (vs. 156k prior), unemployment rate to hold steady at 4.7% and +0.3% m/m increase in average hourly earnings (vs. 0.4% prior). Stronger data (with NFP above 220k) will reinforce the Fed’s beliefs that it has delivered on its dual mandate and could suggest that Fed could be on course to raise rates by more this year. This should lend some support to USD. But before the release of US payrolls, we expect USD/FX to consolidate in recent range.

      GBP Crumbled on BoE, Carney. GBP rallied to a high of 1.2706 yesterday on BoE meeting which was initially perceived to be hawkish (2017 growth forecast upgraded substantially to 2% from 1.4% and inflation to peak in 1H 2018 at 2.8%) but GBP’s rally proved short-lived as Sterling came crumbling post BoE Carney’s press conference. He said there is “slack in the labor market”. Unemployment rate at 5% was previously thought to be full employment but BoE now says it can fall to 4.5%, meaning that economic growth may not be inflationary and suggests that the potential sharp increase in inflation for 2017 may not be as worrisome as previously thought (which markets thought may lead to BoE raising rates). This suggests perhaps greater tolerance on rising inflation from MPC.

      PMI Services; China Ups 7D Repo Rate by 10bps. Services PMI from around the world including US, Euro-area, UK) are on tap today. China returns from Lunar New Year holidays today. China’s Jan Caixin manufacturing PMI missed estimate. Nonetheless still in expansionary territory. USDCNY fixing came is at 6.8556 (vs. 6.8588 last week); PBoc sells 7d reverse repos at 2.35% (vs. 2.25% previously).

 

Currencies

G7 Currencies

      DXY – Will Payrolls Surprise? Mixed fortunes for the USD overnight – firmer against EUR, GBP while softer against most currencies, including AXJs (KRW, TWD) and commodity-linked currencies (AUD, CAD). Focus today on US payrolls (930pm SG/KL time), after the massive upside surprise in ADP  employment data on Wed. Consensus is expecting 180k increase in Jan NFP (vs. 156k prior), unemployment rate to hold steady at 4.7% and +0.3% m/m increase in average hourly earnings (vs. 0.4% prior). Stronger data (with NFP above 220k) will reinforce the Fed’s beliefs that it has delivered on its dual mandate and could suggest that Fed could be on course to raise rates by more this year. This should lend some support to USD. DXY was last seen at 99.80 levels. We had shared that 99 – 99.50 is a key area of support. A break below this may exacerbate further downside towards 97.40 levels. We expect this area of support to hold in the interim. Daily stochastics is in near-oversold conditions while price action showed a falling wedge formation in the making. This is typically a bullish reversal pattern (question lies in when it reverses).  Resistance at 100.80 (38.2% fibo), 101.90 (23.6% fibo) before 103.80 (2017 high). Week remaining brings NFP, Unemployment rate, hourly earnings (Jan); ISM, Services PMI (Jan); Durables Goods Order (Dec); Fed’s Evans speaks on Fri.

       EURUSD – Lean against Strength. EUR fell overnight. GBP’s decline post BoE yesterday likely to have spilled over to the EUR. ECB’s Praet said there are ‘many risks, many uncertainties’… “worried about the signals we get from the US but still at the end of the day we hope they’ll still be reasonable”.  Pair was last seen at 1.0760 levels. Price action still show a rising wedge formation, characterised by higher highs and higher lows, moving between 2 upward sloping and converging trend-lines – Question is when will the support (1.0680) break? Resistance remains at 1.08 (100 DMA). Move beyond this puts next resistance at 1.0890 levels. A decisive move above 1.0890 (Dec high) nullifies our bearish bias. Still look to lean against strength on monetary policy divergence play. We look for further downside towards 1.06, 1.0550 levels. Week remaining brings PPI (Dec) on Thu; Services PMI (Jan); Retail Sales (Dec) on Fri.

