Maybank GM Daily - 5 May 2015

FX

Global

      US factory orders for Mar surpassed expectations with a print of  2.1%m/m (Cons.: 2.0%), adding to the optimism in overnight session. Equities started positive ahead of the release, buoyed by a series of healthy earnings report but with earning seasons winding down, market focus is now shifted back to Apr NFP on Fri for cues on whether a June rate hike could be really off the table.

      EUR started the week on the backfoot, down 0.4% against the USD by the end of Mon, still on the downmove in Asia morning. GBP was also sold in the absence of UK markets. On the other end, Antipodeans had modest gains this morning but RBA decision is perhaps the market mover later at mid-day. With OIS data showing markets pricing in a 75% probability of a 25 bps cut, we suspect downsides will be limited regardless of what RBA does in the end. Market players will eye the quarterly Statement on Monetary Policy due on Fri ahead of US NFP.

      Earlier in Asia, markets were thin with Japan away for Golden week. Malaysia returns but Thailand will only start the week tomorrow. Firm dollar tone keeps USD/AXJs biased to the upside. USD/MYR is “Catching Up” with the rest, buoyed also by the worse HSBC PMI-mfg print out of China yesterday. Data docket is not lighter today with Philippines’ CPI due (0900 SGT) and Indonesia’s 1Q GDP out in the afternoon.

Currencies

      DXY - Consolidation. Dollar firmed on strong factory orders amid light trading. 100 DMA at 95 levels managed to provide some support. Day ahead could see the index range-bound between 95 and 96 with mild upside bias amid light trading as Japan remains out for holidays.   Stochastics is showing tentative signs of turning higher from oversold levels; favor playing from the long side. We continue to cautious that the 94.80 (100 DMA) – 95.50 (before the break higher in end Feb) is a key area of support to watch; a decisive daily close below could expose DXY towards 92.20 (38.2% Fibonacci retracement of the run-up since Jun 2014 to Mar 2015).  Week ahead brings Mar trade; Apr composite/services PMI; Apr ISM non-manufacturing PMI; Fed’s Evans to speak (Tue);Apr ADP; 1Q unit labor cost; Fed’s Yellen, Lockhart, George, Kocherlakota to speak (Wed); initial jobless claims and continuing claims (Thu); Apr NFP, average hourly earnings; unemployment rate (Fri).

       EUR/USD – Fade Rallies. EUR slipped on broad USD strength overnight. Chart formation is tentatively suggesting a bearish reversal; stochastics is showing tentative signs of turning lower from overbought areas. Pair was last at 1.1145 this morning; day ahead favour fading rallies towards 1.1215 for a move back towards 1.1050 (first objective). We continue to reiterate our bearish bias on the EUR on a combination of macro factors including diverging monetary policies between Europe and the US  ongoing disinflationary concerns, structural headwinds (labor market slack, high debt, slow reforms, possible fiscal slippages, etc.) and worries over Greece’s ability to meet repayment schedule. Week ahead brings GE Apr CPI; EC Apr consumer confidence (Wed); EC, IT Apr CPI; FR, IT Mar PPI; EC, GE, IT Mar unemployment rate (Thu).

       GBP/USD – Downside Bias Amid Election Uncertainty. GBP was soft overnight; closed around 1.5120, amid holiday-thinned liquidity, broad USD strength and renewed focus on elections on Thu. Daily MACD and stochastics are bearish bias; a close below the 100 DMA at 1.5150 overnight is expected to see further selling pressure. Favour playing from the short side, leaning against any strength towards 1.5180, targeting next objective on the downside at 1.5030 (50% Fibonacci retracement of 1.4566 – 1.5492).

       USD/JPY – Consolidating In Tight Range. Onshore markets remains closed for holidays and re-opens on Thu.  The USD/JPY was little changed, hovering around the 120-region this morning amid quiet trades. In a shortened weak, pair is likely to drift in tandem with the dollar. Look for the pair to trade in a tight range within 119.70-120.80 intraday. Intraday MACD is showing no strong momentum still and slow stochastics indicating tentative signs of falling from overbought levels.

