FX
Global
Overnight
session was driven by post-FOMC reaction vs. escalated concerns that Greece
could potentially leave the euro-area. Euro-group meeting broke down. An
emergency meeting has now been called for Monday to address the Greek issues.
There were many rumors and no one step forth to confirm any. Some of which
include Greek banks may not be able to open on Mon; Grexit is imminent. Above
all, IMF Lagarde said Greek failure to pay by 30 Jun means partial default;
there is no grace period beyond 30 Jun for Greece; and she wants Greek dialogue
“with adults in the room”.
Equities
managed to shrug off Greek concerns and ended the overnight session in positive
territories. In FX, USD reversed some of its earlier losses post-FOMC, while
GBP maintained its bullish momentum. EUR slipped after hitting above 1.14-handle.
NZD remains on a back foot as NZ Finance Ministers comments weighed on
sentiment. The combination of falling USD and growing concerns over Greece
managed to send Gold rising above $1,200.
Data calendar
is light today with no key data out of US or Europe. In Asia, the main event is
BoJ meeting/BoJ Kuroda press conference. We expect no change to BoJ QQE
program. BoJ Kuroda’s press conference will be closely watched for further
follow-up talks on his REER comments last week. Malaysia CPI is also due for
release today. We expect headline inflation to pick up on transportation and
food prices; expect inflation to stay firm due to upcoming Ramadan. We expect
possible paring of risk positions into the weekend as Greek concerns continue
to weigh on sentiment. Bias to buy USD on dips, against ASEANs. Tactical lean
against EUR and GBP strength.
Currencies
DXY – Possible Upside Squeeze Ahead of Weekend (Greek
Risks). USD clawed back some of its losses (due to dovish FOMC
projection) overnight as the slew of economic data – Philly Fed, initial claims
were upbeat. We continue to reiterate our view for a rate hike in Sep as data
continues to suggest that growth path remains intact. We also believe that the
pace of tightening with a 25bps hike followed by a pause within the quarter to
assess the impact is the likely normalization path Fed will take, given that
Fed will take into consideration domestic growth and external environment –
China rebalancing risk, Greek crisis and USD strength into consideration. The
latest FOMC statement remains consistent with our house view. DXY fell to low
of 93.56 overnight before ending the session just above the 94-handle.
Daily momentum remains mild bearish bias. We reiterate that a daily close below
94 could well suggest further downside pressure on the DXY towards 93.15
levels. But we are cautious of a reversal ahead of the weekend as Greek
concerns weigh.
EUR/USD – Greek Concerns Weigh. Euro rose above the 1.14-handle before reversing gains partially to
close around 1.1360 levels as Euro-group meeting broke down. An emergency
meeting has now been called for Monday to address the Greek issues. There were
many rumors and no one step forth to confirm any. Some of which include Greek
banks may not be able to open on Mon; Grexit is imminent. Above all, IMF
Lagarde said Greek failure to pay by 30 Jun means partial default; there is no
grace period beyond 30 Jun for Greece. While daily momentum remains mild
bullish, we are cautious of a lightening of positioning ahead of the weekend on
escalated Greek concerns. Greek headlines will continue to drive
sentiment. Day ahead brings EC Apr current account (Fri); Emergency meeting on
Mon. Will not be surprised if another unscheduled meeting crops up over the
weekend.
GBP/USD – Possible Profit Taking Ahead of Weekend.
GBP rose to 1.5930 high on better than expected retail
sales data overnight. Pair eased to close at 1.5880 overnight. Medium term, the
bullish momentum remains intact; next leg higher could see 1.5970 levels;
interim support now at 1.5660. While we remain bullish in the pair over
the medium term, we caution for potential profit taking ahead of weekend as
escalated Greek concerns could weigh on risk sentiment and result in a
lightening of position. Look to reload GBP longs around 1.5660 levels.
USD/JPY – Two-Way Trades. USDJPY is bouncing higher
back above the 123-handle this morning after slipping below our support at
122.54 (76.4% Fibonacci retracement of 121.52 - 125.86). Firmer dollar tone as
well as JPY selling against EUR and GBP supported the pair. Cautious trades are
likely today ahead of the BOJ policy meeting and Kuroda press conference
thereafter, where markets will be watching for greater clarity on his REER
comments to parliament. Still, we expect his earlier comments on 10 Jun to
continue to keep a lid on price action. We expect the BOJ to stand pat as our
long-standing view remains for BoJ to ease in Oct 2015. We continue to
watch for a daily close below support at 122.54 that could see the pair
re-visit next support at 121.50-121.85 levels (previous resistance before the
break-out that happened in May 2015). Both momentum and stochastics are bearish
bias. Topside remains capped by the 125-figure. Remain better buyers on dips.
AUD/USD – Caught in a Range. AUD has been one of the top performing currencies overnight, rising as
high as 0.7849 before easing to close at 0.78-figure. Daily momentum remains
mild bullish. Day ahead range of 0.7730 (21 DMA) – 0.7820 (50 DMA) expected. We
reiterate that beyond the near-term, a clearance of the 0.78-figure could be a
double confirmation of the double bottom pattern formed in the past two weeks
and the pair could be poised to make a move up towards 0.7880 (50% fibo of May
high to Jun low).
