Maybank GM Daily - 15 Oct 2015

FX

Global

      Strength of the US recovery was in doubt overnight, dragging equities and the USD lower. Earnings report from Wal-Mart and Boeing disappointed. US retail sales also underperformed in Sep, undershooting consensus with a print of 0.1%m/m. The Aug number was also revised from 0.2% to flat. PPI final demand fell more than expected by -0.5%m/m vs. the expected -0.2%.  Fed’s Beige Book affirmed “modest expansion” in 3Q though highlighted concerns of the USD strength and its impact on some industries. All these point to a no-go for a Fed lift-off in Oct. Dollar was sold across the board, especially against the NZD and GBP on Wed. The latter was boosted by better unemployment numbers which edged lower to 5.4% for Aug from 5.5%.

      NZD is still on the upmove this morning, beating its fellow antipodean, AUD. The former was lifted by better consumer confidence for Oct which printed 114.9 compared to 110.8. AUD was on the upmove in early Asia before the release of poorer-than-expected employment report knocked it off its morning highs. Looking forward, Asia has trade numbers due for Sep, followed by Singapore’s retail sales. We still await BOK’s rate decision, out anytime soon. Consensus expects the central bank to keep its policy rate unchanged amid signs of improving domestic demand and supplementary budget effects to feed through.  BI is also expected to stand pat. Elsewhere, China’s monetary numbers and India’s trade numbers are due anytime.

      Beyond Asia, ECB Constancio, Nowotny and Hanson speak today. EU leaders also start two-day summit in Brussels. In NY session, initial jobless claims are due. More importantly, Sep CPI will be watched along with empire manufacturing index. Fed Dudley, Bullard and Mester will take turns to speak. Look for more dovish speaks to weigh on the greenback.

Currencies

G7 Currencies

      DXY – Soft. USD was sold across the board, weighed by overnight release of earnings report, economic data and Beige Book. DXY was last seen at 94.70 levels. US Sep retail sales missed consensus with a print of 0.1%m/m. The Aug number was also revised lower from 0.2% to flat. PPI final demand fell more than expected by -0.5%m/m vs. the expected -0.2%.  Fed’s Beige Book affirmed “modest expansion” in 3Q though highlighted concerns of the USD strength and its impact on some industries. All these point to a no-go for a Fed lift-off in Oct or even within this year at all. DXY was seen at the 94-figure. Weekly/ daily momentum and oscillator indicators remain bearish bias. Next support seen at 93.56. Resistance remains at 95.70-80 levels (21 & 200 DMAs). Week remaining brings initial jobless claims; Oct empire manufacturing; Sep real average earnings; Fed’s Dudley, Bullard, Mester speak (Thu); Sep Industrial production; Aug JOLTS job openings; Oct Univ. of Michigan Sentiment (Fri).

      EUR/USD – Buy on Dips. EUR rallied overnight boosted by soured sentiments and was last seen around 1.1465.  Pair remain underpinned by broad USD weakness and equity weakness (inverse relationship between EUR and risk assets still holds albeit slight weakening of correlation coefficient). Technically, monthly, weekly and daily momentum indicators are now aligned for a bullish setup. But we caution that up move could be a grind as ECB rhetoric - “can do more QE if need arises” – acts as an invisible hand to slow any up move. Beware of more ECB speaks lined up for the week ahead which could cap EUR strength. Resistance at 1.1470 (61.8% fibo of Aug high to Sep low). Daily chart shows overbought conditions and upmove in the session could be a grind. However, beyond the 1.1470-level, a move towards 1.17-handle should not be ruled out. Support seen at 1.1370, 1.1240 (50 DMA), 1.1140/60 levels (100 and 200 DMAs), 1.1090 (Sep low). Week remaining brings ECB Constancio, Nowotny, Hanson speak; EU Summit (Thu); ECB Nowotny, Jazbec speak; EC Aug trade; EC Sep CPI (Fri). We previously highlighted that the previous negative correlation between EUR and risk assets (DAX as proxy) remains but its significance is slowing abating (correlation coefficient at -0.56 vs. -0.68 previously). This could be so due to slowing monetary policy divergence as market expectation of US rate hike appears to be fading. We will continue to monitor this.

      GBP/USD – Choppy Moves. GBP bulls were reinvigorated by the better labour report. ILO unemployment  edged lower to 5.4% from previous 5.5%. Jun-Aug added 140K of employment, smack in line with consensus. Pair was last seen at 1.5470, testing the 100-DMA as we write. Bullish momentum accelerates but RSI flags near overbought conditions. Expect tests beyond the 1.5488 (100-DMA) to be on short leash, with next key resistance seen at the 1.56-figure. Support is at 1.5326, 1.5240 (23.6% fibo of Sep high to low) before 1.51 (Oct low).

