FX
Global
Jul nonfarm payroll came in a tad weaker-than-expected at 209K
compared to the consensus of 230K. Unemployment rate rose to 6.2% from
previous 6.1%. The weaker-than-expected NFP drove demand back to the US
treasuries and dollar dipped in tandem. 10-year yield is back to sub-2.5%,
allowing an extension for carry trades. On the other hand, the broad
improvement in data could mean that retracements in the dollar are likely to
be shallow.
The US data calendar is rather quiet this week with only Jun factory
orders and trade balance of note. Elsewhere, more central bank meets, including
RBA, ECB, BOE and BOJ. None of them is expected to move though their
assessment of the economy and outlook would be closely watched. RBA releases
quarterly SoMP on Fri.
In Asia, Indonesian markets re-open after their Idul Fitri
celebrations. Jun trade numbers and Jul CPI (Cons.: 4.48%y/y) are due today.
Expect some upside pressure as USD/IDR catches up with the rest of its peers.
Singapore’s PMI-mfg is out tonight. We do not expect any major moves in the
SGD trade weighted at the moment with the S$NEER now hovering around 0.5-0.7%
above the mid-point. Thereafter, Philippines’ Jul CPI (Cons.: 4.6%y/y) will
be released on Tue but the key data to watch would be Indonesia’s 2Q GDP
(Cons.: 5.2%y/y) that day. |
Malaysia’s Jun export & trade numbers on Wed will be eyed closely
for the final clue of its current account performance in 2Q. BOT also makes
policy decision that day with consensus including our house view, expecting no
change in the policy interest rate. China’s Jul data dominates for the rest of
the week and we would take special note of trade numbers with impact on AUD and
rest of Asians. Liquidity numbers could also give a hint of the health of the
economy. Inflation numbers are also due but we do not take that to be much of
an event at this point.
G7 Currencies
DXY – Shallow Dips. The dollar strength unfolds amid a slew of
better economic data and upbeat Fed assessment. The labour report came in
weaker-than-expected at 209K vs. the consensus of 230K and DXY touched a low of
81.1880 on Fri and steadied around 81.30 as we write. Expect the greenback to
trade within range for the rest of the week with further dips to meet support
around 80.90. This week, focus is on Jun factory orders, trade balance and the
usual initial claims for a lack of more important data.
USD/JPY – Buoyant in Range. USD/JPY rallied towards the end of the week and
accumulated much bullish steam. Last seen around 102.40, expect pairing to
remain buoyant still with support around 102.28, ahead of the next at the
102-figure. First barrier is seen at 103.43. BOJ meets next week but no change
is expected from the central bank and statement should not ruffle the markets
much. Eyes on China’s data for any change in risk sentiments.
AUD/USD – Capped. AUD/USD waffled around the 0.93-figure this morning, on the uptick owed
to dollar retracement. Intra-day chart shows bearish momentum, though could
still be supported by 0.9274-support. 0.9330 is seen as the first barrier for
the pair ahead of the next at 0.9360. RBA is not expected to move this week but
statement will be watched. Broad dollar strength is likely to keep the AUD
under pressure and despite the recent fall in the AUD, the currency is likely
not within the comfort zone of the central bank. In fact, RBA Governor Glenn
Stevens commented that the currency is overvalued. Weaker retail sales report
also weighed on the currency though AUD offers were perhaps slowed by the
firmer 2Q CPI. We retain our view that interest rate will remain steady until
the second half of next year. Little fireworks are expected from the
post-decision statement on Tue but the quarterly Statement on Monetary Policy
(SoMP) will be more scrutinized for insights. Jul labour report is also due on
Thu.
EUR/USD – Heavy. Bears are in control of the EUR/USD, especially after a softer-than-expected
CPI estimate for the Eurozone for July. Immediate support is seen at 1.3367 and
momentum indicators are bearish. Expect upticks to be limited by the resistance
around 1.3400 and 1.3432. Risks are still to the downside with next support
some distance away at 1.3316. ECB meets next week and any (unlikely) surprises
could trigger more volatility for the pair. Expect sideway trades to dominate
(albeit) with a heavy tone.
