Maybank GM Daily - 15 Dec 2014

FX

Global

US/EU equities were back in the red last Fri. Oil tumbled to fresh 5-year lows below $60/bbl. Commodity-linked currencies continue to bear the brunt – AUD, CAD, NOK, RUB were broadly weaker. EUR remained resilient. USD was weaker, almost reversing the gains in the week before last.        Over the weekend, PM Abe’s ruling coalition secured a majority win (325 out of 475 seats) in the lower house elections, as expected. But turnout was low at around 52%. USD/JPY traded lower towards 117.80s, before trading back up to near-119 levels this morning. Focus this week on FOMC/Fed projection this Thu (Asia time). Expectations are mounting for slightly more hawkish tone, including the removal of “considerable time” phrase from the FOMC statement.         Looking ahead for the week, some key releases include PH Oct overseas remittances (+7.9% y/y Prior); US Nov IP (+0.6% m/m Cons.) on Mon. For Tue, RBA minutes and US Nov housing data. For Wed, SG Nov NODX (+3.6% Cons.); MY Nov Inflation (+2.8% Prior); BoE Minutes and US Nov CPI (+1.5% y/y Cons.). For Thu, FOMC meeting; Philly Fed Business Outlook; GE Dec IFO (104.7); UK Nov retail sales (+4.3% y/y Cons.). For Fri, GE Nov PPI (-1% Prior); 3Y LTRO repayment; JP Nov dept sales (-2.2% y/y Prior) and BoJ Monetary Policy Statement..

G7 Currencies

       DXY – Consolidate with bias downside. USD closed weaker for the week around 88.36 levels. US Nov PPI was down 0.2% m/m (vs. -0.1% Cons.); Univ. of Michigan confidence was stronger than expected (93.8 vs. 89.5 Cons.). Week ahead eyes on FOMC (Thu morning SG time), with markets looking for a somewhat more hawkish tone. Some are expecting the Fed to drop “considerable time” language it its statement. We continue to remain constructive of the longer term USD bull trend, but are mindful of stretched USD long positioning and we are cautious of a near term pullback. Stochastics are currently falling from overbought levels. 88-levels is an interim support, followed by 87-levels (50 DMA).Day ahead sees Dec Empire manufacturing and Nov IP.

       USD/JPY – Consolidation. As expected, PM Abe and his ruling coalition parties were returned to power with a more than two-thirds majority in the Lower House. The USD/JPY was sold off when the markets re-opened on the back of lingering risk sentiments from Fri’s global equity sell-off as well as the “buy on rumor, sell on fact” on the election results. Also not helping the pair was the weak Tankan survey for 4Q, which saw the index for both large manufacturing and non-manufacturing companies slipping lower to 13 from 12 and 16 in 3Q respectively. While short-term pull-back is likely after the massive run-up, we continue to be JPY-negative given the ultra-loose BOJ monetary policy. For now, we continue to expect the pair to remain in consolidative trades within 117.45-120.25 for the week ahead. For the week ahead, look out for Nov trade (Wed) and BOJ policy statement (Fri).

       AUD/USD – Fade Rallies. AUD/USD remains heavy, falling to fresh multi-year low of 0.8205 this morning (15 Dec). RBA Stevens commented that AUD/USD should be closer to 0.75, to better serve the economy than the pair at 0.85, in an interview with AFR (12 Dec). Downside pressure should continue to persist, on weakness in domestic economic growth, soft commodity prices, potentially widening interest rate differentials with USD and RBA’s explicit intent for weaker AUD. The daily MACD is bearish. Next support targets 0.82-levels. Retracement risk is limited towards 0.84-levels. Favor fading rallies. Next week sees RBA minutes, RBA Debelle’s speech (Tue); Nov Westpac Leading Index (Wed).

