FX
Global
 US equities continue to decline for the fourth consecutive session despite better than expected US PMI and jobless claims data. USD rebounded overnight, with DXY rising to 97.40 levels. EUR, GBP, AUD, NZD declined. JPY and gold gained on geopolitical concerns in Yemen. Crude oil prices continue to firm on supply disruption concerns over situation in Yemen. WTI and Brent at around $50.60/bbl, $58.50/bbl levels, respectively. In overnight data, Euro-area M3 growth was encouraging (+4% y/y in Feb, up from +3.7% in Jan). Loans to the private sector improved further and increased 0.6% y/y in February up from 0.4% y/y in Jan. This was mainly driven by loans to nonfinancial corporations, which declined at the slowest pace since mid-2012. This is encouraging as data suggests banks are moving back towards the business of lending and together with improvement in IP, PMI there could point to a cyclical growth recovery in the Euro-area. Day ahead in Europe brings FR Mar Consumer confidence; IT Jan Industrial and sales orders; GE, IT retail sales. For US, 4Q GDP; core PCE; Mar Univ. of Michigan sentiment data will be closely watched. Fed’s Vice-Chair Fischer due to speak. Day ahead USD could consolidate further notwithstanding 2-ways moves. |
G7 Currencies
| DXY – Consolidation. USD jumped on better than expected composite/services PMI and jobless claims data. Fed’s Lockhard and Bullard echoed other Fed speakers that the Fed remains on track to commence normalization later this year. DXY now at 97.40 levels and could consolidate in 97 – 98 range. Daily MACD remains bearish bias; but stochastics are nearing oversold levels. Day ahead brings 4Q GDP; core PCE; Mar Univ. of Michigan sentiment and Fed’s Fischer to speak. USD/JPY – Sideways. Risk aversion sent the USD/JPY lower towards 118.33 overnight before recovering to the 119.40-levels on the back of rising UST yields and equities. Pair has since eased off, tracking the softer dollar tone, and is now hovering below our support at 119.20 (50DMA). A firm break here could see the pair headed towards the next support at 118.80 (100 DMA). We continue to look to buy on USD dips. Both headline and core inflation rose by 2.2% y/y in Feb, but stripped off the effects of the Apr consumption tax hike, core inflation was flat. This though is unlikely to force the BOJ to action for now as the decline could be attributable to cheaper oil prices. Thus any rebound is likely to be temporary with resistance still at 120.00. Intraday MACD continues to show no strong momentum while slow stochastics indicates upside bias. AUD/USD – Sell on Rallies. AUD attempted another rally overnight but failed at 0.7884, making successive lower high daily close for the 3rd day. Daily stochastics is showing tentative signs of falling from overbought areas, and this could suggest some early signs of downside pressure. Favor fading rallies towards 0.7850, with a stop-loss placed above 0.79. No data scheduled for release today. We continue to see further weakening in the A$ on a combination of factors including soft domestic economic growth, falling inflation and further intensification of USD strength. We still see at least another rate cut to come possibly in Apr or May meeting. NZD/USD – Consolidate with Bias to Fade Rallies. NZD consolidation with a bearish bias continued. Yesterday we suggested looking for intra-day rally towards 0.7640 to fade into; with stop-loss placed above 0.7700 targeting a move back towards the 0.7465 (50 DMA). Slow stochastics suggests the pair is nearing overbought areas. Next key support at 0.7577 (23.6% Fibonacci retracement of 0.7192 – 0.7697), before 0.7505 (38.2% Fibonacci retracement) and 0.7465 (50 DMA). EUR/USD –Fade Rallies. EUR/USD attempted another squeeze above 1.10-handle towards 1.1052 high overnight before easing to close at its lowest level (1.0884) for the week. Daily MACD remains mild bullish bias while stochastics are nearing overbought levels. We continue to favor fading rallies above 1.10 levels. Over the medium term we continue to maintain our core bearish EUR/USD view amid structural decline in Europe fundamentals and diverging monetary policies. Day ahead FR Mar Consumer confidence; IT Jan Industrial and sales orders; GE, IT retail sales (Fri). |
EUR/SGD – Range-bound. EUR/SGD eased from around 1.50 handle (23.6% Fibonacci retracement of 1.6390 – 1.4573) to trade lower towards 1.4915 levels at time of writing, tracking a much weaker Euro. MACD remains biased for further upside while stochastics suggests some fatigue in recent rally. We continue to caution that a daily close above 1.50 could see upside risk towards 1.52 levels (50 DMA). Intra-day range of 1.4850 – 1.4950 expected.