       AUD/USD – Buying into RBA? AUD/USD steadied around 0.7850 this morning. Regardless of the decision later, we think the risk-reward ratio is not favourable for a short-AUD position at this point. Support is seen at 0.7804 in the near-term with the next support seen around 0.7740, the lower bound of the bearish ichimoku cloud. Resistance is seen at 0.7903, the upper bound of the daily ichimoku chart. Break of the 0.79-figure could see a retest of the 0.80-figure.

       NZD/USD – Bias Downside. NZDUSD traded a relatively muted range between 0.7508 – 0.7558 before closing the session unchanged yesterday. Pair is likely to take cues from RBA meeting (1230pm SGT); a 25bps cut in cash rate to 2% at RBA later could fuel expectations for RBNZ to cut at its next meeting given that NZ OCR is at 3.5% and have hiked rate 4 times last year (giving it more room to cut further).  On the technical analysis perspective, pair is biased for further downside; MACD and stochastics are bearish bias; a daily close below 0.7535 levels (50 DMA) is expected to see the pair re-visit 0.71 – 0.72 levels. Favour playing from the short side.

       EUR/SGD – Consolidation. EUR/SGD consolidated in the range of 1.4824 – 1.4930 tracking moves in the EUR. Pair likely to consolidate in recent range in absence of fresh leads.

Asia ex Japan Currencies

      SGD NEER trades around 0.06% below the implied mid-point of 1.3348 with the top end estimated at 1.3081 and the floor at 1.3614.

       USD/SGD - Consolidating Higher. The USD/SGD appears to be in consolidation mode around the 1.3320-levels after running higher over the past few sessions. In the absence of fresh catalyst, look for range-bound moves within 1.3230-1.3380 for now with the bias still to the upside. Intraday MACD is still showing bullish momentum, though slow stochastics remains at overbought levels. PMI fell to 49.4 in Apr (Mar: 49.6), the fifth consecutive month of below 50 print, while electronics PMI dipped to 49.1 in Apr (Mar: 50.1).

       AUD/SGD – Two-Way Moves. AUD/SGD is on the uptick this morning, underpinned by the firmer AUD tone this morning. Pair is on its way to retest the 1.0460-resistance but we expect further upticks to be capped by the next barrier at 1.0592. Momentum indicators are not showing much directional bias so we do not discount two-way action. Break of the 1.0376-support is required for bears to reassert.

       SGD/MYR – Consolidate in Triangle. Cross traded around 2.70 levels this morning. Pair is likely to consolidate in triangle bounded by 2.68 – 2.73 range. We continue to caution that a break out lower with a decisive close below the 100DMA at 2.67 levels could see the pair ease towards 2.6350 (23.8% Fibonacci retracement of 2013 low to 2015 high).  4-hourly stochastics is approaching overbought areas and could suggest some downside bias interim; likely to see intra-day range of 2.68 – 2.7050

       USD/MYR – Range-Bound. USD/MYR gapped higher towards 3.5970 in the open tracking 1s NDF higher. Move higher tracked a firmer USD strength and some softness in oil prices amid holiday-thin liquidity conditions. Daily momentum and oscillators are mild bullish bias. Next resistance at 3.6080 (100 DMA) before 3.6210 (21 DMA). Intra-day see 3.5850 – 3.6100 range. Week ahead focus on BNM meeting (Thu); we are not expecting any change to policy rate.

       USD/CNH – Consolidative. USD/CNH crept higher and was last seen around 6.2140 this morning, underpinned by firm dollar seen. Pair is settling into a consolidation phase within 6.1842-6.2292. A breakout is needed for more directional cues at this point. Expect USD/CNY fixing to be slightly higher than the fixing at 6.1165 yest. We still await the completion of the head and shoulders pattern and the clearance of the neckline around the 6.19-figure, which is near to the 200-DMA at 6.1896. On 4 May, USD/CNY was fixed 28 pips higher at 6.1165 (vs. previous 6.1137). CNYMYR was fixed 23 pips higher at 0.5723 (vs. 0.5700). Apr HSBC PMI-mfg came in below expectations at 48.9. Elsewhere, PBOC academic adviser commented that the stock rally will not undermine the economy. An editorial by Securities Journal state that China has room to cut rates in 2Q, which is in line with our call for a 35bps cut.