      USD/JPY – Capped. USD/JPY is bouncing higher this morning despite the Nikkei tracking lower. Pair had slipped to an overnight low of 118.63 on the back of a softer dollar tone, though it is now back within striking distant of the 119-handle at 118.96 as the JPY was sold off against the majors this morning. Helping to support the pair higher was the dimmer economic outlook for the economy as reflected in the Cabinet Office Monthly Economic Report for Oct, which now sees   “weakness” in some areas though the economy continues on a moderate recovery. This is in contrast to the Sep Report which saw “slowness” in some areas. Intraday momentum indicators are bearish bias, though stochastics is currently at oversold levels, suggesting the potential for a rebound ahead though for now it could signal that further upside could be capped. With our support level at 119.60 taken out, next support is seen at 118.30 (23.6% Fibo retracement of the Aug high and low) before 116.20 (Aug low). Resistance is around 119.25 (29 Sep low) ahead of the next at 120.00 (50DMA, 100DMA). We have Aug IP, capacity utilization and tertiary index due later this morning. We continue to favour buying on dips as our long held view is for the BOJ to add to its easing measures at end-Oct meeting (the BOJ semi-annual outlook report will be released at the same time) given the lack of inflationary pressures and sluggish growth. 

      AUD/USD – Risks Tilt to the Upside. AUD is having a choppy week so far with resistance at 0.7357 (100-DMA) deterring bids. Pair was last seen around 0.7325 with the pair on the uptick, in line with most of Asia, rejoicing in the prospect of an extended breather with Fed hike likely delayed into Dec or even into 2016. Support is seen at the 0.72-figure ahead of the next at 0.7160. On the other hand, resistance is seen at 0.7388 ahead of the next at 0.7490.  Weekly/daily momentum indicators are suggesting further upside. Australia lost 5.1K of employment in Sep as full time employment dropped 13.9K vs. an addition of 8.9K for part-time. Participation rate slipped 64.9% while jobless rate was unchanged at 6.2%. Beyond the near term, we hold our view that Australia is seeing nascent signs of bottoming for the economy as well as for the AUD as exports growth starts to become less negative. Week ahead remaining brings RBA Financial Stability Review (Fri).

      USD/CAD –Bearish Conditions, Counting Down to Polling Day on 19 Oct. USDCAD bears reassert themselves overnight with the help of the soggy dollar. Pair was last seen around 1.2910, testing the 100-DMA as we write. Momentum is bearish with next support seen at 1.2806 (23.6% fib retracement of the May-Sep rally). 1.30-figure is a viable resistance. Data calendar is light this week with only existing home sales (Sep) tonight. Apart from that, focus will be on the 2015 Canadian federal election, held on 19 Oct.

       NZD/USD – Fade Rallies; Watch 3Q CPI on Fri. NZD is climbing higher underpinned by stronger manufacturing in Sep, rising consumer confidence and dollar softness this morning. NZD was last seen at 0.6810 levels. Intraday momentum is on the uptick again with stochastics still indicating bullish bias. Bias to fade rally. First support on the downside at 0.6711 (21DMA) before 0.6633 (50 DMA). Week remaining brings Finance Minister speaks (Thu); 3Q CPI (Fri) – key focus (Cons. +0.2% q/q).

Asia ex Japan Currencies

      The SGD NEER trades 0.41% below the implied mid-point of 1.3690. We estimate the top end at 1.3415 and the floor at 1.3965.

      USD/SGD – Bearish Bias. The USD/SGD bounced lower below the 1.38-handle this morning with soft dollar overnight reinforcing the unwinding of long USD/SGD positions following the MAS decision to just reduce slightly the rate of appreciation of the SGD NEER yesterday. Pair is last seen around 1.3770 with both intraday MACD and stochastics bearish bias. With risks still to the downside and with several of our support levels taken out, new support is seen around 1.37-handle before the next at 1.3670 (200DMA). Resistance is seen around 1.3875. With MAS and GDP out of the way, market focus is now on Sep NODX (Fri).

      AUD/SGD – Volatility in Range. This cross remained on the slide, weighed by SGD strength, last seen around 1.0070. Daily chart shows decimated bullish momentum and MACD is at the zero line. We think there could be two way trades. Support is seen at 1.0050 ahead of the next at 0.9970. Resistance is seen at 1.0162 (100-DMA) ahead of the next at 1.0235 (76.4% fib. Retracement of the Aug-Sep sell-off).

      SGD/MYR – Upside Risk. SGDMYR is bouncing lower this morning back below the 3.00-figure underpinned by the relative strength of the MYR vs. the SGD. Last seen hovering around 2.99 levels. Intraday momentum and oscillator indicators are bullish bias but stochastics is showing signs of flattening. Immediate resistance at 3.045 (50 DMA), 3.0830. Support at 2.95 levels (50% Fibonacci retracement of End-Jul to Sep peak).

      USD/MYR – Gapped Lower. USDMYR gapped lower at the opening this morning to 4.1718 after onshore markets re-opened after a public holiday yesterday as the pair played catch-up with its regional peers. Last seen around 4.1158, pair has lost most of its bullish momentum and stochastics is showing signs of turning lower. Resistance seen at 4.2047 (21DMA) while support is seen around 4.0800 (9 Oct low). Week remaining focus on Sep CPI inflation (Fri).

