FX
Global
Dollar began its upmove in early European session against the EUR, NZD
as well as the CHF. The greenback chopped around at the release of Jun CPI
which met expectations at 0.3%m/m. Core inflation underwhelmed at 0.1%m/m
versus the consensus at 0.2%. However, the dollar retained much of its gains
for the rest of NY session at around 80.800.
The EUR gave way in the face of dollar strength and waffled around
1.3465 at last sight. Risk appetite gained in the European hours with Euro
Stoxx 1.7% higher by close. Buoyant sentiments extended into NY with DJI at
+0.4%, S&P and NASDAQ finished at +0.5% and +0.7% respectively.
Joko Widodo won the Presidential Election, according to the official
result. However, uncertainty still lingers as his rival Prabowo Subianto
withdrew his team from the vote counting yesterday. While the fate of the IDR
is still uncertain, THB extended its strength against the greenback and
supported the ADXY. Singapore’s CPI is due today at mid-day. BOE
releases the Minutes of its July meeting which could give the GBP players
some cues. Europe’s consumer confidence for July will also be due. |
Hot from the wires, AUD spiked on the inflation report as the trimmed
mean measure surprised on the upside. The AUD could continue boost Asian
strength. In the
absence of stronger data for the rest of the session, expect some focus to
continue to be on geopolitical risks in the Middle East and the ongoing
pressure on Russia with threats of sanctions. Expect cautious optimism to keep
Asian bulls in check.
G7 Currencies
DXY – Upside Risks. DXY broke above the 80.68-barrier and
hovered around 80.78 this morning. Momentum indicators show upside pressure
while the 18-SMA exceeds the 40-SMA. Next barrier is still some distance away
at 81.02. Expect intra-day trades to be confined within 80.68-81.00 with some
risks to the upside. No significant data on the tap today.
USD/JPY – Capped. USD/JPY is currently edging higher around 101.53, still within its
101.20-101.76 trading range. An intraday ichimoku cloud continues to weigh on
the pair, and the lack of any directional cues today makes it unlikely that a
break above the cloud is likely today with 101.64 capping topside today. 101.20
continues to limit downside. The government cut its forecast for FY14 real GDP
growth to 1.2% from 1.4% on the back of weaker exports and the
stronger-than-expected slowdown in domestic demand after the sales tax hike in
Apr. FY15 real GDP is forecasted at 1.4%. Inflation is expected to rise by 1.2%
and 1.8% in FY14 and FY15 respectively.
AUD/USD – Higher on inflation. AUD/USD was last seen around 0.9380 ahead of the
inflation report. 2Q CPI came in at 0.5%q/q, in line with expectations and a
tad softer than 0.6% in the previous quarter. The upside surprise stem from the
trimmed mean measure which quickened to 0.8%q/q from the previous 0.6%. Pair
spiked above the 0.9423-barrier, ono its way towards the next resistance at
0.9450. Upside pressure is on the pair but is near overbought conditions. Expect
0.9450 to slow aggressive bids.
EUR/USD – Downside Pressure. The thick ichimoku cloud on the daily
chart weighed on and pushed the pairing to a low of 1.3459 – a new low for this
year. This pairing could be on its way towards the next support seen around
1.3432 (15-Nov-13 low). 18-SMA is below the 40-SMA on the 4-hourly chart.
Upticks could be short-lived with barrier seen at 1.3503. Few data due today
with Jul consumer confidence from the Eurozone perhaps the most closely watched
release. A greater deterioration from the expected -7.5 could add more drag to
the EUR.
EUR/SGD – Downside pressure. EUR/SGD slid on Tue in tandem with most EUR crosses.
Last printed 1.6678, this cross could continue its slide after a clean break
through the 1.6758-support.The downside bias on the momentum indicator also
flagged bearish risks. The 1.6758-support has turned into a barrier. The
bearish ichimoku cloud is also a bearish signal for this pairing. Next support
is seen at 1.6641 (11-Nov low) ahead of 1.6558.
Regional FX
The SGD NEER trades 0.62% above the implied mid-point of 1.2475 with the
top end estimated at 1.2227 and the floor at 1.2723.
USD/SGD – Supported. After testing our support at 1.2931 before bouncing back to close
above the 1.24-figure overnight, USD/SGD slipped back below that level at
around 1.2396 this morning. Intraday MACD forest continues to hug the zero line
closely, suggesting little directional cues today. Strong support remains at
1.2931 and for bearish extension towards 1.2343, we need to see a firm break of
this support level. 1.2422 should guard topside today. Inflation print for Jun
is due later this afternoon, but is unlikely to have a significant impact on
the pair, barring any major surprises. Market is expecting a more moderate increase
of 2.4% y/y vs. May’s 2.7%.
AUD/SGD – Sideways. After taking out several of our resistance levels on its way up
overnight, AUD/SGD is currently correcting and is back below 1.1668 which we
had identified as resistance yesterday. With intraday MACD forest is now
at the zero line, we expect the cross to trade sideways within 1.1600-1.668
today. SGD/MYR – Range-Bound. SGD/MYR currently
trading near the lower half of the 2.5547-2.5727 range, last sighted around
2.5603. Intraday MACD forest is hugging close to the zero line currently, while
the cross is now in the thick of the intraday ichimoku cloud, suggesting
range-bound trade is likely. We look for range-bound trades still within
2.5547-2.5727 today.
