FX
Global
The CPI estimate for May of the Eurozone came in softer at 0.5%y/y compared
to the previous 0.7%. That did not aid EUR bears much as EUR/USD saw a
short squeeze to a high of 1.3648 before easing back. Pair is nonetheless,
still within range as investors await ECB. Two ECB officials warned that
Draghi’s likely signal for interest rate cut this week may not be the final one
(BBG).
New York had a weak start and remained rather anemic for the rest of the
session. This was in anticipation of a softer factory orders in Apr. The
print at 0.7%m/m was a deceleration from the previously revised 1.5%, beat
consensus. Equity indices ended in small red. USTs did not have a field day
though as 10-year yields came within striking distance of the 2.6% before
easing off a touch under.
Data calendar in Asia is light apart from Australia’s GDP. Market
players are likely to lie in wait at the sidelines for the next string of US
economic data due tonight. Apart from the ADP employment report, trade numbers
are also due along with the release of the Beige Book. These could set
the tone for NFP on Fri.
Perhaps apprehension over ECB tomorrow could temper moves today. We
expect the decision by ECB to be more closely watched compared to the monetary
decision by BOE. The latter is not expected to do much. The session today
should see EUR in range, DXY supported and USD/AXJs on the backfoot.
G7 Currencies
DXY – Firm. The index kept
within the range on Mon and hovered sideways, last seen at 80.577. We expect
the recent high of 80.681 to remain a barrier. Any swings should be triggered
by data releases including US trade numbers, ADP report as well as the Beige
Book tonight. Expect dips to remain supported with technical support still seen
at 80.381. Next bullish target is seen at 80.828. Fed Bank of Kansas City
President George (non-voter) urged the Fed to allow a “passive runoff” of the
balance sheet before the liftoff in interest rate. The rise in main rate should
be gradual thereafter.
USD/JPY – Still Overbought. USD/JPY hit a high not seen since 2 May around 102.59
this morning, helped partially by rising US yields and dollar strength. Pair is
currently sighted around 102.55, though momentum remains flattish as indicated
by intraday MACD and with the pair still in overbought conditions. Still
a move towards our resistance at 102.68 is a possibility, though the grind
higher could be slow. A firm break of that level would expose the next hurdle
at 103.00. Otherwise, we continue to look for the pair to trade within a
tighter range of 102.30-102.68 today.
AUD/USD – Flat. AUD/USD softened overnight on dollar resilience and
was last seen around 0.9260, ahead of the GDP release. RBA left cash rate
unchanged at 2.5% and we note a slightly more sanguine assessment of the global
economy as well as growth within. Nonetheless, resource sector investment
spending “is set to decline significantly” and the central bank highlighted
emerging signs of improvement in investment intentions in other sectors. The
statement lifted the currency higher before AUD/USD eases off as investors
digest the rather neutral tone. Pair is not showing much momentum on the
4-hourly MACD and we reckon that the pair could remain in consolidative mode
within 0.9209-0.9320. 1Q GDP came in at 1.1%q/q quickening from the previous
0.8%q/q. Year-on-year, growth picked pace to 3.5% from the previous 2.7%.
AUD/USD was lifted to a high of 0.9299 before retreating to around 0.9280.
Choppy trades are likely to continue within 0.9209-0.9320.
EUR/USD – Zigzag. EUR/USD was engaged in choppy trade for much of Tue and traded lower
into Asia after a short squeeze. The pair was last seen at around 1.3614. The
short squeeze received little follow-through, leaving market players likely
frustrated. As ECB looms near, we expect more sideway gyrations in the pairing
within 1.3586-1.3670. MACD is slightly bullish. We look for Draghi to
give a dovish statement after the widely expected rate action on Thu, in order
to provide the EUR a more lasting drag.
Regional FX
The SGD NEER trades 0.29% above the implied mid-point of 1.2617. We estimate the top
end at 1.2365 and the floor at 1.2868.