       USD/IDR – Bullish Bias. The USD/IDR rebounded back above the 13000-levels this morning ahead of the 1Q15 GDP release this afternoon. A worst-than-expected performance (cons.: 4.93% y/y) is likely to keep the pair above the 13000-levels. A firm break of our resistance at 13050 could see the pair head towards the next hurdle at 13150. Support remains at 12950. Intraday MACD and slow stochastics are bullish bias. Foreign funds sold a net USD1.45mn in equities on Mon. 1-month NDF is edging towards the upper bound of its current trading range of 12950-13150, sighted around 13125 currently, with four-hourly MACD still showing bullish momentum and slow stochastics indicating tentative signs of falling from overbought levels. The JISDOR was fixed higher at 13021 on Mon from Thu's 12937.

       USD/PHP - Bullish Bias. The USD/PHP is edging higher this morning around 44.660. The moderation in Apr headline inflation (2.2% y/y vs. Mar: 2.4%) likely increased speculation that the central bank could cut rates at its policy meeting on 14 May. This was despite the warning by the central bank governor that domestic monetary policy need not be in sync with other nations. Pressure remains on the upside for now with intraday MACD showing bullish momentum and slow stochastics at overbought levels. Look for upside to be capped around 44.800, while support is seen around 44.400. 1-month NDF is edging lower this morning to 44.700 but remains within its 44.400-44.900 range with intraday MACD and slow stochastics showing bearish bias. Foreign funds sold a net USD2.93mn in equities on Mon.

       USD/THB - Consolidation.  Onshore markets remain closed and re-open on Wed. After bouncing higher for the past four sessions, the USD/THB appears in consolidation, settling around the 33.300-region. Pair took out our weekly resistance level at 33.300 with further remains a possibility in the near term (see our report attached in the email). New hurdle is now seen around 33.450 (1 Feb 2010 high), while support is seen at 33.000 intraday. Intraday MACD is still showing bullish momentum and slow stochastics remains overstretched.

Rates

Indonesia

      Indonesia statistics issues Indonesia’s April inflation data which came in at 0.36% MoM or 6.79% YoY. Core inflation came in at 0.24% MoM or 1.49% YoY. Amid slightly better than expected, Indonesia bond market closed with losses supported by drying market liquidity. We believe that bond prices may continue to decline and sees FR0070 to reach the 8% level in near future. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.604%, 7.720%, 7.928% and 8.071% while 2y yield remains unchanged to 7.340%. Trading volume at secondary market was seen thin at government segments amounting Rp6,012 bn with FR0069 (5y benchmark series) as the most tradable bond. FR0071 total trading volume amounting Rp1,338 tn with 24x transaction frequency and closed at 100.903 yielding 7.604%.

      DMO will conduct their sukuk auction this week with four series to be auctioned which are SPN-S06112015 (Coupon: discounted; Maturity: 6 Nov 2015), PBS006 (Coupon: 8.250%; Maturity: 15 Sep 2020), PBS007 (Coupon: 9.000%; Maturity: 15 Sep 2040) and PBS008 (Coupon: 7.000%; Maturity: 15 Jun 2016). We believe that the auction will be oversubscribe by 2.0x – 3.0x from its indicative target issuance while our view on the indicative yield are as follows SPN-S06112015 (range: 5.850% – 5.950%), PBS006 (range: 7.550% – 7.650%), PBS007 (range: 8.400% – 8.500%) and PBS008 (range: 7.250% – 7.350%).

      Corporate bond trading traded heavy amounting Rp663 bn. SSMM01A (Sumberdaya Sewatama I Year 2012; A serial bond; Rating: idA) was the top actively traded corporate bond with total trading volume amounted Rp160 bn yielding 8.775%.