USD/MYR – Heavy. USD/MYR was little moved this morning after the rebound seen on Tue.
Last sighted around 3.1745, this pair is around the lower bound of the recently
traded 3.1660-3.2040 range. Intra-day indicators suggest slight downside risks,
not helped the least by the bearish ichimoku cloud which caps upticks around
3.1822. The 1-month NDF was on the uptick this morning, last seen around
3.1790. Support at 3.1748 remains intact for now and downside momentum has
lasrgely pared. A break here though exposes nearby support at 3.1694(9 Jul
low). Malaysia’s foreign reserves stood at MYR423.8bn (USD131.9bn) as
of 14 Jul.
USD/CNY
was fixed at 6.1572 (+0.0028), vs. previous 6.1544 (+2.0% upper band limit:
6.2829; -2.0% lower band limit: 6.0365). CNY/MYR was fixed at 0.5132 (+0.0004).
USD/CNY – Tilting Lower in Range. Pair slipped in tandem with most of USD/AXJ yesterday
and remained on the downmove this morning despite the higher USD/CNY fixing.
Last seen around 6.1990, the pair is fast approaching the lower bound of the
recently traded 6.1953-6.2104 range. The lower bound at 6.1953 could still
support offers. Australia’s RBA Deputy Governor Lowe commented that 3%
of its net reserves are denominated in yuan and highlighted potential for
growth in yuan trade invoicing. Ahead of the HSBC flash PMI-mfg for July due
tomorrow, expect the pair to trade with a downside bias amid current optimism.
More good news with some rumours that the highly scrutinized Huatong Road &
Bridge Group may be able to pay its bond principal ono time after all,
according to the 21st Century Business herald.
1-Year CNY NDFs – Downside Bias. Last seen around 6.2540, the NDF has been supported
by the intra-day ichimoku cloud. The pair is now testing support around 6.2550.
A clean break here exposes the next at 6.2519. Slight downside bias is flagged
by the momentum indicators and not least of all a break below the cloud. 18-SMA
is also below the 40-SMA, guiding the pair lower. Topsides remain guarded at
6.2575. USD/CNH – Lower. USD/CNH slumped below the 6.20-figure
this morning and is last seen around 6.1990. Risks could be to the downside
with 18-SMA below 40-SMA. Bears should gun for the next target at 6.1950. CNH
lost its premium to onshore spot and now trades at a discount. Nonetheless,
optimism should keep both pairings on the downmove.
USD/IDR – Election Relief. It’s official! Joko Widodo has won the presidential
elections with 53.15% of the votes compared to his rival Prabowo Subianto’s
46.9%. The reaction so far on the currency front has not been significant with
the USD/IDR currently lower around 11518. This is because the market is waiting
to see the next moves by Prabowo (he has until Fri to file an appeal to the
Constitutional Court over the election result). Foreign funds were cautious
yesterday, buying just a net USD0.52mn in equities yesterday, though this was
an improvement from yesterday’s sell-off of a net USD1.98mn. As we wrote in our
report yesterday, should Prabowo concede the election amid improving risk
appetite, we could see a move pass the 11500-support towards 11300/11400 this
week. However, should Prabowo mount a legal challenge, political uncertainty
could extend for at least another month with a spike towards 12000 possible. In
either case, concerns about economic fundamentals especially about the twin
deficits should add caution to the pair. In the interim, market is likely to
view the election result positively but the possibility of an extended
political uncertainty should limit further downside. We reckon the pair would
remain supported around 11500 for now though a test of this level cannot be
ruled out today. News flows from the Prabowo camp will be closely watched over
the next few days. Topside remains guarded by 12000. 1-month NDF hit a low of
11509 following news of a Jokowi victory last night but has since rebounded and
is currently hovering around 11579. However, intraday MACD is indicating waning
bearish momentum. The JISDOR was fixed lower at 11531 yesterday vs. Mon’s 11577
– a low not seen since 22 May.
USD/PHP - Downside Still. USD/PHP slid to 42.285 this morning from yesterday’s
close of 43.410, hovering lower at around 43.365 this morning. Intraday MACD is
still showing increasing bearish momentum though RSI is indicating close to
overstretched conditions. An intraday ichimoku cloud also weighs on the cross,
keeping a lid on upsides. Downsides today remain limited by 43.185 while 43.528
should act as barrier today. 1-month NDF is wobbling this morning, hitting a
high of 43.430 before settling back to around 43.270 currently with bearish
momentum is on the wane as indicated by intraday MACD. Moody’s has trimmed the
country’s growth outlook to 6% from 6.5% but this has not affected its credit
rating, the outlook of which remains positive.