USD/SGD – Upside Risks. USD/SGD took out our resistance at 1.2569 this
morning and is currently hovering around 1.2579. Despite the upswing, momentum
indicators continue to show little momentum in either direction today and with
the pair just a tad off overbought conditions. Pair could face upside pressure
ahead of the ECB meeting tomorrow with a firm break of immediate resistance at
1.2583 exposing the next hurdle at 1.2596. 1.2540 should continue to provide
support today. Singapore’s May PMI data print disappointed yesterday with
overall PMI moderating to 50.8 in May (though still in expansion mode) and
electronics PMI little changed from Apr at 50.4. Market had been expecting an
uptick of 51.3 and 50.8 respectively.
AUD/SGD – Consolidative Mode. Cross is on the uptick this morning, currently
trading around 1.1645. Intraday MACD forest is currently hugging the zero line
and we expect the cross to remain in consolidation mode within a tighter
1.1590-1.1695 range today. SGD/MYR – Range-bound. SGD/MYR attempted but failed to break out of the
current trading range of 2.5665/2.5721. Cross is currently wobbling, hovering
around 2.5710 this morning. With directional clarity still lacking at this
point, we look for the cross to trade range-bound with a wider 2.5564-2.5571
range today.
USD/MYR – Higher. USD/MYR edged higher this morning and was seen at 3.2340. Bullish
divergence is playing out, inspired by the resilient dollar and rise in the UST
yields that are likely to dampen sentiments in the local domestic bond markets.
We look for pairing to reach the next barrier at 3.2390 today. Support is seen
at 3.2160. 1-month NDF traded higher overnight and has broken the
3.2372-barrier. RSI flags near overbought conditions though MACD is still
bullish. We expect prices have gentler grind towards next resistance at
3.2464. In local news, The Start reported that PM Najib could reshuffle the
Cabinet before the start of Ramadan. At least two new ministers are expected to
join and three serving ministers may be affected. Changes are likely to include
MCA President Datuk Seri Liow Tiong Lai and Gerakan President Datuk Mah Siew
Keong.
USD/CNY was fixed lower at 6.1693 (-0.0017), vs. previous 6.1710 (+2.0%
upper band limit: 6.2952; -2.0% lower band limit: 6.0483). CNY/MYR was fixed at
0.5203 (+0.0006). USD/CNY –Firmer in Range. USD/CNY bounced higher in the
latter half of the Tue session and remained rather buoyant around 6.2530
despite the lower fixing. MACD on the 4-hourly chart indicates higher more
bullish momentum and we expect prices to remain elevated with barrier seen at
6.2622. Support is seen around 6.2510 ahead of 6.2413. From the press, PBOC
watchers assured that the credit crunch in Jun last year will not be happen
this year as the central bank remain supportive of growth at the moment.
1-Year CNY NDFs – Steady. The 1Y NDF swivelled around 6.2570for much of the
intra-day trades on Tue, extending sideway moves. 4-hrly chart shows flat
momentum and we expect more consolidation within 6.2485-6.2635 with a likely
tilt to the upside.
USD/CNH – Flat. Momentum is also rather flat for this pair which was last sighted
around the 6.25-figure. CNH now trades at a premium to CNY foreshadowing
another period of stability in the FX region. Support is still seen at
6.2474 while topsides are guarded now by 6.2564.
USD/IDR – Temporary Relief. USD/IDR is seeing some relief this morning after
gapping higher at the opening over the past two sessions. Still, the pair
remains above the 11800-level at around 11806 with bullish momentum waning
slightly while remaining in overbought conditions. A reversal of the sell-off
in equities yesterday by foreign funds to a tune of a net USD21.36mn should
provide support for the IDR today. 11750 should be supportive today while
immediate resistance remains at 11831. A firm break of this level would expose
the stronger hurdle at 11893 (19 Feb high). Since hitting a high not seen since
14 Feb of 11885 yesterday, the 1-month has eased to trade lower around 11854
currently with four-hourly MACD now showing bearish momentum. The JISDOR was
fixed higher at 11806 yesterday from 11740 on Mon. Indonesia is planning to
rise power tariffs for non-listed companies by 11.57% starting Jul with the
plan increase taking place gradually over two months, while those for
households could rise by 5.7-10.43% depending on power usage. This proposal is
pending approval by parliament.
