FX
Global
The
creditors are coming down hard on Greece as they demand most of their terms
to be implemented by the Athen’s government and parliament within 72 hours
before talks on its third bailout can even start. In the meantime, the Greek
crisis deepens as banks are set to run out of money by today despite strict
capital controls. EUR gapped down a little, last seen around 1.1140. We
expect trades to remain choppy with a base around 1.0750. In Asia, focus is
still on China’s stock markets. We are cautious of further decline which could
heighten the risks of outflows out of Asia.
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China is set to release the bulk of its Jun data,
including 2Q GDP. Markets do not expect much from this set of numbers with only
marginal improvement expected for liquidity numbers and little improvement in
the retail sales, industrial production and urban FAI. Trade numbers due today
and that will have a hold on AUD. For Singapore, key advanced estimate of
2Q GDP is due on Tue. Malaysia Jun CPI inflation is likely to show marginal
pick-up. India Jun WPI (Cons. -2.25% y/y) is due on Tue. Bank Indonesia meets
on Tue and BoJ, on Wed – likely to keep policy unchanged. Expect BI to keep
policy rate on hold at 7.5% as inflation leaves little room for BI to manoeuvre
its monetary policy. It will also be a short week for SG, MY and ID due
to Hari Raya Holidays on Fri.
US has retail sales, CPI, housing data as well as
Fed Chair Yellen’s 2 day semi-annual testimony (15-16 Jul) to watch. The USD
could face some technical downside pressure in the near term. Ongoing P5+1(US,
UN, Russia, UK, France and Germany) with Iran nuclear talk could also drive
oil price sentiment. For the majors, Fed Chair Yellen’s speech on the
economic outlook later today (1230am SGT 11 Jul) and subsequently over the
2-day semi-annual testimony to House Financial panel (Wed) and Senate Banking
panel (Thu) will be closely watched, given the spate of risk events – Grexit
risks, Chinese equity markets and a dovish shift in recent FOMC minutes.
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Currencies
DXY – Near Term Downside Pressure; Buy on Dips. DXY
reversed some of earlier losses as Yellen restored confidence that a it remains
“appropriate” to take the first step to raise rate this year. DXY closed 96.02
last Friday; marginally softer at 95.97 this morning. We continue to reiterate
our view for the first rate hike (25bps) in Sep as data continues to suggest
that growth path remains intact. We also believe that the pace of tightening
will be gradual, given that Fed will take into consideration domestic growth
and external environment – China rebalancing risk, Greek crisis and USD
strength into consideration. Looking on bullish momentum on the daily chart is
showing tentative signs of stalling while stochastic is falling from overbought
areas; taken together this could suggest some near term bearish bias. Next
support at 95.30/50 levels (21 and 50 DMAs) before 94.75 (23.6% fibonacci
retracement of Apr high to May low). Resistance at 96.50 (50% fibo
retracement of) before 97.40 (61.8% fibo). We remain better buyers on dips.
Weekly momentum/stochastics bullish underlying bias remains intact. Heavy
week ahead for the US with Jun retail sales, import prices (Tue); Jun PPI; Jul
Empire manufacturing; Jun IP; Fed’ Beige book; Fed’s George to speak; Fed’s
Yellen semi-annual testimony to House Financial panel (Wed); Jul Philly Fed
business outlook; Fed’s Yellen semi-annual testimony to senate banking panel
(Thu); Jun housing starts, building permit, CPI; Jul Univ. of Michigan
sentiment; Fed’s Fischer to speak (Fri).
EUR/USD – Greece Goes into Sudden Death (After Extra-Time). Still no
decision of a deal or no deal for Greece despite the Institutions previously
setting Sunday as deadline to reach a deal. EU Finance Ministers demanded
Greece enact the reforms to show its commitment and not empty promises (enact
reforms into law within the next 72 hours); while there were headlines
suggesting that German Finance Ministry had prepared a document for a temporary
5-year exit for Greece (German Finance Ministry declined to comment/nor confirm
the existence of the document). EUR was last at 1.1135 (vs. Fri close of
1.1162). Daily MACD is exhibiting tentative bullish divergence signals while
stochastics is showing tentative signs for mild bullish bias. Next resistance
at 1.12 levels (21 and 50 DMAs), before 1.1460/70 levels (May 2015 high). Break
above previous high in 2015 expose EUR towards its 200 DMA at 1.1580 levels.
Next support targets 1.1030 levels (100 DMA) before 1.0850 levels (61.8% fibo
of 1.0460 – 1.1470). Day ahead expect EUR to be driven by headlines (though
fatigue is setting in); trade in range of 1.1030 – 1.1230. Week ahead Euro-area
Finance Ministers meeting (Mon); GE Jul ZEW; GE Jun CPI; EC May IP; EU Finance
Ministers meeting (Tue); FR Jun CPI (Wed); EC May trade; EC Jun CPI; ECB
meeting (Thu); EC May construction output (Fri).