USD/THB – Consolidating. USD/THB broke below our 31.800-support overnight
after hovering around the 31.900-region for most of the day, helped by
improving sentiments over the economy and expectations of progress over
political reforms. This was also reflected in the foreign appetite for Thai assets
yesterday where with a net THB1.72bn and THB23.64bn in equities and debt was
purchased. Pair was last sighted around 31.773 with risks still to the
downside, though the RSI continues to indicate overstretched conditions for the
past two sessions. With the break of 31.800-support, next support is now around
31.500 with interim support likely around 31.650. For now, we expect the pair
to consolidate after the aggressive moves so far.
Rates
Local government bond market saw mixed trading as we noted better profit
takers throughout the day especially on the Islamic GII. Players chose to
reduce risk ahead of the festive holidays next week. The market would also turn
to next month’s auction pipelines with the re-taps of 7-year MGS 9/21, 10-year
GII 5/24 and 10-year SPK 2/24. The auction packed month especially on the
Islamic securities might pressurise the yields of Islamic securities.
In the IRS market, nothing was traded with the market lacking of
conviction to move either way. At current level, paying 5-year IRS may be
favoured as the spread between fixed rate and KLIBOR has narrowed, minimizing
the cost of negative carry. 3M KLIBOR stayed stable at 3.59%.
In the PDS market, focus was on high grades like GG and AAA. There were
mixed buying interest across the curve. Offers shifted lower despite there were
selloffs on the govvies end. We prefer to stay sidelined on the high grades as
levels are a tad too tight following the newly printed Danainfra.
Singapore
The SGS market had another quiet day with the IRS tracking the USD rates
slightly higher. The IRS curve bear flattened a tad whilst in SGS, long
dated bonds outperformed. At the close, yields at the long end were
slightly lower while short end was unchanged. There was little noticeable
reaction to yesterday's announcement of the larger-than-expected size in the
reopening of the 10-year SGS benchmark
In the Asian credit market, Indon names traded higher. The country's
presidential election result will be revealed. On the other hand we saw a mixed
tone on the China high yields. Buying was seen from private banking clients.
Most China investment grades were unchanged. In the SGD credit space, we saw
PBs taking profit on existing Perps and switching to high yields like the newly
printed Halcyon. We expect to see new issuance from the Export Import Bank of
China, Tata Steel, China Rail, and Sino Ocean.
Indonesia
Indonesia bond market booked gain for 6 consecutive days amid Prabowo
statement of withdrawing from electoral process less than 2 hours before KPU
initial election result announcement schedule. Investors were waiting for KPU
final election result during the day where the result was announcement only
came out after bond market closes resulting in Jokowi – JK winning the
presidential race by 53.15%. Indonesia bond market in our view would continue
booking gains in regards to Jokowi – JK winning euphoria. Yet we also see a
chance of profiting taking by the end of today’s trading session. 5-yr, 10-yr,
15-yr and 20-yr benchmark series yield stood at 7.823% (+0.6bps), 8.025%
(+2.1bps), 8.488% (+0.2bps) and 8.653% (-0.1bps) while 2-yr yield shifts down
to 7.421% (-0.2bps). Trading volume was noted heavy amounting Rp19,225 bn as a
result of conventional government bond auction bids. FR0068 (20-yr benchmark
series) and FR0070 (10-yr benchmark series) was the most tradable bond during
the day. FR0068 total trading volume amounted Rp6,387 bn with 138x transaction
frequency and closed at 97.381 yielding 8.653% while FR0070 total trading
volume amounted Rp4,595 bn with 88x transaction frequency and closed at 102.305
yielding 8.025%.
Indonesian government held a series of auctions yesterday and received a
total of Rp19.72 tn bids versus its target issuance of Rp10.00 tn or
oversubscribed by 1.97x. However, only Rp13.50 tn bids were accepted for its
8-mo SPN which was sold at a weighted average yield of 6.58857%, 1-yr SPN at 6.80000%,
5-yr FR0069 at 7.84943%, 10-yr FR0070 at 8.001976% while 20-yr FR0068 was sold
at 8.65921%. Incoming bid during the auction came in lower by 11.56% during the
auction compared to Jul 8th, 2014 conventional auction amounting Rp22.29 tn and
were mostly clustered at the FR0068 (20-yr benchmark series) and FR0070 (10-yr
benchmark series). Bid-to-cover ratio during the auction came in at 1.20X –
5.06X. No bids were rejected during the conventional auction yesterday. The
good demand and awarded yield during the auction was in line with our
expectation. Till the date of this report, Indonesian government has raised
approx. Rp29.91 tn worth of debt through bond auction in 3Q 14 which represents
31.15% of the 3Q 2014 year target of Rp96 tn. Assuming that if Indonesia
government issues Rp1.5 tn at the each sukuk auction (upcoming 4 sukuk auction)
in 3Q 2014 then the Government needs to issue Rp12.02 tn at every upcoming
conventional auction in 3Q 2014 to meet their target of Rp96 tn
On the corporate bond segment, trading volume was quite heavy as well
with total volume amounting Rp949 bn yesterday (vs average per day (Jan – Jun)
trading volume of Rp677 bn). PPGD02ACN2 (Shelf registration II Pegadaian Phase
II Year 2014; A serial bond; Rating: idAA+) was the top actively traded
corporate bond with total trading volume amounting Rp155 bn and was last traded
at 100.07 yielding 8.572%.
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