Asia ex Japan Currencies
The SGD NEER trades around 1.76% below the implied mid-point of 1.3463 with the top end estimated at 1.3189 and the floor at 1.3738. USD/SGD – Supported. USD/SGD climbed to 1.3722 overnight but has since edged below the 1.37-levels, tracking the dollar. The weak industrial production print for Feb (-3.6% y/y) did not appear to have a lingering impact on the pair. Nevertheless, the bias is still to the upside given that market continues to expect further MAS easing measures by in Apr. We do not share that view as MAS is likely to adopt a "wait-and-see" approach as the expansionary 2015 budget should keep the economy supported. Moreover, disinflationary pressures have already been factored in during the inter-meeting move in Jan. Intraday MACD and slow stochastics continue to show upside bias, suggesting downside could again be limited. Barrier today is seen at 1.3720, while support nearby is around 1.3670 before 1.3590. AUD/SGD – Consolidating With Bearish Tilt. AUD/SGD is in consolidative mode after its move lower on Wed and is currently hovering around 1.0717. Both intraday MACD and slow stochastics are showing a bias to the downside, suggesting further moves lower could be likely. For now, expect intraday trades within 1.0700-1.0800 to hold, though a break of the 1.07-levels would expose the next support at 1.0645. SGD/MYR – Range-Bound. The SGD/MYR reversed course and slid below the 2.68-levels this morning after climbing for two consecutive sessions. Cross was last sighted around 2.6769 with intraday MACD showing tentative bearish momentum, though stochastics is indicating little bias in either direction, suggesting range-bound trades remain likely. Look for range-bound trades within 2.6720-2.6900 intraday. USD/MYR –Downside weekly reversal in the making? USD/MYR traded heavy towards 3.6680 levels, tracking the gains in oil prices. Daily MACD and slow stochastics are mild bearish bias, suggesting further downside. Support levels still at 3.6430 levels (23.6% Fibonacci retracement of 3.3474 – 3.7350), before 3.63 (50 DMA). Intra-day range of 3.65 – 3.6850 expected. Looking out on weekly technicals, the pair could potentially make a downside weekly reversal (if it makes a weekly close below 3.6550) and this could suggest further downside in the pair for the following week. We continue to monitor development on the technical analysis perspective. On medium term fundamentals, we continue to see further weakness in the Ringgit on a combination of domestic worries including risk of smaller net foreign fund inflows and heightened risk of sovereign rating downgrade amid contingent liability exposure, lower fiscal revenue and declining current account surplus. USD/CNH – Consolidation. The pair remains in consolidative mood and may trade recent ranges of 6.20 - 6.22. Weekly MACD and stochastics are now turning bearish bias which could suggest a down trend could be in play. We look for further rallies towards 6.2300 levels to fade into, playing the China reform story which could spur inflows. At the same time we are cautious of policymakers keeping the pair relatively stable, preventing any excessive moves. We continue to expect a 50bps cut in RRR and targeted monetary easing to align its policy with fundamentals. We reiterate our view that the objective of policymakers is to lower the cost of funding to support SMEs. It is also not our base case scenario for the PBoC to widen its trading band at this stage as we see little incentive to do so now. Widening the trading band will have a tendency to see one-way bets and throw the currency stability objective off-course. USD/CNY was fixed higher by 22 pips at 6.1397 (vs. 6.13750). CNYMYR was fixed lower by 16 pips at 0.5882 (vs. 0.5898). USD/IDR – Rangy. USD/IDR remains above the 13000-handle this morning, playing catch up to the dollar moves overnight. Pair is currently edging higher around 13057 with momentum indicators showing only mild bullishness, while slow stochastics is bias to the upside. However, pair has entered into an intraday ichimoku cloud, suggesting that range-bound trades are possible ahead. Look for intraday range of 12890-13150 to hold today. Foreign funds sold a net USD25.25mn in equities yesterday, but added a net IDR1.08tn to their outstanding holding of government debt on 25 Mar (latest data available). 