GBP/USD – Bias
to Buy Dips. GBP bounced nearly 200pips higher from its day low
last Fri into the week/Fri close (1.5517) on hopes of Greece nearing a deal;
this morning seen around 1.55 levels. Daily stochastics are at oversold
levels. While bearish momentum remains intact it is showing tentative signs of
waning. Next resistance at 1.5530 (50 DMA) before 1.5640 (21 DMA). Support at
1.5430 (200 DMA) before 1.5260/80 (100 DMA). Bias to buy on dips. Week ahead
brings BoE credit conditions & bank liabilities surveys (Mon); Jun CPI,
PPI, RPI; ONS Jul house prices (Tue); May employment change, average weekly
earnings (Wed).
USD/JPY – Downside Risks; Buy on Dips. USD/JPY pushed lower, tested 120.41 briefly on 8 Jul on safe-haven flows
following risk-off sentiments driven by the Chinese stock market rout and
Grexit concerns. Pair has since recovered towards the 123-handle, but has since
eased as the risk of Grexit has risen. Daily MACD is still showing bearish
momentum but stochastics are tentative bullish bias, suggesting possible
limited downside for the pair. Next support at 120.50 levels (trend-line
support from the lows in Jan, Apr, May, Jul 2015). Resistance expected around
123.50 (23.6% Fibo). We remain buyers on dips. Only an abrupt close below 120
would cast doubt over USDJPY’s medium-term bullish set-up. Our long-standing
view is for BOJ to ease in Oct 2015. Quiet week ahead with just May industrial
production (Mon); and BOJ policy statement/BOJ Kuroda press conference (Wed).
AUD/USD – Upside Squeeze? AUD turned lower this
morning, last seen around 0.7420. This pair traded fresh 6-year low of 0.7372
(8 Jul) following iron ore and China equities’ decline. Underlying (medium
term) momentum remains bearish. But near term, we caution for potential upside
squeeze; 0.7650 (21 DMA) could be re-visited. A decisive close above 0.7730-60
levels (50 DMA and 50% fibo of May high to Jul low) will cast doubt over
bearish bias. Week ahead brings Jun NAB Business confidence (Tue); Jul
Westpac Consumer confidence (Wed); CPI expectation (Thu).
USD/CAD – Two-Way Trade.
USDCAD bounced a tad in anticipation of the Iran nuclear deal to be confirmed
within today. This pair was last seen around the 1.27-figure. Expect two-way
trades within 1.2630-1.2840. Expectations of a 25bps rate cut this Wed to
support the USDCAD. Support is seen around 1.2630. Should oil prices rebound,
expect this pair to threaten this support level ahead of the next at 1.2560.
Conditions are still bullish though momentum seems to be waning on the daily
MACD. The weekly chart however tells of risk to the upside with MACD forest
back to the zero line. Last Fri, unemployment rate for Jun steadied at 6.8%,
better than the expected 6.9%. Employment fell 6.4K with a loss of 71.2K
part-time employment offset by 64.8K of full time employment. This week has
Bank of Canada meeting on Wed followed by Jun CPI on Fri.
NZD/USD
– Risk of Upside Squeeze. NZD continues to stay
above 0.67-handle, helped by food prices and REINZ house prices which came in
better than previous readings. We caution that the pair could squeeze higher;
possibly towards 0.6830/50 (21 DMA; 23.6% fibo of 0.7564 – 0.6622); 0.6980
(38.2% fibo). Daily stochastics is turning higher from oversold levels while
MACD is exhibiting a bullish divergence. Remain better sellers on rally;
will reassess bearish bias on break above 0.71 levels (50% fibo retracement; 50
DMA). We continue to reiterate our long-standing 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. Week ahead brings Jun BusinessNZ
manufacturing PMI; 2Q CPI (Thu).
Asia ex Japan Currencies
The SGD NEER trades 0.08% above the implied mid-point
of 1.3548. The top end is estimated at 1.3278 and the floor at 1.3819.
USD/SGD – Consolidate; Buy on Dips. USDSGD rally over the past few sessions failed to push the pair above
key resistance at 1.3545 (50% Fibo retracement of the 1.3938-1.3151 downswing).
Daily MACD is showing mild bullish momentum but stochastics is indicating mild
bearish bias, suggesting rangy trades are possible ahead. Look for the
pair to consolidate within 1.3420 (50DMA) – 1.3580. Bias remains to buy on
dips. We reiterate that the pair needs to make a decisive close above the 50%
Fibo for further upside to materialize. On tap this week is 2Q15 GDP advance
estimates (Tue); May Retail Sales (Wed); and Jun NODX (Thu). Market is
expecting some easing after growth surprised on the upside in 1Q with 2Q15 GDP
estimated to come in at 2.4% y/y. Downside surprises though could increase
speculation of a MAS move in Oct and weigh on the SGD.
