FX
Global
Overnight session was focused on earning reports. DJI came under
pressure to close -0.2% for the day, weighed by Boeing. S&P and NASDAQ
fared better to finish at +0.2% and 0.4% respectively, underpinned by
technology stocks (Apple, Microsoft and Facebook).
Earlier on Wed, BOE released the Minutes of its July meeting and
pulled the GBP/USD towards the 1.7020-level. Governor Carney suggested that
the economy could withstand higher rates though highlighted that wages were a
sign of more slack in the labour market that previously thought.
RBNZ raised benchmark interest rate by 25bps to 3.5% today as expected
but mentioned it would assess the impact the series of rate rises since
March. Two things may have affected markets. First, the statement signals a
likely pause in the rate hike momentum as it sees further moderation in house
price rises, modest inflation & softer growth momentum after 100 bps of rate
hikes. Second, the statement stated that the NZD is unsustainable at current
levels and could see significant fall as RBNZ projects the NZD TWI to fall 7%
over the next 3 years. The speed and extent of hikes depend on
assessment of the tightening to date. The latest move will keep inflation
near the 2% target as strong immigration gains fuel housing demand. The
NZD/USD fell 1.2% to 0.8609 levels from 0.8709. AUD/NZD cross jumped
90pts and targets Jun high of 1.1025, may see the 1.1000/35 range. Stops above
Jun 4 high at 1.1036.
Dollar made modest gains overnight and continued to rise against Asian
currencies this morning, with the exception of MYR in early hours. Both
Nikkei and Kospi traded flat in initial trades, signaling caution ahead of
key HSBC flash PMI-mfg release for July out of China. Rest of the prelim
PMI-mfg figures also due from EU and US. Elsewhere, geopolitical tensions
will also be at the back of investors’ minds. |
G7 Currencies
|
DXY – Upside Risks. DXY edged higher and was last seen around
80.82, retaining its buoyant tone in a pretty quiet overnight session.
Momentum indicators show upside pressure while the 18-SMA remains above the
40-SMA on the 4-hourly chart. 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. The weekly initial jobless and continuing claims are
due, along with the prelim. PMI-mfg figure as well as new home sales.
USD/JPY – Slight Upside Bias. USD/JPY remained trapped in its current trading
range of 101.20-101.76, hovering around 101.55 at last sight. Intraday MACD
is showing slight uptick in bullish momentum today, which could keep the
uptick going. Exports disappointed in Jun, renewing fresh speculation that
more BOJ action may be needed to stem JPY strength. Pair is likely to remain
range-bound within 101.20-101.76 today with the bias tilted slightly to the
upside. Trade deficit narrowed to JPY822.2bn in Jun from an upwardly revised
JPY910.8bn in May, though this was still higher than the JPY642.9bn deficit
market was expectating. Exports continued to contract, dipping 2.0% y/y in
Jun (May: -2.7%), below market’s expectations of +1.0%. Imports improved,
rising 8.4% y/y vs. May’s revised -3.5%.
AUD/USD – Sideways. AUD/USD was dragged by the NZD pullback and hovered
around 0.9440, off its overnight high of 0.9462. The upside surprise in the
trimmed mean CPI for the 2Q spurred the AUD rally on Wed. The
0.9450-resistance had indeed slowed aggressive bids but bulls were
invigorated by China’s HSBC flash PMI-mfg. Interim support is seen around
0.9420 and we expect 0.9474 to slow bids ahead of the next at 0.9505. Upside
momentum is still flagged though decelerating. Expect sideway trades with an
upside tilt.
EUR/USD – Downside Pressure. The pair drifted lower to around
1.3457, printing new low for the year as we write. This pairing is still 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 are likely to be
short-lived with barrier seen at 1.3503. Preliminary PMI data will be
released today and risks are to the downside, judging from the softer
consensus as compared to the Jun numbers. |
EUR/SGD – Southbound drift. EUR/SGD touched a low of 1.6641 before steadying
thereabouts in late NY trades. The support at 1.6641 is in danger now as
downside pressure in the cross remains. Last printed 1.6652, this cross could
continue its slide after a clean break towards the next technical support
around the 1.66-figure.The momentum indicator still indicates bearish risks.
Intra-day barrier is seen at 1.6691.
Regional FX
The SGD NEER trades 0.76% above the implied mid-point of 1.2472. The top
end is estimated at 1.2225 and the floor at 1.2720.
USD/SGD – Consolidation. USD/SGD took out our support at 1.2931 on its way
down yesterday to close at 1.2368 – a low not seen since 30 Oct 2013. Pair is
currently correcting after yesterday dip with the pair hovering around 1.2378.
