Maybank GM Daily - 10 Apr 2014

FX

Global

·         Dollar was hammered across the board by FOMC Minutes that was less hawkish than expected. Markets were gearing for a more hawkish tone after Fed Chair Yellen mentioned a 6-month period as a considerable time to hike rates after winding down QE. The Minutes revealed instead, a broadly unchanged outlook and that “economic conditions warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.”  Equities were buoyant with indices recording gains of >1% each.

·         This morning, Japan Feb machine orders came in softer than expected with a fall of -8.8%m/m compared to the previous growth of 13.4%. Australia’s Mar labour report is in focus next.

·         USD/AXJs will continue to trade with downside bias after the overnight dollar slump. AUD strength is likely to sustain, fully taking advantage of the dollar weakness. Improvement in external demand from the region also gives regional currencies a likely boost, especially as dollar and all fears of a coming rate hike and yield compressions recede into the background.

·         Meanwhile, polls are still being tallied for Indonesia’s parliamentary elections.

·         More data in focus in Asia as China releases its Mar data. In particular, trade numbers will hold the attention of many. Its liquidity numbers will be released anytime from today.  Malaysia’s industrial production and Philippines’ exports are also due. After Asia trade, BOE makes policy decision.

G7 Currencies

·         DXY – Settling Lower. The index plunged after the Mar Minutes turned out to be rather dovish. Although there were improvements noted in the labour market, only a part of the unexpected weakness in economic conditions was due to the severe weather. The greenback was hammered to a low of 79.450 as we write. Next support is seen at 79.200. Intra-day chart shows bearish momentum. Price moves are likely to remain heavy but the greenback may encounter buying interest around the 79.200-support. Topsides first guarded by 79.540 ahead of the next at 79.688.

·         USD/JPY – Upside Risks. USD/JPY was rather resilient around 102.00, still hovering thereabouts as we write. Machine orders were a disappointment in Feb but buoyant sentiments in NY spilled into Asia and kept downsides limited. 101.55 is still the support level to watch while bids could be slowed by the 102.47.  We still think action should remain within this range.

·         AUD/USD – Bullish. The pair got a free-ride up as the dollar slid overnight and was last seen around the 0.94 as we write. The labour report was just released with a 18.1K addition to employment. The consensus of 2.5K (as polled by BBG) seemed almost too easy to beat. Unemployment rate fell to 5.8%. AUD/USD spiked to around 0.9430 as we write, as bulls were again invigorated. Next barrier is seen at 0.9450. 0.9349 now slows offers.

·         EUR/USD – Steady. Pair remained lofty on dollar weakness and hovered around 1.3868 as we write. Next barrier is seen at 1.3876. 1.3847 has been a strong support before and dips around this level are likely shallow. We think bullish bias, as indicated by the momentum indicators still holds. The positive cross-over of the 18-SMA and 40-SMA also supports the view. A move above 1.3876-hurdle exposes the next at 1.3914.

Regional FX

·         The SGD NEER trades 0.66% above the implied mid-point of 1.2550. We estimate the top end at 1.2300 and the floor at 1.2799.   USD/SGD – Bearish. The USD/SGD is wobbling this morning but remained below the 1.25-level. Currently hovering around 1.2465, risks are still to the downside with the pair in oversold conditions and dips in the interim could be shallow ahead of the MAS meeting on Mon.  Should the break below 1.2457 (76.4% Fibo retracement of the Oct-Jan upswing) be sustained, the next support target is seen at 1.2445.

·         AUD/SGD – Bullish.  After a sluggish start, bullish moves continued with the result of strong Aussie jobs data. Cross surged to hover around 1.1764 currently with momentum now flipped to show bullishness. Resistance is now seen at 1.1780 before the next at 1.1796.  SGD/MYR – Wobbly.  The cross wobbling this morning, hovering around 2.5828 at last sight with momentum currently barely bearish and the cross hovering just off oversold conditions. 2.5782 has so far held off bearish moves and we expect the cross to remain within 2.5782/2.5854 today.

·         USD/MYR – Downside Momentum. Pair has broken the support at 3.2230 with a gapdown this morning, after the dollar slide overnight. Last seen around 3.2205, next support is seen at 3.1980. MACD shows strong bearish momentum and the recent break of the neckline at 3.2495 of the head and shoulder formation has herald aggressive offers. Strength of the MYR feeds on itself as local bond markets continued to rally. A more aggressive bearish target seen at 3.1470. 1-month NDF is on the uptick at the moment, recovering modestly from the overnight slide and was last seen around 3.2270. Upticks are likely to meet resistance at 3.2372. Malaysia’s industrial production for Feb is due at mid-day. It is expected to accelerate to an average growth of 6.2%y/y from the previous 3.6%. 

