Maybank GM Daily - 7 Apr 2014

FX

Global

·         Following the modest gains in the US ADP, the NFP print showed that US employers added 192K jobs in Mar from the revised 197K increase in Feb. Though this was marginally lower than the 200K expected by the markets, it was still the first time that private employment exceeded its pre-recession peak and suggested that the pick-up should allow the Fed to stick to its current policy course. The unemployment rate printed 6.7% in Mar, unchanged from the previous month and below market’s expectations of 6.6%. Reacting negatively as expectations was for a stronger recovery after the harsh winter, the equity markets tanked, sending the DJIA lower by 0.96% and the S&P by 1.25%. The NASDAQ took a hammering, down 2.60%, felled by sinking technology stocks. In contrast, the 10-year UST rallied with yields dipping 8bp to 2.721%.

·         This week, we have Fed, Bullard, Plosser, Kocherlakota and Evans speaking, and the release of the 18-19 Mar FOMC minutes but no fresh cues are expected. Quiet US data week ahead: MBA mortgage applications on Wed, initial jobless claims, PPI final demand and the University of Michigan confidence index. Elsewhere in G7, we have BOJ and BOE deciding on monetary policy this week, though both are not expected to make any changes, while Australia releases NAB business surveys and labour report, where any deterioration is likely to be a drag on the AUD.

·         In Asia, the focus is on China where trade, liquidity and inflation prints will be closely watched following concerns over its slowing economy. Elsewhere in Asia, we have BI monetary policy decision on tap on Tue, where position adjustment has begun as IDR steadied and where apprehension over the parliamentary elections is likely to keep the aggressive bets away.

G7 Currencies

·         DXY – Sideways. In the aftermath of the softer NFP print, the dollar index dipped slightly to close at 80.423 on Fri. We need to see a sustained move above 80.500 for bulls to take control. Until then, the index is likely to move sideways this week. 80.500 remains the immediate hurdle with the next barrier at 80.829, while 80.091/79.920 should support. Quiet data week ahead with the Mar FOMC likely to be in brief focus.

·         USD/JPY – Upside risks. The move towards 104 on Fri was not sustained as the BOJ meeting on Mon and Tue was again in focus. Uncertainty over the BOJ’s next move is keeping USD/JPY bulls on the sidelines. Expectations are for the no changes until the next meeting at the end of the month, though some are expecting some action on the ETF front on Tue. With momentum still to the upside, we continue to expect the pair to trade higher this week with the pair likely to trade at the upper end of this week’s trading range of 102.91/104.90.

·         AUD/USD – Due for reversal. Pair closed at 0.9292 on Fri following NFP but is reversing slightly this morning at 0.9288. MACD continues to show the pair paring most of its bullish momentum and we see further downside ahead. 0.9147 marks the next bearish target for the pair while 0.9308 should slow unexpected bids.

·         EUR/USD – Bearish momentum. Pair extended its Fri pullback to around 1.3700 as we write. The daily ichimoku could is thin at this point and a break of this level exposes the next support at 1.3573. MACD is showing increasing bearish momentum while RSI prints 27.73. 1.3770 is the barrier for topside.

Regional FX

·         The SGD NEER trades 0.34% above the implied mid-point of 1.2636. We estimate the top end at 1.2384 and the floor at 1.2888.   USD/SGD – Slowing upticks. The USD/SGD closed below the 1.2600-level on Fri but is climbing higher back towards the 1.2600-level. Though risks remain to the downside, further upside cannot be ruled out. Upside however is likely to be slowed by 1.2630 this week. 1.2530 (61.8% Fib0 retracement from the Oct-Jan upswing) should provide support. Advanced 1Q14 GDP and MAS exchange rate policy decision could be released anytime between 11-14 Apr.

·         AUD/SGD – Choppy.  The cross is whippy within the 1.1620-1.1723range, hovering currently around 1.1700 at last sight. MACD is still showing dissipating bullish momentum. 1.1723 remains barrier for further bids. The cross needs a strong move above this level for further extension. Otherwise, expect rangy trades to dominate within the current band.  SGD/MYR – Short-termed uptrend.  The cross started the week with a bearish engulfing candle with the cross plunging to 2.5924 this morning. Still, an upward sloping trend channel has formed and we see strong tilt for the cross to tray above the 2.60-figure this week. This trend is likely to hold for the short-term only. A break above the 2.6040-barrier exposes the next resistance at 2.6100. 2.5860 should support this week.

·         USD/MYR – Settling in range. Pair is rebounding after closing lower at 3.2605 on Fri. The pair is currently hovering around 3.2655 as we write. MACD remains close to the zero line and pair may be settling within the 3.2555/3.2903 range.

·         There is no fixing for the USD/CNY and CNY/MYR today as onshore markets in China are closed for a public holiday. Onshore markets re-open tomorrow.

·         USD/CNY – Still directionless. Spot hovers higher around 6.2126 with onshore markets closed for a public holiday. MACD forest is still near the zero line while RSI prints around 60. We expect the pair to remain in sideway gyrations, with upsides well guarded by 6.2340, while offers could be slowed by 6.1902. Look out for trade, liquidity and inflation prints that could see moves lower should they disappoint.