USD/PHP – Consolidation. USD/PHP is edging higher this morning underpinned by
dollar strength. Pair is currently hovering around 43.880, though our
four-hourly MACD forest is indicating little directional clarity this morning.
Still lacking directional impetus, pair should remain in consolidative trades
within a tighter 43.762-44.000 range today. 1-month NDF is wobbling this
morning, currently little changed from yesterday’s close at 43.930 with little
momentum in either direction as indicated by intraday MACD.
USD/THB – Rebounding. USD/THB beat a hasty retreat yesterday to close at
32.620 on the back of the junta’s plans to kick-start the economy and consumer
confidence rising for the first time in 14 months in May, taking out several
support levels on its way down. Also supporting the THB was the purchase by
foreign funds of a net THB3.1bn and THB1.6bn in equities and government bonds
yesterday. This morning, pair is edging higher again, likely on the back of
dollar strength. Pair is currently sighted around 32.674 with intraday MACD
forest showing flattish momentum. Still, lingering positive sentiments should
cap upside today with the new hurdle seen at 32.740 today. 32.550 should be
support today.
Rates
Yields on local government bonds ended the session
higher in a rather defensive market. Market was rangebound ahead of the ECB
policy meeting and US nonfarm payroll, but buying was seen on off-the-run MGS
maturing in 2017 and 2018. Market lacked the impetus to move either direction
but yields edged up after sellers emerged in late afternoon. At market close, 3
and 7-year benchmark MGS ended 1bp higher at 3.49% and 3.94% respectively.
MYR rates shifted higher and steeper, probably
reacting to the lack of MGS buying momentum and higher UST yields. 5-year IRS
dealt at 4.04%. At market close the IRS curve ended 1-2bps higher. 3M KLIBOR
added another 1bp to 3.49%.
In the PDS market, volume on the short end picked up.
Market is biased toward the short duration bracket. Sime Darby 2016 traded at
3.77-3.79% range and Imtiaz 2016 changed hands at 4.28%. The pressure to sell
remained, particularly on the short to belly of the curve.
Singapore
The SGS curve ended steeper in reaction to the
softness in US Treasuries. Dip buying however was noted especially in
short squeezed issues. At market close, yields on 10 to 30-year SGS ended
3-5bps higher while the 2 and 5-year SGS stayed flat. We recommend staying on
the defensive side leading up to the ECB meeting and US nonfarm payrolls later
this week.
Indonesia
IDR Government bond market trade at range today given Indonesia’s rupiah
fell to the weakest level since February on concern the largest trade deficit
in nine months will weigh on the current account. IDR 10y bond touched the
lowest at 7.99% and 15y at 8.45% before back to 8.03% and 8.46%, respectively
at the end of trading session. Furthermore, yield closed at 7.62/7.96/8.46/8.58
for 5Y, 10Y, 15Y and 20Y, respectively.
Indonesian government held a series of sukuk auctions today and received
a total of Rp4.22 tn bids versus its target issuance of Rp1.50 tn or
oversubscribed by 2.81x. However, only Rp0.89 tn bids were accepted for its
6-mo, 6-yr and 30-yr bond. Incoming bid during the auction today was noted
higher by 37.91% at today’s auction compared to May 20th, 2014 sukuk auction
amounting Rp3.06 tn and were mostly clustered at the 6-mo SPN-S amid
strengthened bond price at the secondary market . The 6-mo SPN-S04122014 was
sold at a weighted average yield of 5.75%, 6-yr PBS006 at 8.15208% while 30-yr
PBS005 was sold at 9.09906%. Bid-to-cover ratio on today’s auction came in at
1.14X – 9.90X. No series were rejected in the sukuk auction today.
Rgds,
Maybank FX Research
Global Markets
Maybank
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.