AUD/SGD – Stuck in Range. AUD/SGD is on the downtick, threatening parity again and was last seen
around 1.0030. Momentum indicators suggest that downside momentum could be
waning. Price action shows bids towards the 1.0116 meet eager offers.
Resistance is seen around 1.0116 ahead of the next at 1.0160. Parity is a
psychological support.
SGD/MYR – Tentative Signs of Bearish Bias. Cross is easing from multi-year highs of 2.8250; last at 2.8090 levels.
Daily momentum and stochastics are exhibiting tentative signs of mild bearish
bias; next support at 2.7980 (21 DMA). Break below could see the cross ease
further towards the 2.7790-2.7980 range. Meantime resistance still seen around
2.8250 levels.
USD/MYR – Mild Downside Pressure. USDMYR opened slightly softer this morning (3.7885 vs. 3.7940 close
Fri); last seen at 3.7920 levels at time of writing. Technically, daily
stochastics is turning lower from overbought areas while momentum is exhibiting
tentative signs of bearish bias. A decisive close below 21 DMA could see the
pair ease further towards 3.7550 levels (23.6% fibo retracement of Apr low to
Jul high). Data focus for the week on Jun CPI inflation. We expect a marginal
pick-up from prior month’s print. Ongoing P5+1(US, UN, Russia, UK, France and
Germany) with Iran nuclear talk (which is scheduled to conclude as early as
today) could also drive oil price sentiment.
1s KRW NDF – Double-Top; Sell Rallies. The
pair continues to trade on a back foot; last sighted at 1131.80 levels. Daily
bullish momentum appears to show tentative signs of waning while stochastic is
exhibiting early signs of turning lower from overbought areas. Day ahead see
1126 – 1135 range; bias to fade strength with s/l above 1140
(double-top). Data for the week – Jun unemployment (Wed); Jun PPI (Fri).
USD/CNH – Reverting to
Onshore. USD/CNH is seen around 6.2170 this morning, on the uptick
again but sticky around the 100-DMA at 6.2181. Intra-day MACD indicates mild
bullish conditions for this pair though resistance is seen around 6.2292.
Persistent declines in the stock markets have weakened the CNH with a discount
of more than 100 pips seen at one point relative to its onshore peers. That has
narrowed since the stock markets stabilized. A clear breakout of the
6.2000-6.2240 range is still needed with 100-DMA at 6.2199 under pressure this
morning. We continue to hold the view that the central bank wants to ensure a
steady yuan. Key support for USDCNH is still seen at 6.2029 (200DMA). USD/CNY
was fixed 20 pips lower at 6.1133 (vs. previous 6.1153). CNYMYR was fixed 14
pips lower at 0.6104 (vs. prev. 0.6118). More shares should start trading
today according to Shanghai Securities News. An editorial by China Securities
News urged the state council to promote value investing whilst boosting
A-shares. Chinese police found signs of illegal stock trading according to the
state media. Data-wise, imports are expected to fall an average of 15.5%y/y in Jun
while growth of exports is expected to remain anaemic at 1%.
USD/INR – Pressing Lower. USDINR remained suspended in the cloud though this pair took an offered
tone with a close at 63.40 vs its opening value of 63.325. Daily MACD shows
waning downside momentum for spot prices and we think that spot prices are in a
neutral position, suspended in the thick of the daily ichimoku cloud. Trades to
remain within 63.19-63.80 though pressured to the downside. 1-month NDF is
pressing lower and the bottom of the ichimoku cloud is the support to watch at
63.56. This also coincides with the 100-DMA at 63.513. We await the clearance
of the support region for further bearish extensions and that would also lead
spot prices lower. At home, Finance Minister says some data suggest significant
economic recovery including revenue collections. He also said 8-10% growth
achievable with GST, investment in Infra. Data-wise, we have Jun CPI due today
(Cons.: 5.1%y/y). Trade numbers could be released anytime this week. Jun wholesale
prices are due tomorrow.
USD/IDR – Rangy.
USD/IDR remained within a tight trading range of 13250-13400 so far in Jul.
With a short-trading week ahead due to the Idul Fitri holidays (16-21 Jul),
trades are likely to be range-bound. BI policy meeting on Tue is not likely to
spring any surprises, though ongoing Grexit concerns, together with domestic
growth concerns and approaching US Fed rate normalization, could keep the pair
supported. Week ahead should see the pair bounce within 13250-13400. 1-month NDF
is bouncing higher above the 13400-levels to start the week with daily MACD
showing no strong momentum. The JISDOR was fixed lower at 13304 on Fri vs.
