FX
Global
The US calendar remains light this week with only Jul retail sales
(Cons.:0.3%m/m) and industrial production (Cons.: 0.3%m/m) out on Wed and Fri
respectively. Empire manufacturing (Cons.:20.0) for Aug is due on Fri. Dollar
has kept much of its buoyancy thus far and we continue to expect a supportive
tone for the greenback. While some focus could still be on geopolitical risk
between Russia and Ukraine, US and Iraq, Germany’s ZEW survey will be watched
on Mon followed by growth and inflation numbers from the core economies
later. EUR was little inspired by the post ECB speech last week and EUR bears
may extend their run should data disappoint.
Nearer to home, Australia’s NAB business surveys are also out on Tue
followed by Westpac consumer confidence the next day. At this point, little
can eclipse the shocking jump in the jobless rate and AUD bears are likely to
dominate. Eye the 0.92-figure next.
In Asia, China’s liquidity data will be scrutinized, out anytime
within 10-15 Jul. The Jun numbers had surprised to the upside and Premier Li
Keqiang had even flagged that large scale monetary stimulus is unlikely
because of the pace of expansion in the money supply. CNY has bucked the
trend in AXJs and strengthened 0.4% against the dollar in the past five
sessions. Expect the USD/CNY to remain heavy, as signaled by the
significantly lower USD/CNY mid-point fixing on Fri. Jul retail sales, FAI
and industrial production will also be released. The rest of USD/AXJs
retained a bid tone. Key releases this week is Singapore’s 2Q final GDP
numbers (Cons.: -0.1%q/q). Malaysia’s 2Q GDP (Cons.: 5.5%y/y) and current
account figures are also scheduled for release and USD/MYR bids could be
tempered by expectations of decent numbers.
Elsewhere, BI is due to make its monthly policy decision and majority
expects the central bank to sit on its hands. USD/IDR could remain subdued
ahead of the central bank decision nonetheless. |
G7 Currencies
|
DXY – Buoyant. DXY index hovered within the 81.18 -81.72
range for much of the past week, last seen around 81.45. The index lost
much of its bullish momentum by now and could consolidate within the current
band. There are a few releases to watch this week, notably retail sales and
empire manufacturing for Jul and Aug empire manufacturing. Dips are still
likely to be supported and any upside surprises in these data could lift the
greenback beyond 81.72. Fed Fisher, Dudley and Rosengren will speak in the
first half of the week.
USD/JPY – Rebounds. USD/JPY sank along with risk appetite and was last
seen around 101.70 on late Fri. We do not rule out additional bearish
pressure given the fact that US President Obama authorized air strikes on
Iraq amid a standoff between Russia and Ukraine. Next support is seen around
101.10. That said, the pair is still rangy and near oversold. Positioning
data is against short USD/JPY position. We are bias to the upside in the
interim but any rebounds could hit resistance around 102.50. 2Q GDP data is
due this week and consensus expects
AUD/USD – Heavy. AUD/USD was offered in the second half of last week. The pair broke
key barrier around the 0.93-figure and headed lower to around 0.9250 at last
sight. The big downmove was triggered by the shocking jump in the
unemployment rate to 6.4% from previous 6.0%. While details were not as bad
as the headline, the rise in the jobless rate underscores the excess capacity
in the economy. Next bearish target is seen around 0.92 ahead of the next at
0.9154, though we view action this week likely milder compared to the week
before. Rebounds are likely to meet resistance around 0.9330. Eyes on NAB
business surveys and Westpac consumer confidence, on the tap this week.
EUR/USD – Consolidative. EUR is still under bearish pressure and was last
seen around 1.34 against the dollar. The pair has also lost much of its
bearish momentum in the past week. 1.3316 still marks the support for the
pair and we watch the German ZEW survey tomorrow for any volatility. Beyond
Tue, inflation and growth numbers are on due out of the core economies and
could give players a better feel of the fundamentals. Risks are still to the
downside as we write but the short squeeze on Fri has alerted us to potential
upsides in the interim and we expect two-way action within 1.3316-1.3430. |
EUR/SGD – Tentative Upward Tilt. EUR/SGD hovered around 1.6770, near to its previous
close of 1.6791 last Fri. The daily chart also shows bullish pressure on this
pair though nearby resistance around 1.6821 slows bids. Expect the 1.6944 to
cap topsides this week and this cross could trade with a upward tilt
tentatively. Support is seen around 1.6691. Eye the EU data for cues with
German ZEW survey out first tomorrow. Expectations of the Aug survey are
softer. Beyond Tue, 7mre inflation and growth data are due out of the core
economies later this week.