·         USD/CNY was fixed a tad higher at 6.1510 (+0.0020), vs. previous 6.1490 (+2.0% upper band limit: 6.2765; -2.0% lower band limit: 6.0304). CNY/MYR was fixed at 0.5219 (-0.0022).

·         USD/CNY – Steadying in range. The fixing was surprisingly higher after the dollar weakness overnight. Spot sneaked a peak below the 6.1930-support at one point on Wed before rebounding around 6.2030 as we write. MACD shows bearish momentum. A lack of interest however, could leave the pair within the 6.1930-6.2180s range for now. PBOC’s new Chief Economist Ma Jun was reportedly urging a plan to liberalize China’s financial system by targeting money supply M3 instead of M2 (WSJ) before interest rate liberalization.

·         1-Year CNY NDFs – Heavy in range. The 1Y NDF treaded water overnight in tandem with the dollar weakness. The fixing this morning continue to keep downsides limited. Intra-day chart shows paring bearish momentum and two-way interest could keep pairing within the 6.2160-6.2280 range.

·         USD/CNH – Rangy. Pair bounced on the higher fixing. This bounce is however uninspiring as the pair is still within range. Pair is now limited by the 6.2004-barrier and downside pressure persists. Support for the pair is still seen at 6.1805 while topsides are guarded by 6.2004. Break of the latter exposes 6.2122.

·         USD/IDR – Bullish. Onshore markets re-opened today after closing for parliamentary elections. The USD/IDR gapped higher at the open to 11348 on profit-taking in the aftermath of the elections and the disappointing showing of the PDI-P (around 20% of the popular vote according to quick counts vs. party’s target of 27%) – the party of presidential candidate Jokowi. A move back to 11500 cannot be discounted as a result. Pair is currently sighted higher at 11341 with risks now tilted to the upside. Immediate resistance is at 11365 before the next at 11411, while 11300 should support. The 1-month NDF is currently hovering higher at 11398 this morning from 11385 yesterday. There was no fixing for the JISDOR yesterday because of market closures.

·         USD/PHP – Supported. Markets re-opened after a public holiday yesterday with the USD/PHP sliding helped by a sluggish dollar and exports outperformance in Feb. Last sighted around 44.618, risks are now to the downside. 44.495 continues to provide support ahead of 44.421 while 44.820 is seen as resistance.The 1-month NDF is little changed this morning from yesterday’s close of 44.490 with momentum still to the downside and the 1-month just off oversold territory.  Philippines’ exports overshot expectations, surging 24.4% y/y in Feb from 9.2% in Jan and vs. market expectations of 16.6%. Electronics shipments were up 26.6% y/y in Feb from a revised 9.2% in Jan.

·         USD/THB – Wobbly. The USD/THB breached but failed to close below 32.175 yesterday, recovering to close at 32.190. Foreign funds bought a net THB1.7bn and TH4.4bn in equities and government bonds yesterday, supporting the THB. The pair is wobbling this morning though risks remain bias to the downside, especially following the dovish FOMC statement. A retest of the 32.175-level could be possible and a sustained break of this level could expose the stronger support at 32.050.

Rates

Malaysia

·         Local bond market continued to rally in reaction to stronger MYR which touched 3.2255 from 3.2400 at previous close. Steady UST performance during Asian trading hours further boosted the buying momentum. However, prices were kept by profit taking activities. At market close, 3, 7, 10 and 15-year benchmark MGS slipped by between 1-4bps to close at 3.40%, 3.95%, 4.08% and 4.45% respectively in an actively traded market.

·         IRS rates were stable today despite a stronger MYR performance and MGS prices. Basis continued to trade on the tight end as most people seem to be getting received side flows.

·         Interest for the PDS market picked up alongside with the rally on the govvies end. The focus was still on the short end. The normal names that are in demand include Prasarana, Danga, Rantau, Sime Darby, and Cagamas. PTPTN changed hands at 4.62%, slightly higher than the new 10-year Danainfra which was priced at 4.55%.

Indonesia

·         Please note that there is no note on Indonesia fixed income as onshore markets were closed yesterday (9  Apr) for elections.

Rgds,

Maybank FX Research

Global Markets

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