EUR/SGD – Narrow Two-Way Trades. EUR/SGD hovered around 1.6730, on the downtick along
with SGD strength this morning. Even so, this cross still registers an increase
in bullish momentum and dips are likely to be supported intra-day. The
technical support is seen around 1.6640 while topsides are guarded first by
immediate barrier around 1.6760 ahead of the next at 1.6821. Beyond the
near-term, sell on upticks could be way to play as the daily ichimoku cloud
still weighs. 18-SMA is still below 40-SMA. Bounces are thus likely to remain
on short-leash.
Regional FX
The SGD NEER trades 0.59% above the implied mid-point of 1.2538. We
estimate the top end at 1.2288 and the floor at 1.2787.
USD/SGD – Some room for Upside. USD/SGD bounced towards the 1.25-figure last Fri and
continues to sustain bullish momentum this morning. Pair is on the uptick and
key support is seen at 1.2450. We see some room for upside. Next barrier is
seen at 1.2502 ahead at 1.2529 (the 61.8% Fibonacci Retracement of the Oct-Jan
rally). Nearby support is seen around 1.2450 ahead of the next at 1.2396.
Jul PMI is due tonight and consensus expects a marginal improvement to 50.6
compared to the previous 50.5. The electronics sector is expected to keep pace
of expansion at 50.7.
AUD/SGD – Choppy. AUD/SGD slipped towards the 1.16-figure as we
expected last week and steadied around 1.1615 this morning. We do not rule out
further slippage towards the 1.1534-support should there be a sustained break
of the 1.16-figure. Key event of the week is RBA meeting on Tue, labour report
on Thu and the Statement on Monetary Policy on Fri. Expect some volatility
within 1.1534-1.1718 range. SGD/MYR – Capped.
SGD/MYR bounced towards 2.5690 by the end of the week and gained upside
momentum on the daily chart. Despite the slight bullish momentum on the MACD,
bids are still deterred by the lower bound of the daily ichimoku cloud at
2.5715 and the pair was last seen around 2.5675. Cloud keeps a lid on the
cross. Expect more two-way trades within 2.5550-2.5730.
USD/MYR – Shifting Higher. USD/MYR broke above the 3.2040-barrier and waffled
around 3.2010 this morning, pressed lower by the dollar retreat. MACD sustained
bullish momentum and range-trading has possibly shifted towards the higher
3.1933-3.2396 range. Jun trade numbers will give a hint of how the current
account has performed in 2Q. We do not see sharp deterioration in the print and
should continue to underpin MYR. In the meantime, strong corporate dollar
demand keeps buoyancy intact.
USD/CNY
was fixed at 6.1661 (-0.0020), vs. previous 6.1681 (+2.0% upper band limit:
6.2918; -2.0% lower band limit: 6.0453). CNY/MYR was fixed at 0.5187 (+0.0002).
USD/CNY – Downside Bias. Pair opened at the 6.18-figure before slipping to around 6.1760,
weighed by softer dollar tones. The pair trades in tandem with most of USD/AXJs
but unlike most other USD/AXJs, the bearish tone in the pair is more
pronounced. The 18-DMA well below the 40-DMA. Expect bids to be limited by the
6.1860-resistance. Next support remained at 6.1699 ahead of the next, some
distance away at 6.1533 (50% Fibonacci retracement of the Jan-Apr rally). At
home, the CSRC has plans to lower some risk management requirements on
brokerage companies such as cutting the net capital-net assets ratio
requirements to 4% from 8% (CSJ, BBG). PBOC also commented that there will not
be broad monetary easing as credit and money supply have expanded rapidly.
1-Year CNY NDFs –Consolidation. The NDF slipped this morning and was last seen around
6.2490 this morning. MACD forest on the daily chart shows no momentum though
18-SMA is still above the 40-SMA. Expect consolidative trades with 6.2625 seen
as a viable barrier for the pair. Pair tests the 6.2485-support as we write and
support is seen around 6.2430. USD/CNH – Heavy. USD/CNH was
last seen around 6.1740, still within striking distance of around 6.1706-support.
The support is eyed closely ahead of the 6.1591. MACD (daily) shows downside
momentum. 18-SMA is still below the 40-SMA and upticks may be limited. Expect
sideway trades at this point. Barrier remains around 6.1850 for intra-day
trade, ahead of 6.1900.