1-month NDF climbed higher towards the 13200-levels this morning with intraday MACD showing bullish momentum though slow stochastics is at overbought levels. JISDOR was fixed higher at 13003 yesterday from Wed’s 12932, and another higher fixing is expected given the spot’s climb this morning. USD/PHP – Consolidation. USD/PHP rebounded from yesterday’s BSP decision to hold policy pat. The Deputy Governor commented that “lower interest rate was not appropriate” though “nothing can be ruled out at this point” as the central bank remained “data dependent”. Pair is also probably playing catch up to the dollar moves overnight. Look for consolidative trades today with intraday MACD showing mild bearish momentum and slow stochastics little bias in either direction. Topside should be capped around 45.000 today while dips should see support around 44.500 still. 1-month NDF remains on the uptrend, though there was a temporary respite this morning with the 1-month hovering slightly lower at 44.930. Intraday MACD continues to show no strong momentum and slow stochastics is mildly bias to the downside. Foreign funds bought a net USD34.79mn in equities yesterday, helping to cap PHP upside. USD/THB – Consolidating Higher. USD/THB is edging higher this morning, not helped by the 6.14% y/y decline in exports in Feb. Pair is currently sighted around 32.570 with intraday MACD showing mild bullish momentum and slow stochastics indicating little bias in either direction, suggesting that sideway moves remain likely ahead. Continue to expect the pair to trade in familiar ranges of 32.430-32.650 intraday. Foreign reserves up till 20 Mar is due later today. Foreign funds sold off a net THB1.19bn and THB2.72bn in equities and government debt yesterday, supporting the pair.
Rates
Malaysia
| Local government bonds saw better buyers as the curve ended 1-2bps lower. Trades were mostly at the belly with the 5y MGS ending 1bp lower from previous close. The new 7.5y MGS 9/22 issue size was announced at MYR4b. WI was last taken at 3.75% and last quoted at 3.77/74%. GIIs also saw heavy trading volumes on the back of the bullish sentiment. The GII curve bull flattened as the 20y GII 8/33 closed 10bps lower while the rest were down by 1-4bps. IRS rates mostly unchanged and there were no trades. Although there were very tight spreads of 1bp for 3 tenors, still nothing dealt. 3M KLIBOR unchanged at 3.73%. |
In the PDS space, we saw some GGs at the long end of the curve tightened 1bp from previously traded levels. GG names were generally well bidded in the secondary market but few offers were seen partly due to Danainfra opening its books for new issuances: 1) 7y MYR600m at 4.15%, 2) 10y MYR300m at 4.33%, 3) 15y MYR300m at 4.61% and 4) 20y MYR300m at 4.79%. The 7y issuance was upsized by MYR200m from the initial guidance. We think the pricing levels are rather tight with not much upside. 6y Dana traded around 4.10% previously while 14y Dana was picked up at 4.60% yesterday, which is 1bp lower than the new 15y issue. 9y GGs also exchanged at 2bps below the new 10y Dana. In addition, the new 10y and 15y issuances are tighter than the recently sold Prasarana bonds by 5bps and 3bps respectively
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