Maybank GM Daily - 5 May 2014

FX

Global

·         US NFP came in strong at 288K, much higher than the consensus of 218K. Unemployment rate slid to 6.3% in Apr from the previous 6.7%. As a result, the dollar surged to a high of 79.852 before reversing out all gains to end the day around 79.50, virtually unchanged from open. The index was hammered thereafter when Ukraine tensions escalated. Fear of a brewing civil war in the Ukraine could continue to keep JPY crosses under pressure while Yellen’s next testimony to the Senate Budget Committee on Thu could also swing sentiments via the dollar leg.

·         There are a number of central bank meetings of note this week including RBA, BOE and ECB. None is expected to move though forward guidance is again key. RBA could be watched for any jawboning on the AUD especially after the softer 1Q CPI. Swings in this currency could also be dictated by retail sales, labour report and Statement on Monetary Policy (SoMP).  BOE and ECB will add volatility to their respective exchange rate. A clearer view of the fundamentals and policy divergence could provide greater directional bias for the EUR/GBP.

·         Nearer to home, Japan is away for Golden Week and will resume operations on Wed. Onshore markets in Thailand are closed for Coronation Day today while those in China return from a long weekend break. Regional investors will watch China’s HSBC PMI-mfg print due at 9.45 am (HKT) this morning. Indonesia’s 1Q GDP will also grab some limelight on the margin. Other events of note this week includes the policy decisions by BI, BNM and BSP. China’s trade numbers on Thu could also provide cues on regional recovery.

·         Expect USD/AXJs to trade in tight ranges, pulled by the opposing forces of dollar weakness and fragile weak sentiments.

G7 Currencies

·         DXY – Heavy. The greenback remains on the backfoot, last seen around 79.50 this morning. 79.268 remains a key support for the pair this week. The daily momentum indicators show an increase in bearish momentum. 79.688 acts as an interim barrier ahead of the next at 79.920. Keep a watch on JPY and EUR for their bearings on the index amid rocky risk sentiments.

·         USD/JPY – Stuck in Range. USD/JPY spiked past the 103-figure at one point before swinging back towards the 102-figure. The pair is back in familiar range of 101.96-103.00. Risks are to the downside given the last few bearish sessions and we look for offers to meet next support at 101.66.

·         AUD/USD –  Sideways. Pair touched a high of 0.9317 this morning before edging back to around 0.9280. Prices show optimism ahead of China’s HSBC PMI-mfg release. MACD shows that the pair is paring its bearish bias. However, we think price needs to sustain a move above the 0.9319-barrier for more upsides. Otherwise, we expect the pair to remain in sideway gyrations within 0.9200-0.9319. There are a number of events to trigger a breakout, namely RBA rate decision, retail sales, labour report, SoMP and last but not least China’s trade numbers.

·         EUR/USD – Resilient. The anti-dollar bounced from its low of 1.3812 to around 1.3870 this morning. Next barrier is seen at 1.3914. Bias is still to the upside. We expect the intra-week action to be confined within 1.3770-1.3930. Pair could stick around 1.3880 today, in the absence of stronger cues. ECB makes policy decision on late Thu.

Regional FX

·         The SGD NEER trades 0.61% above the implied mid-point of 1.2590. The top end is estimated at 1.2340 and the floor at 1.2840.   USD/SGD – Downside risks.  This morning, the USD/SGD remains on the slide with the pair hovering close to the key 1.2500 level at 1.2502 on the back of dollar weakness. Bullish momentum is waning with MACD forest now hovering just off the zero line. RSI is inching closer to oversold conditions at 28. A sustained break of the 1.2500-figure could see the pair headed towards 1.2451 (9-Apr low), which could guard downsides this week, though the grind lower could be slow because of the Ukraine tensions. Barrier this week is seen at 1.2568. Apr PMI is eyed today

·         AUD/SGD – Bearish momentum.  Cross has been on the slow grind lower the past week or so and is still on the downtick to start the new week. Cross is currently hovering lower around 1.1615 on the back of SGD relative strength.  Risks remains to the downside with MACD forest indicating increasing bearish momentum ahead, putting our.1590-support nearby at risk. A break of the latter exposes the next at 1.1530. 1.1695 guards topside this week.   SGD/MYR – Edging higher.  Cross is climbing higher to start the week underpinned by SGD strength. With 2.6061 broken, the next hurdle is now 6.6103 ahead of 6.6125. The cross is currently hovering around 2.6076 with MACD forest indicating renewed bullish momentum while the RSI is printing 71, close to overbought territory. 2.5974 continue to guard downsides this week.

·         USD/MYR – Choppy. Pair opened at 3.2650 before edging lower towards the 3.26-figure. Action has been choppy in the past few sessions with little directional bias. Momentum indicators show slight bullish momentum. We expect pair to retain the current momentum and remain supported above 3.2550. 3.2770 caps topsides. The 1-month NDF was also on the downward drift, last seen around 3.2670. BNM makes policy decision this week.