USD/IDR – Market re-opens. USD/IDR waffled around 11730, softer than its
previous close of 11803. Despite the downtick in early trades, MACD on the
daily charts shows a tilt to the upside though lacking materially, indicating
shallow dips ahead. Support is seen around 11500 this week. With price action
trapped within the daily ichimoku cloud, perhaps the daily ichimoku cloud could
be of some guide and 11950 marks the upper barrier for the pair. The 1-month
NDF also on the downtrend but offers could be deterred by the support around
11760. Last seen around 11780, the 18-SMA is seen below the 40-SMA and signals
downside pressure. IDR strength is all the more supported by the inflows. Bond
inflows amount to USD482.4mn month-to-date and could continue to remain
supportive of the currency should this extend. Data-wise, Jul CPI and Trade
data are on tap today and market (Maybank: 4.60%) is expecting headline
inflation to moderate to 4.45% y/y in Jul (Jun: 6.70%) due to a higher base of
comparison last year because of the fuel price hike. As for trade, consensus is
looking for export, imports and the trade balance to come in at -1.0% y/y,
-4.1% y/y and -USD387m in Jun, while our economic team is expecting +3.09% y/y,
-0.49% y/y and -USD340mn.
USD/PHP –
Capped. USD/PHP opened lower on dollar retreat and was last seen around
43.690. This pair still keeps bullish momentum despite the downmove this
morning though the daily Ichimoku cloud above the prices is a formidable
barrier. Resistance is marked at 44.00 now while downticks could be supported
43.750 ahead of 43.420. Interim barrier is seen at 43.80. Given the current
momentum, there is still upside risks though upticks are likely to be resisted.
Plays are likely to remain within range. Foreign funds sold off USD6.6mn last
Fri and a extension of the sell-off today could keep pair supported on dips.
PSEi is down -0.1%.
USD/THB – Supported on Dips. USD/THB edged lower this morning and waffled around
32.14, in tandem with the rest of USD/AXJs. Notwithstanding the dollar retreat,
this pair still gained bullish momentum and we expect the 32.050 to limit
offers this week. Upticks are likely to test the first barrier around 32.245
ahead of 32.355. Foreign funds sold a net USD14.5mn of equities on Fri,
accompanied by a net sale of USD7.8mn of debt. Expect upside pressure to
continue should sell-off extends this week. For data, Jul CPI came in below
market expectations of 2.40%, rising by a more moderate 2.16% y/y (Jun: 2.35%),
on the back of lower food prices as well as the price controls put in place by
the military junta. Core inflation however rose by 1.81% in Jul from 1.71% in
Jun. The Ministry of Commerce has revised down its full-year inflation forecast
to 2.35% for 2014 from 2.40% because of easing concern of drought and lower oil
prices, while our economic team is maintaining their forecast at 2.25% with
upside risks from the demand side.
Rates
Local government bonds ended the day softer on price with the belly of
the curve up by 2bps. Most trades centered upon the 7y and 10y part of the
curve with the GII seeing more activity. Volumes remained thin as most players
were still away on holiday. Near term, govvy’s movement remains highly
influenced by the UST and the expectation of the USDMYR pair.
IRS levels edged higher as USDMYR gapped up nearly 200pips. This led to
weaker local bond sentiments, which eventually caused rates to go north.
However, market dealers were reluctant react aggressively given the lack of any
flows to hedge. 3y IRS traded at 3.8775%, 5y traded at 4.07%. 3M KLIBOR stayed
unchanged at 3.60%.
The PDS market saw decent buying despite the govvy sentiment turned
weaker. Danainfra 7/21 was taken at 4.21%. Buying was seen down the credit
curve for names like Kesturi and Tanjung Bin Energy. Interest remained strong
on high grades for names like Manjung and Plus. Bids were shown across tenors
with little or no offers seen.
Singapore
SGS opened flat today but yields slowly went higher towards the end of
the day as the SGD IRS got paid up about 3bps. With the US nonfarm payrolls
data releasing tonight, players position defensively with continued squaring up
interest and if payrolls data meets market consensus at 230,000, we could see
markets slowly moving towards paid positions.
In the Asian credit market, sentiment turned softer on concerns of US
rates might go higher faster than expected. Not helping is the Argentina’s debt
being claimed default and fresh sanctions on Russia. Some corrections took
place on the Indon names after the recent election rally. Philippine credits
also took a hit. We however saw better buying on HY Chinese property papers,
with only small selling in the IG property space for names like Wanda and Sino
Ocean.
Indonesia
Please note that there is no write-up on Indonesia fixed income today.
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