      1s KRW NDF – Downside Risk. 1s KRW NDF is edging lower this morning on higher risk appetite (equities higher) amid a softer dollar tone. As well, the BOK on hold is also weighing on the pair. As expected, the BOK held its policy rate unchanged at 1.5% as the improving domestic demand and supplementary budget effects to feed through the economy, helping to mitigate the weakness in activity/exports data amid  subdued inflation. Pair was last seen at 1138 levels this morning. As we had been reiterating, daily stochastics has slipped into oversold territories. 4-hourly momentum/stochastics suggest downside risk intra-day. Support is seen around 1127 (200DMA) and resistance at 1146 levels (21DMA).

      USD/CNH – Bearish Momentum Waning. USD/CNH hovered around 6.3430 this morning. This pair seems to be settling into sideway trades with support at 6.3080 (100-DMA). Resistance is seen around 6.3780 ahead of the next at 50-DMA at 6.4042.   Convergence of the CNH and CNY is still sustained. USD/CNY was fixed 6 pips lower at 6.3402 (vs. previous 6.3408). CNY/MYR was fixed 51 lower at 0.6517 (vs. previous 0.6568). In news, Trading in Shanghai will close at 1130pm instead of 4.30pm starting from end Nov. We see this as another move to fulfill a technical requirement for CNY to be included in the IMF SDR  basket in its endeavours for yuan internationalization. The extension of trading hours, into European session, is also to enable the pricing of the yuan to be more market determined, complementing its goal for more extensive use in London hours as well as greater convergence with CNH.

      SGD/CNY – Rally.  This cross broke multiple levels of resistance and hovered around 4.6100, underpinned by SGD strength. Support is seen at the 200-DMA at 4.5770. Next support is seen at 4.5490. This cross is testing resistance at 4.6191 (Aug high) a break there exposes the next at 4.6723 (Jun high).

      1s INR NDF – Steady. 1s USDINR is pressing on the 100-DMA this morning, last printed 65.04. The 50-DMA at 66.07 remains a resistance. Daily MACD shows that bearish momentum has weakened. The lack of momentum could imply more two-way trades in the near term within 64.80-66.10. A break to the upside exposes next resistance at 66.38 while a bearish breakout exposes 200-DMA at 64-figure. Tue saw foreigners bought USD49.6mn of equities and USD640.7mn of bonds.  Finance Minister Arun Jaitley said government has already imported 5000 tons of pulses and another 2000 tons to arrive soon. This could act to ease prices of the crop. Trade numbers will be released in the second half of the week.

      USD/IDR – Consolidation After Gapping Lower.  Onshore markets re-opened today after closing for the Hijriyah New Year holiday yesterday with the USD/IDR gapping lower at the opening to 13370. Pair is playing catch-up with its regional peers amid a softer dollar tone. Currently seen around 13270, intraday MACD is showing bearish momentum and stochastics is flat-lining. This suggests that the pair could consolidate around current levels ahead. We continue to caution against complacency as domestic concerns (sluggish growth, slow pace of reforms, twin deficits etc.) remains and the current euphoria could prove to be temporary. For now, look for support around 13000 and upticks to meet resistance around 13500. The 1-month NDF is on the slide this morning back below the 13500-levels with intraday momentum indicators and oscillators bearish bias. There was no JISDOR fixing yesterday as onshore markets were closed for a public holiday. BI meets to decide on policy today and our economic team is not expecting any moves and for the policy rate to remain at 7.5%.

      USD/PHP – Consolidation.  USD/PHP gapped lower at the opening this morning to 45.858 from yesterday’s close of 46.003, tracking the USD/AXJs broadly lower. Pair is currently hovering around 45.775 with both intraday momentum indicators and oscillators showing no directional bias, suggesting range-bound trades are possible ahead. We look the pair to consolidate within 45.670  (11 Aug low) – 45.940 intraday. 1-month NDF slipped lower to 45.850 this morning with both intraday MACD and stochastics now bearish bias. Risk appetite fell yesterday with foreign funds selling a net USD0.65mn of equities.  Aug overseas remittances due later today.

      USD/THB – Supported. USD/THB continues its slide lower back below the 35.300-handle at around 35.269 amid a softer dollar tone this morning. Pair has lost most of its bullish momentum, and stochastics remains bearish bias. This suggests the range-bound trade around current levels is possible, though the risks are tilted to the downside. Still, continued profit-taking as they did yesterday and weak investor sentiments could stem further portfolio inflows for now, which could limit further downside for the pair. Foreign investors sold a net THB0.92bn and THB3.52bn in equities and government debt yesterday. Moreover, concerns about sluggish domestic growth amid global growth concerns should also be supportive of the pair. Look for 35.050 to limit downside while 35.480 (21DMA) should cap. Week remaining has 9 Oct foreign reserves (Fri).