FX
Global
US
equities closed marginally higher as 4Q GDP showed an upward revision to
consumer spending (to 9-year high) amid Fed’s Yellen dovish talk, which
reinforced risks of both a later liftoff and a slower pace of subsequent
hikes. USD closed mixed; slightly weaker against the JPY and EUR but
stronger against commodity-bloc currencies. Oil prices fell on easing
geopolitical tension in Yemen.
Key
focus for the week ahead is US Mar jobs report on 3 Apr which could provide
further catalyst for the USD. Consensus is looking for a +250k gain in NFP
following a blockbuster NFP print of +295k in Feb. A very strong NFP above
250 towards 300K would lead to a dollar resurgence in the interim. Consensus
is also looking out for +0.2% m/m (vs. +0.1% prior) in average hourly
earnings. Unemployment rate is expected to be unchanged at 5.5%. There will
be 7 Fed speaks littered throughout the week with Fed’s Fischer, Lacker,
Lockhart, Mester on Tue; Williams and George on Wed as well as Kocherlakota
on Fri. All are 2015 voting members except for Mester, George and
Kocherlakota. Week ahead we continue to see 2-way trading, with a
bias to buy USD on dips. We see muted moves for USD/AXJs.
Other
key data we are watching for the week includes US Feb pending home sales
(+0.4% m/m Cons.); US Feb PCE core (+0.1% m/m Cons.); GE Mar CPI (+0.4% m/m
Cons.) for Mon. For Tue, US Mar Chicago Purchasing Manager (52.4 Cons.); EC
Mar core CPI (+0.7% y/y Cons.). For Wed, US Mar ADP employment change (+230k
Cons.); Mar manufacturing PMIs from US, EC, GE, FR, IT, China and JP; AU Feb
building approvals (-4% m/m Cons.) and JP 1Q BoJ Tankan report. For Thu, US
Mar services/composite PMIs; UK construction PMI. For Fri, US jobs number and
China Mar HSBC composite/services PMI will be of keen focus. Also to note
Good Friday public holiday on 3 Apr. |
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G7 Currencies
DXY – Consolidation. USD
closed mixed amid Yellen’s dovish speech and 4Q GDP revision lower. While we
continue to caution for USD pullback risk to 95.50 levels, we remain better
buyers of USD on dips. Daily DXY formed a series of two hammer exhaustion
patterns and subsequently formed a bullish key day reversal on a marginal new
low. Stochastics are also stabilizing at oversold levels amid bearish bias
momentum indicator. Week ahead brings Feb pending home sales, PCE core; Mar
Dallas Fed manufacturing (Mon); Jan S&P/CS house price index; Mar Chicago
Purchasing Manager; Mar Consumer confidence ; Fed’s Fischer, Lacker, Lockhart
and Mester to speak (Tue); MBA Mar Mortgage applications; Mar ADP employment
change; ISM Manufacturing; Manufacturing PMI, Fed’s Williams and George to
speak (Wed); Mar services/composite PMI; Feb trade balance (Thu); Mar NFP,
average earnings, unemployment rate (Fri).
USD/JPY – Bearish Bias; Buy On Dips.
Double-top formation in the daily chart at 121.85 continues to hold well and
price action suggests USDJPY could continue to drift lower in the absence of
fresh BOJ actions, upcoming regional/local elections in Apr and renewed safe
haven plays on Middle-East concerns. Daily MACD and slow stochastics are
indicating bearish bias. Key support around the 119.00 (100DMA); 117.90 (23.6%
Fibo retracement of the Oct-Dec 2014 upswing). Further dips beyond these
support levels could see a revisit of 115.50 (38.2% Fibo retracement). Feb IPI
fell 2.6% y/y below expectations of -0.6%, highlighting the weakness in the
recovery from the recession, though the impact on the USD/JPY was negligible.
Week ahead brings Feb cash earnings (Tue); BOJ 1Q Takan report; Mar
manufacturing PMI (Wed); and Mar composite/services PMI (Fri).