Intraday MACD forest continues to hug the zero line closely, suggesting a lack
of directional cues ahead still. With our 1.2931-support broken, new support
nearby is now seen around 1.2362 before 1.2343. Our previous support at
1.2931 has now turned barrier for today. Headline inflation slowed unexpected
to 1.8% y/y in Jun (May: 2.7%), way below market expectations of 2.4%. Core
inflation (which excludes housing and private road transport) moderated as well
to 2.1% in Jun (May: 2.2%). 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%. Driving
inflation lower was lower car prices because of a dip in COE premiums and
easing housing cost due to the large supply of housing coming on stream and the
impact of the existing housing cooling measures. The government is expecting
inflation to come in at the lower half of the 1.5-2.5% forecast range, and core
inflation at 2-3% in 2014.
AUD/SGD – Downside. AUD/SGD is on the retreat after yesterday bullish uptick. Cross is
currently trading lower around 1.1681 this morning. Given the downward pressure
on the AUD, we look for the cross to move between 1.1640/1.1724 today with
risks to the downside. With intraday MACD still showing little directional
momentum in either direction, we we expect the cross to trade sideways within
1.1600-1.1668 today. SGD/MYR – Rangy. SGD/MYR is on
the uptick with the cross sighted just off the 2.60-figure at 2.5599. Momentum
indicators continue to show little pressure on either side, though a thick
intraday ichimoku cloud hovers above the cross that could limit upside. Expect
rangy trades within 2.5547-2.5630 today.
USD/MYR – Heavy. USD/MYR tested the 3.1660-support this morning before rebounding to
around 3.1685. The support level is still in danger with the 18-SMA still below
the 40-SMA on the 4-hourly chart. Momentum is still to the downside and a break
here could accelerate offers towards the next technical support at 3.1471.
Bearish ichimoku cloud weighs on. Upticks are now likely to be resisted 3.1732
ahead of 3.1770. The 1-month NDF was on the uptick this morning, last seen
around 3.1745. Support at 3.1694 is still intact though recent price moves
remain heavy. We do not rule out a break here that could trigger more offers
towards nearby support at 3.1694 (9 Jul low). Malaysia’s says debt-to-gdp ratio is expected to remain below the
55% ceiling at 54.2% at the end of the year.
USD/CNY
was fixed at 6.1579 (+0.0007), vs. previous 6.1572 (+2.0% upper band limit:
6.2836; -2.0% lower band limit: 6.0372). CNY/MYR was fixed at 0.5126 (-0.0006).
USD/CNY – Tilting Lower in Range. Pair gapped down this morning below support at 6.1953
in spite of the higher fixing and waffled around 6.1948 as we write. Downside
momentum is gaining and next support is seen around 6.1860. Upsides to be
stopperd by 6.2021. China’s HSBC flash PMI-mfg came in at 52.0 vs. previous at
50.7. This is above the consensus of 51.0.
1-Year CNY NDFs – Downside Bias. The NDF broke below the Ichimoku Cloud and broke
multiple support levels along the way, steadying around 6.2465 as we write.
Choppy trades are ahead with the Chikou span (lagging span) now caught in the
cloud. Topsides could be deterred by 6.2519 while downsides are likely
cushioned by 6.2430. 18-SMA is also below the 40-SMA, guiding the pair lower.
Risks are still to the downside. USD/CNH – Lower. USD/CNH slid to
a low of 6.1911 before stedying around 6.1926. Risks are to the downside with
momentum indicators flagging bearish conditions for the pair. Pair is at the
brink of testing support at 6.1898. Rebounds to be meet resistance at 6.2023
while a clean break of the next support exposes the next some distance away at
6.1706, which completes our double top target.
USD/IDR – Inching Higher. After retreating on the back of the euphoria of a
Jokowi victory, the USD/IDR is back on the uptick, currently sighted around
11526 this morning. Market is waiting anxiously on the next moves moves by
Prabowo (he has until Fri to file an appeal to the Constitutional Court over
the election result). Moreover, BI’s comments yesterday that they would
intervene in the FX market to stabilize the exchange rate also threw some cold
water on the election relief. Foreign funds however threw caution in the wind
yesterday, buying a net USD43.99mn in equities yesterday. Strong support remains
at 11500 today, but should Prabowo concede the election, we could still see a
move pass this support towards 11300/11400 this week. However, should a legal
challenge be mounted and protests break out, heightened 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. Month-end demand for dollars could
also weigh on the IDR ahead. Topside should be capped by 11750 in the interim.