USD/CAD - Bears Gaining
Momentum. USDCAD clawed back most of its earlier losses (traded as low as 1.2128)
to close around 1.2222 overnight. While momentum remains bearish bias, we
cautions for an upside squeeze in the pair, possibly towards 1.2290 levels.
4-hourly momentum and stochastics are indicating a mild upside bias. Day ahead
brings May CPI and Apr retail sales.
NZD/USD – More Downside to Go. NZD remained soft overnight on much weaker than expected 1Q GDP which
has somewhat tilted markets to shift to our out-of-consensus view of a back to
back cut in Jul. NZ Finance Minister’s comments this morning is expected to
weigh on the pair – NZD”s long run average vs USD is low 60s; NZD may fall
further; some think RBNZ has plenty of room to cut rates. Momentum and
stochastics continue to indicate a mild bearish bias. We continue to reiterate
our view for further downside pressure on the NZD on a combination of drivers
including further expectation of RBNZ cutting rates again in Jul on weak dairy
prices, falling PPI amid weakening demand. We expect at least another 25bps cut
and the next cut could come as soon as the next meeting in Jul. Day ahead NZD
short squeeze higher cannot be ruled out on profit-taking ahead of weekend.
Still favor to add to shorts on rally towards 0.6980 for a move towards 0.65
objective.
Asia ex Japan Currencies
The SGD NEER trades 0.53% above the implied mid-point of
1.3424 with the top end estimated at 1.3157 and the floor at 1.3690.
USD/SGD – Bearish Bias; Buy on Dips. USDSGD slipped to an overnight low of 1.3286 before rebounding to hover
around 1.3334 at last sight. Intraday MACD continues to show bullish momentum,
though stochastics is at oversold levels. In the absence of fresh catalyst,
expect the pair to track movements in both the EUR and JPY ahead. Support remains
1.3305 before the next at 1.3268 and we continue to favour buying the pair on
dips. Rebounds if any should meet resistance around the 1.34-handle.
AUD/SGD – Awaiting Bearish Breakout? AUD/SGD is back on the slide after climbing to an intraday high of 1.0449
yesterday. A combination of AUD weakness and SGD strength is weighing on the
cross this morning. The further strengthening of the SGD, accompanied by
weakness in the AUD, could mean a bearish breakout from the current range. The
clearance of the support at 1.03-figure opens the way towards Mar low of
1.0243. We await a break out of the 1.0300-1.0520 range.
SGD/MYR – Easing. SGDMYR
eased towards 2.7830 levels at time of writing this morning, following Ringgit
strength overnight. Daily stochastics is showing tentative signs of falling
from overbought areas; bullish momentum also showing tentative signs of easing.
Day ahead see 2.77 – 2.79 range.
USD/MYR – Bearish. USDMYR
eased further amid USD weakness following dovish-tilt FOMC. Lows of
3.7035 was traded this morning. Daily momentum has turned mild bearish. Daily
stochastics continues to show signs of turning lower from overbought – could
suggest near term mild pressure to the downside. While we continue to caution
that the pair could remain supported on concerns at home, dovish-tilt FOMC
(weaker USD) could see a temporary respite in recent USDMYR run-up. Day ahead
expect pair to consolidate in 3.7870 – 3.7350 range. Move lower below 3.70 (21
DMA) could suggest further downside bias. For the remaining of the month we
continue to keep an eye on Fitch review of the country’s sovereign rating
likely to be due sometime between now and end-Jun. Malaysia CPI is on tap
Friday. We expect headline inflation to pick up on transportation and food
prices; expect inflation to stay firm due to upcoming Ramadan.
USD/CNH – In Range. USD/CNH
eased marginally towards 6.2040 while the CNH-CNY gap narrowed. USDCNH support
is still seen at 6.1990 (200DMA). An ichimoku cloud is forming above price
action that could cap upside, which suggest rangy trades ahead. We continue to
hold the view that the central bank wants to ensure a steady yuan. Pair is
still within the broader consolidative 6.19-6.21 range. On 19 Jun, USD/CNY
was fixed 22 pips lower at 6.1104 (vs. previous 6.1126).
USD/INR – Mounting Upside Pressure. USD/INR gapped lower at the opening yesterday and continue it downtick
to close at below the 64-handle at 63.7325 on Thu. The slide yesterday saw both
MACD and stochastics bearish bias. 1-month NDF is climbing higher back to the
64.00-handle. We need a breakout of the 63.835-64.890 range for stronger
directional cues.
USD/IDR – Range.