·         1-Year CNY NDFs – Slow grind higher. The 1Y NDF grinded higher at 6.2370 with onshore markets closed. Next barrier is seen around 6.2470 with bids likely to be slowed by this resistance level. MACD is near the zero line while RSI climbed higher to 71.087.

·         USD/CNH – Little momentum in either direction. After slipping to 6.2130 on Fri, the pair is wobbling this morning giving the lack of directional cues from the USD/CNY. Pair remains within 6.1920-6.2231 range this week and there is little impetus at the moment for a breakout and look for price moves to remain confined within this band.

·         USD/IDR – Range-bound. The USD/IDR slipped below the 11300-level to 11284 this morning to the start the week. Still, with parliamentary elections in focus on Wed, some volatility in the pairing can be expected this week. MACD is still showing bullish momentum, albeit waning, with RSI printing around 30. Foreign funds sold a net USD3.64mn in equities on Fri but added a net IDR3.06tn in bonds to their outstanding holdings on 2 Apr. We expect the pair to trade range-bound this week between 11220/11365 this week. The 1-month NDF is climbing higher at the start of the week at 11335 from Fri’s close of 11320 with momentum still on the upside. The JISDOR was set at 11310 on Fri, unchanged from Thu.

·         USD/PHP – Rangy.  The USD/PHP is climbing higher this morning at 44.857, though this was down from the morning’s high of 44.955. MACD is showing little momentum in either direction for the week with the RSI printing around 50. Still, support for the PHP could come from foreign buying as they did on Fri with a net USD9.9mn in equities purchased. 45.050 continues to cap upside for the week before 45.154 while 44.840 44.700 should limit downside. The 1-month NDF is inching higher at 44.920 to start the week, up from 44.860 on Fri. Momentum though has flipped with the MACD just below zero line.

·         USD/THB – Bullish risks. The pair is wobbling this morning, hovering around 32.477. Rising political tensions following the pro-government demonstrations over the weekend should keep the THB supported. Foreign buying was again mixed on Fri with a net THB461.1mn of equities sold but a net THB413.8mn in bonds purchased. Risks remain on the upside for the week with 32.520 curbing topside before 32.605, while 32.292 should limit downside this week.

Rates

Malaysia

·         Local government bond market saw late selling ahead of the nonfarm payroll tonight. Yields mostly traded unchanged with the 7 and 15-year MGS benchmarks traded higher by 1bp. Today we had a 7.5-year SPK auction which received very good BTC of 3.399x – best BTC since January 2012. Auction result came in with the highest, lowest and average yield of 4.362%, 4.318% and 4.345% respectively. Post tender the SPK rallied 2bps but was shortly met with profit takers.

·         Ahead of the US job data, we saw good paying interests in MYR IRS market across the curve. Rates ended circa 1-3bps higher with decent size trades reported on the bellies.

·         The PDS market was quiet as usual. Danainfra announcement is out with decent size proposed. Market’s main focus should remain on primary issuances for the time being.

Indonesia

·         Indonesia bond market corrected after a 6 consecutive day incline. Local bond market was moving quite slowly as investor were waiting for Non Farm Payroll and unemployment rate data especially after weekly initial jobless claim data increases and trade balance deficit widened. Beside NFP and unemployment data, investors are also seeing closes on RDG meeting which is been scheduled to take place this Tuesday. Our economist sees that Indonesia central bank would keep its reference rate still at 7.50% as Indonesia's trade balance in February 2014 returned to a surplus of US$0.79 billion, manageable Inflationary pressures as inflation eased from 0.26% m-o-m in February 2014 to 0.08% m-o-m in March 2014 and Rupiah appreciation from Rp11,634/US$ in February 2014 to Rp11,404/US$ in March 2014 (rose by 1.98% m-o-m). Furthermore, bank credit has shown a slowdown as a result last year reference hike (175 bps hike in 2013).

·         5-yr, 10-yr, 15-yr and 20-yr benchmark series yield shifted up to 7.657% (0.5bps), 7.875% (2.4bps), 8.228% (1.8bps) and 8.419% (0.5bps) while 2-yr yield also shifted up to 7.341% (1.3bps). Trading volume at secondary market remains heavy amounting Rp10,358 bn (vs average per day trading volume of Rp7,602 bn). SR006 (3-yr) and FR0068 (20-yr benchmark series) was the most tradable bond during the day. SR006 total trading volume amounting Rp5,975 bn with 349x transaction frequency and closed at 101.796 yielding 8.055%.while FR0068 total trading volume amounted Rp873 bn with 65x transaction frequency and closed at 99.570 yielding 8.419%.

·         On the corporate bond segment, trading volume decline to Rp298 bn on Friday’s trading (vs average per day trading volume of Rp750 bn). APLN01CN1 (Shelf registration I Agung Podomoro Land Phase I Year 2013; Maturity date: 27 Jun 2018; Rating: idA) was the top actively traded corporate bond yesterday with total trading volume amounting Rp105 bn and was last traded at 96 yielding 10.430%.

Rgds,

Maybank FX Research

Global Markets

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