Maybank FX Tech Weekly - 24 Apr 2015

       USD appears on course to make a second consecutive weekly decline amid a week of disappointing US data prints – from housing, manufacturing PMI to weekly jobless claims. Tonight’s US Mar durable goods orders (Cons. +0.6%) and core capex orders (Cons. +0.3%) will be closely watched for further signs of USD weakness. Ahead of Euro-area Finance Ministers meeting this weekend, we are cautious of conflicting headlines – Greek officials suggest that a deal in near while European Commission Officials said “progress is not good”.

       Week ahead for FX could see USD weakness persisting amid the month of Apr being a seasonally down month for the DXY on past 7 out of 10 Aprils, with an average decline of -1.1%. That said, we remain convicted to our USD bullish bias and see this dip as opportunity to accumulate into. USD/AXJs have also declined in particular USD/MYR and the decline could extend further towards 3.53 levels for the week. Should this materialize, we favor buying on dips on oversold conditions amid our view for Ringgit weakness off the back of soft oil prices, risk of rating downgrade amid contingent liability exposure, lower fiscal revenue and narrowing current account surplus remain unchanged.

       Week ahead focus on central bank meetings – BoT (Wed); BoJ, FOMC, RBNZ (Thu). We expect all to keep monetary policy on hold (BoT at 1.75%; RBNZ at 3.5%), but the accompanying statements could contain a dovish tone. US FOMC statement will be closely watched and could provide the catalyst for USD direction. Markets are somewhat expecting a dovish-biased statement given that recent job data and CPI inflation disappointed. RBNZ’s accompanying statement could re-emphasize RBNZ Assistant Governor’s speech (23 Apr) that monetary policy will remain stimulatory; cautious of verbal intervention to jawbone NZD strength. While it is not our base case scenario for BoJ to increase stimulus at the upcoming meeting, we remain cautious of any BoJ action, given LDP lawmaker Yamamoto’s comments that he sees likelihood of BoJ increasing stimulus at the upcoming meeting.

       Other key economic data we are keeping a close watch for includes US Apr services PMI (Cons. 59.5); China Mar industrial profits for Mon. For Tue, RBA Governor speaks; UK 1Q GDP (Cons. +0.6% q/q); US Apr Richmond Fed Manufacturing index (Cons. -2). For Wed, US 1Q GDP (Cons. +1% q/q); GE Apr CPI (Cons. -0.1% m/m). For Thu, US Apr initial jobless, continuing claims; US Mar PCE core (Cons. +1.4% y/y); US Apr Chicago Purchasing Manager (Cons. 50); Fed’s Tarullo speaks; EC, IT Apr CPI; FR, IT Mar PPI; GE, IT Mar unemployment rate; Aust 1Q import and export prices; UK Apr Gfk confidence (Cons. 4). For Fri, US Apr ISM Manufacturing (Cons. 52); US Apr Univ. of Michigan Sentiment (Cons. 96); Aust 1Q PPI (+1.1% y/y Prior); Japan Mar CPI (Cons. +2.2% y/y); Japan Mar cash earnings and UK, China, US, manufacturing PMIs.