       EUR/USD –Upside X’mas squeeze. EUR/USD remains resilient, despite strong US data and weaker Euro-area data. While we remain bearish in the Euro, we continue to caution for possible upside squeeze on stretched Euro short positioning and seasonality demand for Euro in Dec. Rebound targets 1.2550 (50 DMA), before 1.26-levels.  Week ahead brings EC, GE, FR Mfg PMI (Tue); EC inflation (Wed); GE IFO (Thu); and GE PPI; 3Y LTRO repayment (Fri).   

       EUR/SGD – Range-bound. EURSGD drifted higher towards near-1.64 last Friday, before closing around 1.6370s. Initial resistance seen around 1.64 (23.6% Fibonacci retracement from 1.7672 – 1.6008), before 1.65. Support around 1.6320 (100 DMA), before 1.62 (50 DMA). Stochs are approaching overbought levels. 1.62-1.64 range remains in play.

Regional FX

       The SGD NEER trades at 0.03% above the implied mid-point of 1.3129. We estimate the top end at 1.2867 and the floor at 1.3392.

       USD/SGD – Potential Pullback. The USD/SGD rallied past 2011-high to 1.3244 last Mon only briefly before trading lower on a dollar pullback. Pair is sighted currently around 1.3119 and is likely to test its trend line at 1.31 levels this week. Any extended pull-back could see a move towards 1.2910-levels this week, especially should FOMC surprises with a hawkish signal. MACD and slow stochastics are exhibiting bearish signals. The current dip could be a buying opportunity, targeting a more back towards 1.3250.

       AUD/SGD – Drifting Lower. The AUD/SGD has been on an extended downtrend since it hit its high of 1.3612 in 2012. Cross continues to drift lower on the back of continued weakness in the AUD as well as the uptick in the SGD. Cross is within striking distance of our support at 1.0730 with a firm break extending bearish control towards 1.0550. Short-term though, there could be a tendency for the pair to bounce as stochastics are at oversold levels; but bounce is likely to be limited towards 1.1050 levels (Sep-Nov trend-line resistance).

SGD/MYR – Reaching New Highs. The SGD/MYR continues to make multi-year highs, hitting 2.6690 on 11 Dec, amid a dollar pullback and persistent weakness in global oil prices. While stochastics is now at overbought levels, the MACD forest is suggesting a bullish bias. The cross could extend its breakaway gap and test the all time high of 2.6935 (1998) and beyond should it manage to close above 2.6690. Support at 2.6350 should hold. 

       USD/MYR – Bullish. USD/MYR continued to rally sharply over the past 3 weeks breaking many key resistance levels on its way up. The pair is currently hovering around 3.50 (key resistance) and has surprisingly stalled at current levels, despite alot weaker oil prices. Momentum indicators continue to suggest a bullish play towards 3.54 levels (76.4% Fibonacci retracement of 2009 high to 2011 low). Near-term price action may suggest a temporary pause. Interim support seen at 3.4600, before 3.3800 (the breakout level).

       USD/CNY was fixed at 6.1152 (-0.0032), vs. previous 6.1184 (+2.0% upper band limit: 6.2400; -2.0% lower band limit: 5.9953). CNY/MYR was fixed at 0.5684 (+0.0028). USD/CNY – Range. USD/CNY currently trades around 6.1880 levels, lacking much direction over the past few days. MACD appears bullish; 6.20 resistance remains the key level to close above for the pair to maintain its climb.

1-Year CNY NDFs – Range. 1-yr NDF traded slightly lower around 6.31. Stochs are approaching overbought levels. Interim resistance around previous high of 6.3260, before 6.34.  USD/CNH – Range, with upside bias. This pair traded around 6.1900 levels this morning. MACD is bullish and could see 6.21 being challenged intra-day. We remain tactical long in USD/CNH as per our call set in 24 Nov, looking for a move above 6.22 levels.