       GBPUSD – Services PMI on Tap Today. BoE MPC maintained monetary policy status quo overnight, as widely expected. GBP rallied to a high of 1.2706 yesterday on BoE meeting which was initially perceived to be hawkish (2017 growth forecast upgraded substantially to 2% from 1.4% and inflation to peak in 1H 2018 at 2.8%) but GBP’s rally proved short-lived as Sterling came crumbling post BoE Carney’s press conference. He said there is “slack in the labor market”. Unemployment rate at 5% was previously thought to be full employment but BoE now says it can fall to 4.5%, meaning that economic growth may not be inflationary and suggests that the potential sharp increase in inflation for 2017 may not be as worrisome as previously thought (which markets thought may lead to BoE raising rates). This suggests perhaps greater tolerance on rising inflation from MPC. We had shared that UK faces the issue of current account deficit and rising budget deficit; growth prospects may suffer if investment and consumer spending fall (arising out of an erosion in real wages). Full process of Brexit has not even been fully felt as formal trade negotiations have yet to begin (with the EU) and questions remains if HQs will be relocated and if jobs will be lost. GBP was last seen at 1.2520 levels. Price action saw an outside day reversal (suggesting potential downside pressure going forward). Bullish momentum on daily chart is showing further signs of waning while stochastics has fallen from overbought conditions. Our resistance at 1.2720 (23.6% fibo retracement of Jun high to recent low) held well. Next support at 1.2430 (50 DMA). Data weakness today could be catalyst for GBP to test lower. Day ahead brings Services, Composite PMI (Jan) on Fri.

       USDJPY – Downside Pressure; But Bias to Buy Dips. USDJPY continued to come under pressure this morning. Longer end (10Y and beyond) UST-JGB bond yields differentials are narrowing.  US payrolls data later tonight could be a catalyst for USDJPY. Pair was last seen at 112.60 levels. Bearish momentum on daily chart remains intact. Key area of support remains at 112 – 112.60 levels. A decisive move below this puts next support at 109.90 levels (50% fibo retracement from Nov low to Dec high). Resistance at 115.20 (50 DMA). While downside pressure remains, we look for tactical opportunities to buy on dips towards 112 (SL below 111.50), targeting a move towards 114.50.

       NZDUSD – Eyeing the break below 0.7280, 0.7235 NZD’s gains were retraced into NY close overnight amid USD rebound. Pair was last seen at 0.7295 levels. Highs remained capped under 0.7350 levels. We continue to flag out a potential rising wedge formation in the making (bearish reversal). Bullish momentum on daily chart is also showing signs of waning while stochastics is showing tentative signs of falling from overbought conditions. Key support level at 0.7280 (upward sloping trend-line support from the lows in Jan 2017). A decisive close below this puts next support at 0.7235 (23.6% fibo retracement of Dec low to Jan high). We do not rule out further downside towards 0.7164 (38.2% fibo), 0.7136 (100 DMA), 0.7110 (200 DMA). We reiterate that our short term bearish call will be nullified on close above Tue’s high of 0.7350.

       AUDUSD – Up, up and Away? This pair came within striking distance of the 0.77-figure overnight before tapering off to levels around 0.7660 amid profit-taking. The uptrend has not stopped. Resistance is there at the 0.77-figure before the Nov high of 0.7780. Bullish momentum remains with support for the pair coming from the waffling USD. New support is seen around 0.7630, before the next at 0.7525, 0.7470 (50% fibo retracement).  We continue to favor AUD to trade firmer vs. USD, SGD, JPY given rising metal demand that boosts its terms of trade and national income. That should also provide Australian more time for its economic rebalancing efforts.

       USDCAD – Pressured. USDCAD remained pressured, last printed 1.3025. This pair continues to drift lower towards the next support around 1.2961 (76.4% Fibonacci retracement of the Aug-Dec rally) before the next at 1.2850. MACD is slightly bearish, with stochastics also pointing south. Barrier is seen around 1.3236 before 1.3333 (200-DMA). Bias is still to the downside but moves down have been a grind. At home, a report from Ottawa stated that infrastructure spending is behind schedule.

Asia ex Japan Currencies

       SGD NEER trades around 0.56% below the implied mid-point of 1.4040. The top is estimated at 1.3760 and the floor at 1.4320.

      USDSGD – Still Watching 100 DMA. USDSGD traded in subdued ranges of 1.4080 – 1.4134 in absence of fresh catalyst overnight. Last seen at 1.4120 levels, largely unchanged from yesterday’s levels. Mild bearish momentum on daily chart remains intact. Key support level remains at 1.4090 (100 DMA). Break below this on weekly close could suggest further downside towards 1.3950. Our bias remains to buy on dips, targeting a move back towards 1.4280 (21 DMA), 1.4320 (50 DMA). Watch moves in USDJPY and US payrolls tonight for direction.