·         USD/CNY was fixed lower at 6.1560 (-0.0020), vs. previous 6.1580 (+2.0% upper band limit: 6.2816; -2.0% lower band limit: 6.0342). CNY/MYR was fixed at 0.5257 (+0.0007).

·         USD/CNY – Downside risks. Onshore markets resume operations this morning after a long weekend. Pair gapped down to 6.2527 at last sight, weighed by the dollar weakness.  With this gapdown, pair has lost much of its bullish momentum and could remain in sideway trades within 6.2460-6.2670. A break to the downside exposes next support at 6.2305. 1-Year CNY NDFs – Focus on the Downside. Pair is on the downtick with focus tilted now to the downside at the 6.2485-support. Support for the week is seen at 6.2350. MACD showing bearish momentum on the daily chart though RSI is neutral around 50. Upticks to meet resistance at 6.2570 ahead of the next at 6.2725. PBOC Deputy Governor Yi Gang said that the process of capital account liberalization is a long-term one. In other reports, PBOC officials stated that the reserve requirement ratio is still a major tool of China’s monetary policy.

·         USD/CNH – Capped. USD/CNH has been in tight swivels last week and remained in sideway gyrations around 6.2540. Pressure is increasingly to the downside and we look for a break of the 6.2450-support for further downside towards 6.2240.

·         USD/IDR – Two-way forces. The USD/IDR is on the slide, inching close to the 11500-figure. Currently, the pair is hovering around 11515 on the back of dollar weakness. Still, momentum remains bullish as indicated by MACD forest, even though the momentum is waning. For bears to gain control, we need to see a sustained break of the key 11500-level to expose the next support at 11475. Otherwise, we expect the pair to trade within the confines of 11500/11584 this week. Beside GDP which is out later today, BI’s MPC is on tap this, though market is expecting BI to hold steady. The 1-month NDF is edging lower to start the week, hovering around 11560 currently vs. Fri’s close of 11565 with MACD forest indicating waning bullish momentum. The JISDOR was fixed higher at 11537 last Fri from Wed’s fixing of 11532, though this was still lower than the previous Fri’s fix of 11601.   Indonesia’s GDP is on tap today and our economic team expects the economy to expand by 5.59% y/y in 1Q14, a moderation from 4Q13’s 5.72% on slower consumption spending.

·         USD/PHP – Little momentum in either direction. The USD/PHP gapped lower at the opening to 44.470 from Fri’s close of 44.500 on the back of dollar weakness. Last sighted around 44.440, MACD forest is indicating little momentum in either direction currently with RSI edging close to oversold conditions at 34. 44.279 should guard downsides this week, while 44.651 (38.2% Fibo retracement from the Mar-Apr downswing) should cap further bids. 1Q14 GDP, Apr CPI and Mar Exports are on tap this week. 1-month NDF is edging lower this morning at around 44.450 from Fri’s close of 44.510 with MACD forest hovering close to the zero line indicating flattish momentum. 

·         USD/THB – Upside risks.  Onshore markets are closed today for Coronation Day and will re-open tomorrow. Markets should be quiet today as a result. Currently, the USD/THB is hovering around 32.380, easing from 32.444 on Fri, a high not seen since 8 Apr. Still, the risks are to the upside with MACD forest indicating increasing bullish momentum. RSI is also looking stretched, printing around 61 currently. Moreover, political tensions are set to rise with protests by both pro- and anti-government forces set for today, the Constitutional Court ruling on the status of the government on the back of the Thawil case (expected 7 May), and the upcoming decision by the NACC on whether to charge PM Yingluck for dereliction of duty over the rice case (expected 8 or 13 May). Thus, USD/THB could come under upward pressure this week. Even inflows from overseas might not be sufficient to mitigate. Next target is seen at 43.480, and a sustained breached would expose the next at 32.550. 32.137 continue to be supportive.

Rates

Malaysia

·         Yields on local government bonds ended the session lower in response to slip in US treasury yields. Market opened firmer with offers got lifted at the opening. Fresh flows were seen from local foreign names across the yield curve. Market shrugged off a weaker MYR which touched 3.2690 from 3.2560 at the opening. However, price advanced was capped by profit taking activities ahead of the US nonfarm patrol and MPC but profit taking activities eventually stopped as buyers were unperturbed. At market close, 3, 5, 7, 10 and 15-year benchmark MGS ended lower by between 1-5bps at 3.37%, 3.57%, 3.89%, 4.05% and 4.41% respectively in an active market.

·         MYR IRS saw good offers amid stronger UST and MGS market, albeit no trades were concluded throughout the day.

·         The PDS market was relatively quiet ahead of the nonfarm payroll. Levels traded in some regular names were rangebound. UEM 18 traded back to 100 at 4.60% with MYR80m and GGs like Khazanah 21 traded at 4.35%, 1 bp lower than last level.  Illiquid names like DRB Hicom was seen traded in block across the tenor from 2016 to 2022 on average levels that were higher by 20 bps from last traded. Focus will be on the nonfarm payroll and quite likely will provide direction on where the market will head toward.

Indonesia

·         There is no note on Indonesia Fixed income today.

Rgds,

Maybank FX Research

Global Markets