       USD/IDR – Gapped Higher Again. The USD/IDR again gapped higher at the opening to 12550 from Fri’s close of 12467, pressured by IDR selling by macro names as well as the possible unwinding of carry trades ahead of FOMC on Fri. Pair is currently sighted around 12598, a high not seen since 2008, with daily MACD forest showing bullish momentum, though the pair is overstretched. With more of our barriers taken out with this gap higher, a move towards 12700 (25 Nov 2008 high) seems likely, though the drift higher could be slowed by BI entering to smooth volatility. 12375 should provide support this week. Last week, foreign funds sold a net USD110.64mn in equities, and removed a net IDR5.11tn from their outstanding holding of debt on 8-11 Dec. Softer risk sentiments this week could see further sell-off and keep the pair supported this week. The 1-month NDF surged to highs not seen since 2008 when it hit 12806 this morning with daily charts showing bullish momentum though the 1-month is overbought currently. The JISDOR was fixed at a new high of 12432 on Fri but a new high is likely to be reached today given the spot’s gapped higher this morning.

       USD/PHP – Rangy. After being on an extended slide since hitting 45.156 (20 Nov), the USD/PHP has been in consolidation within 44.355-44.700 over the past few sessions. Pair is currently seen hovering around 44.615 with momentum indicators showing little directional clarity for now. Moreover, the pair is trapped within a ichimoku cloud, suggesting range-bound trading is likely ahead. Last week, foreign funds sold a net USD54.3mn in equities, and softer risks sentiments ahead could see weak portfolio inflows this week, keeping the pair supported. Ahead of FOMC on Fri, we continue to expect the pair to remain in rangy trade for the week within 44.355-44.700. The 1-month NDF bounced higher this morning, sighted around 44.700. Daily chart is showing a bias to the downside this week, though the 1-month is currently trapped within an ichimoku cloud, suggesting range-bound trades ahead. Overseas remittances for Oct are due today and market is expecting a gain of 6.5% y/y, slower than the 7.9% seen in Sep.

       USD/THB – Range-Bound.  The USD/THB dipped this morning t 32.820 on the back of a softer dollar tone, but remains well-within it current trading range of 32.750-32.900. Daily charts are also showing little momentum in either direction ahead, suggesting range-bound trades are likely ahead. The pair remains vulnerable to moves in the dollar and dips are likely to be short-lived. Also, there are unlikely to be any surprises from the BoT policy decision on Wed with consensus, including our economic team, expecting the central bank to stand pat on the policy rate at 2.0%. Last week, foreign funds sold a net THB8.07bn in equities but bought a net THB5.07bn in debt. Mixed risk sentiments are likely to continue ahead of the FOMC meeting on Fri that could see mixed interests in Thai assets again this week, keeping the pair range-bound.

Rates

Indonesia

      10-yr benchmark series price dropped to 101.545 or equivalent to yield of 8.131%. Bond prices continue to slides for the fifth week. Several reason which have caused this price decline are expectation of higher December inflation and bond supply pressure next year which have caused a foreign outflow and depreciating Rupiah. Holiday season around the corner have also made investor to just stay away from the bond market for some while till at least the starting of next year. Last but not least is better US economy data (better US retail data) along with other recent US economy data publication have also contributed negatively towards the bond market. The decline in recent weeks has been seen supported by a heavy volume. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.895% (+8.3bps), 8.131% (+12.6bps), 8.361% (+9.8bps) and 8.602% (+17.3bps) while 2-yr yield shifts up to 7.405% (+2.7bps). Government bond traded heavy at secondary market amounting Rp15,717 bn with ORI011 (3-yr) as the most tradable bond. ORI011 total trading volume amounting Rp2,769 bn with 238x transaction frequency and closed at 101.778 yielding 7.840%.

       Corporate bond trading was heavy amounting Rp785 bn (vs average per day (Jan – Aug) trading volume of Rp650 bn). MEDC01CN2 (Shelf registration I Medco Energi International Phase II Year 2013; Rating: idAA-) was the top actively traded corporate bond with total trading volume amounted Rp160 bn yielding 11.4949%.