       AUDSGD – Double Top Threatened. AUDSGD is fast approaching the recent high of 1.0859 this morning, lifted by the strong AUD. We watch that level carefully for any signs of retracements. As we had mentioned, we see a potential double top around 1.0860 and thus project for this pair to head towards 1.0580 before it goes higher towards 1.10, 1.12 objectives. If not, bulls may just march on regardless. Daily stochastics indicators suggest the cross is falling from overbought conditions.  We remain bias to stay long, or accumulate on dips. Support at 1.0630 (23.6% fibo retracement of the Jun-Nov rally), 1.0575 (50DMA), 1.05 levels (38.2% fibo).

       SGDMYR – Double Top Resistance Still Holding.  SGDMYR traded lower amid MYR relative strength; last seen at 3.1330 levels. We cautioned that the interim double top resistance maybe at risk of giving way. Daily momentum and stochastics indicators are showing mild signs of turning mild bullish. A daily close above the previous high of 3.1480 could see further upside into uncharted territories. Support at 3.1150 (50 DMA). Expect range-bound trade between 3.1250 – 3.1450 today.

       USDMYR – Rebound Risks. USDMYR retraced gains; last seen at 4.4250 levels. Trading remained subdued. Expect range of 4.42 – 4.44 to hold intra-day. Mild bearish momentum on daily chart remains intact while stochastics is in oversold conditions (suggest potential rebound risks ahead).

      1s USDKRW – 1140 – 1155 Range Ahead of US Payrolls. 1s USDKRW continued to trade under pressure, tracking the decline in USDJPY. Lows overnight at 1139 on stops triggered; last seen at 1146 levels. Bearish momentum on daily chart remains intact while stochastics is in near-oversold conditions though signals of rebound are not strong yet. We shared that a head and shoulders formation appears to be in the making, with neckline support at 1150 (also 200 DMA) – 1158 levels. Break below this puts next support at 1130. Expect 1140 – 1155 range to hold intra-day.

       USDCNH – Range. USDCNH hovered around 6.8100, trading in tandem with the USD this morning. Onshore markets are back this morning. With Trump getting ready to renegotiate NAFTA, concerns are that China will be target next, as soon as his Secretary Treasury Steve Mnuchin gets the nod from the Senate. Near-term, this pair continues to consolidate within the 6.7750-6.9200 range. A break of the 100-DMA could see extension towards 6.7750. Against the basket, CNY is likely to remain stable. Hence, we prefer to long the CNH against higher beta currencies which are lower yielding like the EUR, JPY and even SGD. Against the USD, China is unlikely to resist the rise of the USD dominance and we look for USDCNY to reach towards 7.10 by 3Q. USDCNY was fixed 32 pips lower at 6.8556 (vs. previous 6.8588). CNYMYR was fixed at 0.6446, 5 pips higher than the previous 0.6446.

       1m USDINR NDF – Budget Warmly Received. 1m NDF pivoted around the 67.50-level yesterday, still pressured by optimism in the budget that was delivered the day before. MACD is bearish bias. Resistance is seen at 68.78. Support is seen around 67.47 (61.8% Fibonacci retracement of the Nov rally). Bias is to the downside towards the next support around 67.07. Foreigners bought USD11.1mn of equities and USD120.4mn of bonds on 1 Feb.

       1m USDIDR NDF – Triangle Formation.  1m USDIDR NDF last printed 13411, still stuck within 13310-13510, likely to remain in this range in the next few sessions unless the USD bulls awaken. Momentum indicators are rather flat and this pair should remain range-bound. Recent price action suggests the moves are within a wider symmetrical triangle defined by 2 converging trend-lines: upward sloping trend-line support between the lows of Sep, Oct-2016 and Jan-2017 and downward sloping trend-line resistance between the highs of Nov, Dec-2016 and Jan-2017. This can represent a either a continuation of a trend (bearish trend channel formed since start of 2016) or a reversal. The direction of the next move can only be confirmed after a valid breakout. We are more inclined to bet on upside risk to the 1m NDF in the next 3-6 months given the potential for even tighter US monetary policy this year on expectations of Trump’s planned fiscal stimulus, which could steepen the UST yield curve further, narrowing the yield differentials between US and Indonesia and sparking further fund outflows that would coincide with the end of the tax amnesty program. Also closer to home, there are risks arising from domestic political tensions (in the run-up to the Jakarta gubernatorial elections in 15 Feb 2017) and growth concerns that should remain supportive of the 1-month NDF. Some of these upside risks though could be mitigated by positive sentiments over the ongoing reform process and fiscal spending on infrastructure projects. Foreign investors bought U$8.0mn of equities yesterday and added U$13.5mn of debt on 1 Feb. The JISDOR was fixed lower at 13374 yesterday. A higher fixing is expected today.