USD/IDR is inching higher this morning after sliding to an intraday low of
13286 yesterday. Pair is sighted currently around 13315 with intraday MACD
still showing mild bearish momentum and stochastics bearish bias. This
suggested that further upside could be capped today with resistance still
around 13400. Any dips today should be an opportunity to accumulate with
support around 13250. BI left policy rate unchanged yesterday as expected on
the back of rising inflation, still persistent current account deficits and
concerns on capital outflows. While rates are on hold, further relaxation of
macroprudential measures (such as loan-to-value rule) is possible to spur
growth. BI remains sanguine about the economy, forecasting growth to come in at
5.0-5.4% in 2015 and inflation within its 3-5% y/y target. Look for 13250-13400
range to hold intraday. 1-month NDF is on the slide below the 13400-handle this
morning with 4-hourly MACD showing waning bearish momentum and stochastics
little directional bias. The JISDOR was fixed lower at 13341 on Thu from the
new historic high of 13367 on Wed. Foreign funds flip-flopped again, buying a
net USD12.85mn in equities yesterday.
USD/PHP – Bearish Bias. USD/PHP is back on the uptick this morning towards the 45-figure on
possible profit-taking. Pair is seen around 44.970 currently with both momentum
and oscillators bearish bias, suggesting that upside could be capped. Further
upside today should meet resistance around 45.200, while any dips should see
support around 44.815 (50-DMA). We remain buyers of the pair on dips. 1-month
NDF is back on the climb this morning above the 45-handle with intraday MACD
showing bearish momentum and slow stochastics at oversold levels. The sell-off
in the stock market continues unabated with foreign funds selling a net
USD25.16mn in equities yesterday.
USD/THB – Rangy.
USD/THB has been whippy over the past several sessions, but remained
well-within its current trading range of 33.560-33.700. Currently sighted lower
around 33.640, pair continues to show bearish bias. In the absence of fresh
catalyst, we expect pair to track dollar moves ahead. Dips should continue to
meet support around 33.560, while rebounds are likely to be capped around
33.700. Yesterday, foreign funds bought a net THB0.54bn in equities but sold a
net THB2.82bn in government debt.
Rates
Malaysia
Post FOMC, local government bond yields were down by
1-10bps with the curve bull steepening due to strong inflows on the 2017s. The
3y benchmark was last done 10bps lower from previous close. The 7y MGS 9/22
reopening auction saw a moderate bid/cover of 1.95x with successful bids
averaging 4.002%. Overall auction results were within our expectation but the
highest bid of 4.02% did surprise the market.
Global rates collapsed and foreign receiving interest
in MYR rates returned. The strong govvy session also capped rates. 5y IRS was
dealt at 3.94%. 3M KLIBOR unchanged at 3.69%.
PDS market lagged behind the rally in govvies with not
much liquidity seen. Bids remain wide and did not reflect the lower MGS yields,
but is still an improvement compared to levels seen in the past few weeks. We
saw FRL tighten 2bps while most other AA trades seem to be crosses. In the AAA
space, some buying in longer dated papers as Manjung 27 and Danga 30 traded
1-2bps wider than MTM.
Singapore
In the SGS market, the belly was fairly well bidded
with the curve bull steepening. SGS around the 2022 maturity traded 7-8bps
lower in yields. The 10y benchmark ended at 2.51%, down 6bps from previous
close. SGD funding rates remain depressed which provided a good chance for
buying shorter end bonds up to the belly area.
Post FOMC, UST rallied with the 10y now below 2.30%.
Asian credit market saw good two way flows on Chinese IGs which tightened
2-3bps in spread. There was mostly buying interest on financial, tech, and
property names. INDONs and PHILLIPs rebounded from the last selloff, with INDON
sovereigns and quasis on average 2-3pts up. But most are likely covering shorts
from the selloff. Liquidity remain rather thin and market is still watching the
progress on Greece. We still prefer short end Chinese SOE and Korean quasi as
spreads appear to be resilient with good two way flows seen.
Indonesia
DMO conducted debt switch auction of the government
bond yesterday and received Rp5.43 tn while the nominal by DMO were Rp2.95 tn.
DMO offered 3 government bond series namely FR0053, FR0071 and FR0068 as
destination bond with 9 government bond series set as source bonds. Bidders
could switch the source bonds and received FR0053 at price of 98.35, FR0071 at
price of 101.95 and FR0068 at price of 96.25.
Indonesia bond market booked significant gains during
the day mainly due to positive sentiment on the note of a dovish statement post
FOMC meeting as well as unchanged FFR. In line with FOMC decision, Bank
Indonesia Board of Governors meeting yesterday decided to halt their reference
rate 7.50%. However, we see that the positive sentiment would be temporary and
profit taking might come in sooner than expected as inflationary pressure would
occur this month resulting in a negative real interest rate. 5-yr, 15-yr,
10-yr, 15-yr and 20-yr benchmark series yield stood at 8.257%, 8.452%, 8.633%
and 8.663% while 2y yield shifts down to 7.825%. Trading volume at secondary
market was seen heavy at government segments amounting Rp22,521 bn with FR0071
(15y benchmark series) as the most tradable bond. FR0071 total trading volume
amounting Rp5,789 tn with 121x transaction frequency and closed at 102.8999
yielding 8.633%.
Corporate bond trading traded thin amounting Rp514 bn.
ADMF01CCN1 (Shelf registration I Adira Dinamika Multi Finance Phase I Year
2011; C serial bond; Rating: idAAA) was the top actively traded corporate bond
with total trading volume amounted Rp114 bn yielding 9.291%
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