Regional FX
The SGD NEER trades 0.20% above the implied mid-point of 1.2530. The top
end is estimated at 1.2280 and the floor at 1.2780.
USD/SGD – Overbought. USD/SGD broke above the 1.25-figure and settled around the 1.2510-mark
in late Asia on Fri. Expect pairing to retain buoyancy this week, likely within
the 1.2460-1.2590 range. MACD shows upside risks in the pair and barrier next
is seen around 1.2587 (50% Fibonacci Retracement level of the Oct-Jan rally).
2Q GDP is due this week and the average forecast implies a likely mild
contraction of around -0.1%q/q. Even so, expect this pair to trace the regional
peers rather than its own growth data.
AUD/SGD – Trapped. AUD/SGD was back at the lower bound of the range that it has been
trading within and the 1.16-figure haunts. This cross has little momentum with
a tug of war between the AUD and SGD bears keeping it within range. Risks are
slightly tilted to the downside and possibly towards the next support around
1.1543. Topsides remained capped by 1.1718 with interim barrier around 1.1680. SGD/MYR – Upside Risks.
SGD/MYR gapped down this morning before edging higher towards the 2.56-figure.
Pressure is slightly tilted to the upside as flagged by the daily MACD chart
though a relatively thick ichimoku cloud caps. Expect two-way action to
continue within 2.5547-2.5730. Watch for Singapore’s GDP on Tue which should
not move the cross normally, unless there is a big surprise. Malaysia’s GDP and
current account numbers for 2Q are due on Fri at 6pm. Those data should give
the cue to trades in the following week. Expectations are for a decent numbers
and could lend MYR some support.
USD/MYR – Choppy. USD/MYR ended the week with a doji candlestick on Fri around 3.2088
after reaching a high for the week at 3.2210. This morning, pair has drifted
lower to around 3.2015. Trades in the past week have been choppy with some bias
to the upside and we would be wary of adding bids. 3.2243 is the interim
barrier for this pair and support is seen around 3.1848. Key releases this week
is the 2Q GDP and current account. Decent expectations should temper upside in
this pair and keep bulls from reaching next target at 3.2365. Jun industrial
production is due today and could come in a tad softer at 5.0%y/y from previous
6.0%.
USD/CNY
was fixed lower at 6.1522 (-0.0040), vs. previous 6.1522 (+2.0% upper band
limit: 6.2778 -2.0% lower band limit: 6.0316). CNY/MYR was fixed at 0.5197
(-0.0015). USD/CNY – Bearish. Pair gapped down in tandem with the rest of Asia to
around 6.1530. Mid-point was also fixed lower. Pair tests the 6.1533-support
(50% Fibonacci retracement of the Jan-Apr rally) at the moment and a break here
clears the way towards the next support at 6.1264. The 18-DMA remains well
below the 40-DMA. Unexpected bids could be deterred by the 6.1630-resistance.
An editorial by China Securities Journal said that the monetary loosening in 2H
might not be as strong as 1H.
1-Year CNY NDFs – Choppy. The NDF was last seen around 6.2275. MACD forest on
the 4-hourly chart shows bearish momentum. Further offers could lead the NDF
towards the next support at 6.2220. Barrier is sen around 6.2350. USD/CNH
– Heavy. USD/CNH slipped below support around 6.1591 and heads lower
towards the next technical support around 6.1375. Conditions are bearish in
this pair and rebounds are likely to be run into selling interest. The
downtrend continues. CNH trades at a slight premium to CNY.
USD/IDR – Bullish Momentum. USD/IDR gapped down this morning though pair still
remained within the daily ichimoku cloud, last seen around 11740. Daily
momentum indicators show slight bullishness. Pair tests the lower bound of the
cloud around 11726 and a break her exposes the next support around the 11700.
Foreign appetite for Indonesia assets waned with a net USD14.9mn in equities
sold on Fri. Risk appetite seemed to have improved after the positive NY
session last Fri. Immediate barrier is seen around 11835. The 1-month NDF also
drifted lower to around 11778. The JISDOR was fixed higher for the third
consecutive session on Fri at 11822 compared to Thu’s fixing at 11766. The
tentative calm should see a lower JISDOR fixing today.