AUD/USD – Sell
on Rallies. AUD closed lower on falling iron ore
prices. We continue to highlight that the AUD/USD is making a successive lower
daily close for the 4th day. MACD is showing early signs of
bearish bias while daily stochastics is falling from overbought areas, and this
could suggest some early signs of downside pressure. Favor fading rallies
towards 0.78 levels (50 DMA). 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. Week ahead brings Feb new home sales (Tue); Feb building approvals (Wed); Feb
trade data (Thu).
NZD/USD – Bias to Fade Rallies. NZD continues to drift lower, tracking its AUD counterpart. Last Thu 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). We remain short in the pair targeting objective. Slow stochastics is
showing tentative signs of falling from overbought areas.
EUR/USD –Fade Rallies.
EUR/USD closed relatively unchanged at 1.0890 levels last Fri. We observed that EUR/USD attempts to rally above 1.10 failed on past 3
sessions as the pair has now eased towards 1.0860 at time of writing.
While Fed projection may seem more dovish than expected, the Fed is still
expected to be on a tightening bias as compared to its Euro-counterparts whom
have just began QE amid ongoing unresolved Greek issues. We continue to
maintain our bearish-bias EUR/USD view amid structural decline in Europe
fundamentals and diverging monetary policies. Oscilators indicators are showing
tentative signs of falling from overbought areas. We remain better sellers on
rallies. Intra-day see 1.08 – 1.0950 range. Week ahead
brings EC Mar consumer confidence; GE Mar CPI (Mon); EC, IT Mar core CPI; FR,
IT Feb PPI; EC, GE, IT Feb unemployment rate (Tue); EC, GE, FR, IT Mar
Manufacturing PMI (Wed); IT budget balance (Thu).|
EUR/SGD – Range-bound.
EUR/SGD closed relatively unchanged at 1.4915 on Fri. Pair now at 1.5925
levels and remain in consolidative mood awaiting fresh leads. 1.50
levels (23.6% Fibonacci retracement of 1.6390 – 1.4573) will continue to
serve as resistance. MACD remains biased for mild upside while
stochastics suggests some fatigue in recent rally; showing tentative signs of
falling from overbought levels. 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 1.84% below the implied
mid-point of 1.3483. The top end is estimated at 1.3208 and the floor at
1.3757.
USD/SGD – Consolidation. USD/SGD eased on the back of paring of USD long positioning over the
past few sessions. The pair is trading close to its lower end of its upward
band. With MAS’ Apr policy meeting just round the corner, the bias is still to
the upside given that market continues to expect further MAS easing measures.
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. Both daily MACD and slow stochastics continue to
show bearish bias. We continue to expect consolidation within the 1.3570-1.3800
range in the week ahead. Data-wise, it is a quiet week with only Mar PMI due on
Thu ahead of the Easter long week-end and US NFP.
AUD/SGD – Consolidating. AUD/SGD’s move higher appeared stalled around the 1.08-levels
(100DMA). The pair could continue to consolidate as it has been since Feb. Both
daily MACD and slow stochastics are indicating bearish bias, suggesting further
retracement could be possible ahead. Still, we need to see a decisive close
above the 1.08 (100DMA) to confirm that the downtrend is over. For
the week ahead, look to play the 1.06-1.08 range.
SGD/MYR – Consolidating Higher. The SGD/MYR gapped higher at the opening this morning to 2.6905 from
Fri’s close of 2.6855 on the back of the relative weakness of the MYR vs. the
SGD. Pair continues to drift higher towards the 2.70-levels with daily MACD and
slow stochastics showing tentative signs of rising. Pair could continue to
consolidate with an upside bias. Look for rebounds to be capped by 2.7010 (23
Mar high), while any retracement to see support around 2.6500 (100DMA).
USD/MYR –Supported. The
decline in USD/MYR towards 3.65 levels last week was due to weak USD and rising
oil prices. While the pair may look vulnerable for further downside, trendline
support at 3.66 levels could hold. There are a few reasons for keeping a
weak-bias for MYR. Oil prices though rosen was due to geopolitical tension in
Yemen; we maintain our view for oil prices to remain soft and this could weigh
on the ringgit further. While lower oil prices are expected to benefit oil
import countries (smaller import bills, leading to widening trade
balance/current account), Malaysia is a net oil exporter and do not benefit as
much relative to its regional peers. 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. Day ahead MACD is mild bearish
bias but slow stochastics are attempting to stabilise nearing oversold levels.