1-month NDF is inching higher, last sighted around 11575 this morning with
intraday MACD now showing a flip to mild bullish momentum. However, intraday
MACD is indicating waning bearish momentum. The JISDOR was fixed below the
11500 yesterday for the first time since 20 May at 11498 compared to Tue’s
11531.
USD/PHP - Upticks.
USD/PHP is bouncing higher this morning, sighted around 43.290 currently.
Intraday MACD though is still showing bearish momentum ahead and an intraday
ichimoku cloud continues to weigh overhead, which could see 43.421 cap upside
today. Expect 43.185 to still be supportive today. 1-month NDF is on the uptick
this morning, climbing to 43.27 at last sight with intraday MACD forest at the
zero line.
USD/THB – Consolidation. USD/THB is inching higher this morning back to around
our 31.800-support level at last sight. Intraday MACD is currently indicating
little momentum in either direction for the pair ahead. Foreign appetite for
government debt continued with a net THB16.42bn purchased yesterday, but that
for equities dipped with a net THB0.76bn sold. Lacking directional cues for
now, we continue to expect the pair to remain in consolidation within
31.65/31.950 today.
Rates
§ Local government bonds traded rangebound amidst thin
liquidity ahead of the holidays. Foreign buying was seen on the 15-year GII
12/28 as the bond inched 2bps lower. We expect volumes to reduce as we head
toward the end of the week.
§ The IRS curve bear steepened slightly today but
nothing was traded. IRS levels for 3 years and above were quoted 1-2bps higher,
but there was a lack of to trade. 3M KLIBOR stayed stable at 3.59%.
In the PDS market, market’s appetite for credit papers remained strong,
from GG names like Danainfra and Prasarana, to names lower the credit curve
like Malakoff and Kesturi, despite govvies have stayed stagnant for the past
two days. We think that the rally may be short-lived, and recommend taking
profit at current levels.
Singapore
§ The SGD IRS curve traded lower today, tracking the
bull steepening move in the USD curve after yesterday's CPI print from US which
alleviates concern for elevated inflations. Rates were lower by 1-2bps with the
front end outperforming, reversing part of the recent flattening move. SGS on
the other hand saw the long dated bonds outperforming. Despite the upcoming
10-year SGS supply, the long dated issues were well bid, with strong interests
seen in the 15-year benchmark, which currently trades at the tightest swap
spread. With the 10-year reopening being the last issuance at the long end
scheduled for this calendar year, there may be scope for the swap spreads of
longer dated issues to widen out and the SGS curve to flatten further.
In the Asian credit market, Indon bonds move to the high again after
Jokowi was confirmed as the winner in the Indonesian presidential election.
Chinese property names opened stronger, even with the new issue opens book
today. Sino Ocean is issuing 5 and 10-year USD papers. The 5-year is guided at
CT5+ 335bps while the 10-year is at CT10+380bps. There were a bit of mixed
response for this paper, given the fact that China Life Insurance is the major
shareholder for Sino Ocean. Although weak operations were noted, the issue
amount is rumored to be small hence we would expect the take up to be decent.
Indonesia
In line with our view, Indonesia bond market noted losses on yesterday
trading session after a 6 consecutive days gains as investor were taking profit
of their positions. Foreigners were mostly seen on the buying side. Notting
much occur yesterday as there were much market sentiment which could drive the
bond market. Going forward, investor would like to know more about Jokowi’s
cabinet and constitutional court result if Prabowo challenges KPU election
official announcement. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield
stood at 7.867% (+4.4bps), 8.063% (+3.9bps), 8.509% (+2.1bps) and 8.686%
(+3.3bps) while 2-yr yield shifts up to 7.427% (+0.3bps). Trading volume was
noted heavy amounting Rp18,966 with FR0068 (20-yr benchmark series) and FR0070
(10-yr benchmark series) was the most tradable bond during the day. FR0068
total trading volume amounted Rp4,917 bn with 148x transaction frequency and
closed at 97.074 yielding 8.686% while FR0070 total trading volume amounted
Rp4,447 bn with 137x transaction frequency and closed at 102.045 yielding
8.063%.
On the corporate bond segment, trading volume was noted thin with total
volume amounting Rp460 bn yesterday (vs average per day (Jan – Jun) trading
volume of Rp677 bn). JSMR01CCN1S (Shelf registration I Jasa Marga Phase I Year
2013 Seri C; C serial bond; Rating: idAA) was the top actively
traded corporate bond with total trading volume amounting Rp60 bn and was last
traded at 95 yielding 10.3895%.
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