USD/PHP –
Two-Way Risks. USD/PHP slipped to around 43.96 this morning, off last
week’s high of 44.29. RSI had flagged overbought conditions and downmove
provide bulls a tentative breather. The morning fall seems to be also guided by
the ichimoku cloud on the daily chart. However, momentum indicators show upside
bias in this pair still. We do not rule out a rebound. 18-day MA is inching
closing towards the 40-SMA, gunning for a positive cross-over. A clear break of
the 43.96-support exposes the next at 43.74. Rebounds to meet resistance at
44.421. Interim barrier at recent high of 44.29. Meanwhile, 1-month NDF was
also trapped by the daily ichimoku cloud. Momentum is also bullish for this
pair and barrier is seen around 44.31 while offers to meet support around
43.80.
USD/THB – Consolidation. Onshore markets are away for a special market holiday today and tomorrow. USD/THB hovered within
range, last seen around 32.150. A net USD36.8mn of equities was sold off on Fri
in tandem with the -USD199.3mn in debt. Daily MACD forest is above zero line
and could signal more scope towards barrier around 32.355. Offers should be
limited by 32.050.
Rates
Local market was filled with risk-off sentiment after the US authorized
air strikes on Iraq leading to further flattening the MYR govvy curve. The long
ends dipped 1-2bps on the 10y to 30y MGS buckets and the same for the Islamic
GII which saw yields lower by the same magnitude. Meanwhile, lower IRS levels
lent even stronger support to bonds. Next week the market would focus on the 7y
MGS 9/21 auction. We expect WI to start trading next week on the 12th of
August, with an estimated size of MYR3.5b.
IRS was under some receiving pressure as global yields plummet on
risk-off headlines. Onshore IRS levels fell by 1-2bps but not as much as we saw
on global rates probably further domestic rates decline to some extent are
capped by the elevated 3M KLIBOR, which added another 1bp today to 3.61%. 5y
IRS traded at 4.02%.
We see active buying interest on the MYR credit today, with the focus
mainly on the government guaranteed front and AAA. Offers shifted a tad lower
from yesterday especially for names like Manjung, Aman, and Danainfra. The
buying persisted following the rally on govvies.
Singapore
SGS rates market was choppy today with the headlines out of the US that
Obama has authorized an air strike on Iraq. This spooked the markets and flight
to quality immediately set in. Bonds were pretty in line with the SGD IRS
hitting a peak of 7bps higher in prices but closed at about 5bps higher. This
yield squeeze may be a start to more bond buying on dips with shocking news
from the high tension parts of the world.
In the Asian credit market, despite UST yield moving lower, spreads have
gone wider as buyers shifted cash price further away. That said, there were
some decent bids seen on Chinese properties and technologies names like
Tencent, Kaisa, and KWG Property. We think the condition will persist for a
while before reaching the bottom for buyers to start bargain hunting.
Indonesia
Indonesia bond market moved on negative mode within the week. Foreign
player risks off Indonesia bond market on Friday’s trading session on geopolitical
concern as U.S. authorized air strikes in Iraq while Russia banned some food
imports in a return respon towards U.S. and European sanctions. Meanwhile July
FX reserve data rose to US$110.5 bn (vs June FX reserve of US$107.7 bn) or
equivalent to 6.2 months of imports and government external debt payment. The
rising reserves were due to Euro Bonds issuance and oil and gas export
proceeds. The data failed to give positive implication to the bond market as
the publication came after the bond market closed. Yield curve bear flattening
with 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 8.042%
(+4.1bps), 8.294% (+5.8bps), 8.671% (+5.7bps) and 8.904% (+3.7bps) while 2-yr
yield shifts up to 7.634% (+10.6bps). Trading volume significantly fell to
Rp7,091 bn from Rp11,623 tn with FR0070 (10-yr benchmark series) and FR0068
(20-yr benchmark series) remains as the most tradable bond. FR0070 total
trading volume amounted Rp1,678 bn with 80x transaction frequency and closed at
100.517 yielding 8.294% while FR0068 total trading volume amounted Rp1,276 bn
with 56x transaction frequency and closed at 95.127 yielding 8.904%.
Corporate bond trading volume was seen thin amounting Rp300 bn (vs
average per day (Jan – Jun) trading volume of Rp677 bn). BBMISMSB1CN1 (Shelf
Registration Subordinated Sukuk Mudharabah I Bank Muamalat Phase I year 2012;
Rating: idA+(sy)) was the top actively traded corporate bond with total trading
volume amounting Rp61 bn.
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