We still see the pair supported; intra-day range of 3.6850 – 3.7200; bias to
buy on dips. Trade data on tap on Fri.
USD/CNH – Consolidation. The pair remains in consolidative mood; rally last Fri stalled at 6.2240
before trading down to 6.21 levels. Weekly MACD and stochastics are mild
bearish bias which could suggest a down trend could be in play; while daily
stochastics is exhibiting tentative signs of rising from oversold level. We
look for further rallies towards 6.2300 levels to fade into, playing the China
financial reform/CNY potentially gaining reserve currency status story. 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 5 pips at 6.1402 (vs. 6.1397). CNYMYR was fixed higher by
25 pips at 0.5907 (vs. 0.5882).
USD/IDR – Rangy. USD/IDR
continued its slow grind higher, climbing from its recent low of 12901 (24 Mar)
back above the 13000-levels. Both daily MACD and slow stochastics are showing
no strong momentum, suggesting range-bound trades are likely ahead. Ahead of
Mar CPI on Wed and US NFP on Fri, look for rangy trades within 12890-13150 to
hold. Foreign funds sold a net USD204.35mn in equities last week but added a
net IDR1.08tn to their outstanding holding of government debt between 23 and 25
Mar. 1-month NDF is easing slightly from the 13200-levels this morning with
both intraday MACD showing bullish momentum showing little bias in either
direction. JISDOR was fixed higher again for the second straight session at
13064 on Fri from Thu’s 13003, and another higher fixing is likely should the
spot continue its climb higher this morning.
USD/PHP – Sideways. USD/PHP continues to consolidate higher towards the 44.80-region with
the pair still playing catch-up with the rest of the region. Data-wise, it is a
quiet week and market is likely to look at US NFP for further clarity. Expect
sideway trades ahead within 44.500-45.000 this week. Daily MACD is showing
bullish momentum, while slow stochastics is falling from overbought levels,
suggesting a potential for a mild retracement ahead. 1-month NDF continues to
consolidate within 44.400-45.230 with daily MACD showing bullish momentum and
slow stochastics still in overbought levels. Last week, foreign funds bought a
net USD69.04mn in equities, helping to cap PHP upside.
USD/THB – Consolidation. USD/THB remains in consolidation after sliding from a recent high of
33.040 (16 Mar), probably helped by foreign funds buying of a net THB10.4bn in
government debt last week, which offset their selling of a net THB3.5bn in
equities. Pair is currently waffling hovering around the 32.60-region with daily
MACD showing mild bearish momentum while slow stochastics remains bias to the
downside. This suggested that any moves higher could remain capped. In the
absence of fresh catalyst and ahead of US NFP, continue to expect consolidative
trades within 32.430-32.650 this week. The week ahead sees a slew of data
releases including trade (Tue), current account (Tue); Mar CPI (Wed) and
foreign reserves for the week of 27 Mar (Fri).
Rates
Malaysia
Local government bond curve rose about 1bp amid low
trading volume. We noted better buyers on dips especially in the belly of the
curve. The WI for the new 7.5y MGS 9/22 ended 2bps higher from previous done.
Players are focused on the MYR4b auction on Monday.
IRS rates at the front end were unchanged while the
belly to the back end closed 1-4bps higher. The 5y IRS was dealt at 3.77%.
Payers appear to be taking a slightly more aggressive stance given the weaker
UST prices overnight. 3M KLIBOR stayed at 3.73%.
PDS market again saw positive bidding interest but
scarce offers. GG names at the belly of the curve traded at previous levels. In
the AAA curve, we saw longer dated Plus 27s to Plus 31s being dealt. These
bonds have been trading frequently in the past few days. For AAs, keen buying
interest was seen for longer dated Sarawak Energy bonds, particularly SEB 24s
to SEB 29s. We heard players are seeking long dated papers with high yields,
especially in the AAA and AA spaces. We suggest selectively picking up longer
dated AAA bonds at the belly as we think there is good carry value
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