      1s USDPHP NDF – Sideways. 1m USDPHP NDF was last seen around 49.84. This pair remains in sideway trades. 50-DMA at 49.94 seems to be a pivoting point for 1M NDF. Barrier is seen at 50.20 and a clean break here on a daily close could see the 1m NDF headed towards the next resistance level at the year-high of 50.40 levels. The peso seems to be rather resilient to the recent mining closures. According to the report of Mines and Geosciences Bureau, about $1.69bn in investments are affected. 43% of current workforce (19,700) in sector will lose their jobs. Support is at 49.45 before 49-figure. Foreign investors sold U$11.4mn of equities on Wed.

      USDTHB – Strong Bond Demand. USDTHB is still languishing below the 200-DMA was last seen around 35.09, weighed by strong bond inflow. Foreign investors added another U$1.3mn of equities, U$163.2mn bonds yesterday, encouraged by regional exports recovery that could widen its already ballooning current surplus and concomitant support for the THB. Momentum indicators show tapering bearish momentum. Stochs show oversold conditions. Bias is still to the downside but we are wary of a rebound back towards the 200-DMA at 35.21 before the next barrier around 35.33. Next support is seen around the 35-figure before 34.90 (76.4% Fibonacci retracement of the Sep to Dec rally). Adding to the optimism at home, consumer confidence rose to 74.5 in Jan from previous 73.5. 

Rates

Malaysia

      Mixed trading in MYR govvies with the MGS curve flatter as selling on the short end pushed yields up while long end yields declined, suggesting some duration switch was in play. Volume was somewhat concentrated around the 3y5y sector.

       MYR rates were somewhat lower due to a combination of lower UST yields and stronger Asian currencies against the USD resulting in foreign receiving interest. The 5y IRS was traded at 3.80%. 3M KLIBOR unchanged at 3.43%.

       Local corporate bond market was better bid. In AAA, the belly tightened 2bps led by Putrajaya’23s. GGs, however, generally traded unchanged to 1bp wider due to rumors of new issuances possibly after the CNY holidays. The AA space was muted. Prefer to stick to the front end of the AAA and GG curves.

Singapore

       Similar to the previous day, SGS market saw buy flows concentrated in the 20y bond and longer, but profit taking reversed some of the earlier gains. In the afternoon, SGS remained mixed with intermittent 2-way flows, though towards the close there were firm bids on short covering. The yield curve closed steeper and lower by 1-5bps. SGD IRS levels, which were unchanged the previous day, fell 1-2bps.

       In Asian credit, IGs were fairly steady tightening 1-3bps, but liquidity was a tad low. MALAYs performed well as short covering and real money demand led the curve to tighten. MALAY’25 and ’26 saw better buying up to 3bps tighter. Other Malaysian credits also did well with PETMK complex 2bps tighter, Axiata’26 2bps tighter and recently issued GENTMK’27, whose yield was higher relative to other corporates, 5-6bps tighter. At the front end, PETMK’19 and RHB’21 tightened 3-5bps. In EM sovereign, ROP’42 rose 60cents, while INDONs traded sideways in anticipation of possible new INDOIs. Japanese names saw better selling in the 10y space, while Korea was rather muted.

Indonesia

       Indonesia bond market moved mixed during the day as FOMC left the reference rate unchanged at 0.5% - 0.75% and did not guide on the next hike. U.S. Labour data which will be release post market close today would be the last significant data release this week. However, the result would impact the movement of IGS price next week. There were minimum market sentiments during yesterday which could move the IGS prices. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.274%, 7.608%, 7.985% and 8.155% while 2y yield moved lower to 7.037%. Trading volume at secondary market was noted moderate at government segments amounting Rp11,787 bn with FR0059 as the most tradable bond. FR0059 total trading volume amounting Rp2,463 bn with 79x transaction frequency.

       Corporate bond trading traded moderate amounting Rp1,002 bn. SMMF03 (Sinar Mas MultiFinance III year 2016; Rating: A-(idn)) was the top actively traded corporate bond with total trading volume amounted Rp500 bn yielding 9.498%.