13347 on Thu. Risk appetite improved leading foreign funds to buy a net
USD48.32mn in equities last week, and to add a net IDR1.90tn to their
outstanding holding of government debt on 6-8 Jul (latest data available). Week
ahead brings BI meeting (Tue) and Jun Trade (Wed).
USD/PHP – Range-Bound. USD/PHP bounced to a weekly high of 45.290 last week before easing to
close just above the 45-figure. Amid a shorten week due to the Eid Al-fitr
holiday on Fri, pair is likely to trade range-bound in the week ahead. Continue
to expect the pair to trade within its current tight trading range of
45.000-45.400 this week. We continue to favour buying the pair on dips. 1-month
NDF is creeping higher this morning around 45.240 with MACD showing no strong
momentum and stochastics are mild bearish bias. Last week saw foreign funds
sell a net USD55.10mn of equities on risk-off sentiments. Quiet data week ahead
with only May overseas remittances due on Wed.
USD/THB – Supported. USD/THB pushed higher, testing the 34-figure, supported by
deteriorating risk appetite following the Chinese stock market route as well as
Grexit concerns. Risk-off sentiments resulted in foreign funds selling a net
THB10.82bn in equities last week, which more than offset their purchase of a
net THB3.19bn of government debt, which continued to weigh on the THB. But the
pair failed to close above the 34-levels but remains elevated at the
33.950-region. Lingering concerns about the Chinese economy remains and that
could keep the pair supported ahead. For now, both momentum and oscillator
indicators are showing no strong bias in either direction, suggesting range-bound
trades are likely ahead. Upmoves above the 34-figure remains likely in the week
ahead and we need to see a clean break of the 34-handle is needed for further
bullish extension to the next hurdle at 34.150. Any dips should be supported
around 33.700 (50DMA). Very quiet week ahead with just foreign reserves for 10
Jul on tap Fri.
Rates
Malaysia
§ Local government bonds opened on a bullish note as the
belly of the curve rallied, with the 7y benchmark ending -4bps. Profit takers
were also seen as players still prefer to keep lean amid volatilities. Issue
size for the 30y MGS 9/43s retap auction was announced at an expected MYR2b. WI
was quoted at 4.73/62% but nothing dealt.
§ In the IRS market, nothing traded as there was zero
interest in onshore markets, though we heard offshore kept trading at the 5y.
MPC was a non-event. 3M KLIBOR remained at 3.69%.
§ PDS market ended last week on a muted note. Bids in
the AAA space widen 3-5bps after the opening of Putrajaya’s new issuance.
However, Telekom 10/24s traded slightly tighter than the Putrajaya’s new 9y
paper at 4.465% vs 4.48%. This could be due to a slightly more negative outlook
on the property sector. Elsewhere, long dated GGs traded 1-2bps wider amid thin
liquidity and AAs at the belly of the curve saw demand.
Singapore
§ SGS market was rather volatile as there was short
covering but selling interest gradually came in and pushed yields higher. The
curve ended +3-8bps and marginally steepened. SGD IRS also ended 3-8bps higher.
Bond swap spreads remain wide with the 10y at -21.5bps. Focus remains on Greece
debt crisis as it finalizes proposals for the EU summit on Sunday.
§ Asian credit market rebounded on the back of firmer
Chinese equities. Chinese IGs traded 5-8bps tighter with demand going strong
for AMCs and O&G. HRAM, SINOPE, BCHINA and Tech names were sought after.
Buying was also strong on HYs. Indon names performed alongside Chinese high
beta property names as offers were lifted across with most ending 1-2pts
higher. Market remains choppy and we prefer to stay defensive at the moment. We
like GLPSP as spread is being supported amid strong fundamentals, prefer TENCNT
19s over the 20s, and seek to buy on dips for these names.
Indonesia
§ Indonesia bond market closed higher on the final day
of last week trading amid minimal market sentiments and ahead of the Ramadan
holiday starting Mid of this week. We believe LCY bond market would react
negatively to the hawkish statement given by Fed Yellen during her speech at
the City Club of Cleveland last Friday. Our Indonesia economist in his recent
BI reference rate report expects that Indonesia central bank would halt their
reference rate at 7.50% while maintaining the deposit and lending rate at 5.50%
and 8.00% respectively. 5-yr, 15-yr, 10-yr, 15-yr and 20-yr benchmark series
yield stood at 8.046%, 8.290%, 8.426% and 8.515% while 2y yield shifts down to 7.736%. Trading volume
at secondary market was seen heavy at government segments amounting Rp14,353 bn with FR0068 (20y benchmark series) as the most tradable
bond. FR0068 total trading volume amounting Rp3,370 tn with 217x transaction frequency and closed at 98.687 yielding 8.515%.
Corporate bond trading traded heavy amounting Rp1,571
bn. MDLN02B (Modernland Realty II Year 2012; B serial bond;
Rating: idA) was the top actively traded corporate bond with total
trading volume amounted Rp200 bn.
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