Maybank GM Daily - 17 Nov 2015

FX

Global

      Equities were largely supported overnight despite fear that Paris attack could weigh on sentiment. French equities were slightly in the red, dragged lower by travel & leisure sector. USD was broadly firmer against most currencies. EUR was under 1.07-handle. Commodity-linked currencies were largely softer, dragged lower by declines in copper prices. Chilean Copper producer (Codelco) cut prices on copper exports to China. Magnitude of the cut was largest since 2009, somewhat underscoring persistent concerns of Chinese demand. Oil prices reversed initial losses to end the overnight session in positive territories.

      RBA minutes released this morning indicated that Australia’s economic growth forecast is expected to strengthen gradually over next 2 years as drag from falling mining investment wanes and activity progressively shifts towards non-mining sectors. Also noted evidence of spare capacity; low wage growth and lower than expected 3Q inflation outcome. (Soft) inflation outlook may afford some scope for further monetary easing should that be appropriate to lend support to demand. AUD enjoyed a short and brief rally above 0.71-handle before sinking back towards its intra-day low at time of writing. Singapore Oct NODX (released earlier) was slightly better than expected (-0.5% y/y vs. Cons. -3%), thanks to surge in pharmaceutical exports while electronics remained a drag. SGD was just marginally firmer at 1.4210 but has now reversed its marginal gain at time of writing (1.4225).

      Day ahead focus on Oct inflation data out of UK as well as US which could provide some cues for direction for USD and GBP. Intra-day data is sparsely populated in Asia; USD/AXJs may face some downside pressure in the interim. That said we remain constructive of USD outlook; and favor buying USD on dips. Other data we are watching today include US Oct IP, Nov NAHB housing market index; German Nov ZEW survey; NZ GDT auction (important for NZD); UK Oct, PPI, RPI; BI meeting – we expect BI to stand pat. Philippines market is closed for the rest of the week for APEC-related holiday.

Currencies

G7 Currencies

      DXY – CPI Date Tonight. USD stays firmed against most currencies overnight. Market talks of “flight to safety” flows supporting the USD while some talked about Fed remains on course to hike rate as Paris Attack alone is unlikely to derail US economic recovery and rate hike plans. DXY was last seen around 99.40 levels. Bullish momentum remains intact. We continue to reiterate interim support at 98.55 (76.4% fibo retracement of Mar high to Aug low) before bigger support at 97.40 (61.8% fibo). Resistance remains at 100.39 (previous 2015 high). Focus for the week ahead on Oct FOMC minutes (Thu, 3am SGT) – which we are on the lookout for any potential explanation for the omission of a key sentence on global risks from the policy statement. But largely not expecting any surprise out of it. Other data we are watching for the week ahead includes CPI (Oct); Industrial Production(Oct); Fed's Tarullo Speaks; NAHB Housing Market Index (Nov) on Tue; Fed's Lockhart Speaks; Fed's Dudley, Mester, Lockhart Panel; Housing Starts (Oct); Building Permits (Oct); Fed's Kaplan; on Wed; Fed Releases Minutes from Oct. 27-28 FOMC Meeting; Initial Jobless Claims (Nov-14); Philadelphia Fed Business Outlook (Nov); Fed's Lockhart Speaks; Fed's Bullard Speaks on Thu; Kansas City Fed Manf. Activity (Nov); Fed's Williams Speaks on Fri.

      EUR/USD – Soft. EUR remained soft under 1.07-handle as supported risk sentiment saw renewed selling interest in EUR. There were a handful of ECB speaks overnight but no explicit mention of monetary policy. Nevertheless market continues to expect the ECB is likely to ease monetary policy at its 3 Dec meeting and this will continue to weigh on EUR. Weekly, daily momentum remains bearish bias. Key support at 1.0675 (previous low) before 1.0460 levels (2015 low). Interim resistance at 1.0870 (23.6% fibo retracement of Oct high to Nov low). We caution that should sentiment worsens, there could be upside risk on EUR (given inverse correlation between risk assets and EURUSD). Week ahead brings ECB’s Coeure, Lautenschlaeger speaking; ZEW Survey(Nov) on Tue; ECB Mersch, Lautenschlaeger Speaks; Construction Output (Sep) on Wed; ECB's Coeure, Praet Speaks; ECB Current Account on Thu; GE PPI (Oct); ECB's Mario Draghi, Coeure, Praet, speaks; ECB's Constancio Speaks in Frankfurt and then in Berkeley; Consumer Confidence (Nov) on Fri.

      GBP/USD – Range-Bound. GBP was a touch softer amid a firmer USD overnight. Focus today on Oct inflation numbers. GBP was last seen at 1.52 levels. Short term technicals suggest pair could trade the range of 1.5140 (23.6% fibonacci retracement of Nov high to low) – 1.5270 (50%) intra-day. Daily momentum is flat. Week ahead brings Oct CPI, PPI, RPI (Tue); Oct retail sales (Thu).

      USD/JPY – Flight To Safety. Risk appetite improved yesterday and continued into today, sending the USD/JPY higher back above the 123-levels. There was probably also increased speculation that the BOJ or the government would have to extend monetary/fiscal stimulus after the economy slipped into a technical recession in 3Q15 that could have weighed on the JPY. Last seen at 123.26 levels, both momentum indicators and stochastics are now showing increasing bullish bias, 122.85-region (21DMAand lower bound of intraday ichimoku cloud forming below price action). Resistance remains at 123.50-60 levels (Nov high). A break of this level on a daily close could see a bullish extension to 124.50 (19 Aug high). We have 3Q housing loans today and then Oct trade; BOJ policy statement/Kuroda press conference (Thu); and BOJ Kuroda speaks (Fri).

      AUD/USD – Range. AUD was a touch firmer this morning after decline yesterday amid falling copper prices. RBA minutes noted economic growth forecast to strengthen gradually over next 2 years as drag from falling mining investment wanes and activity progressively shifts towards non-mining sectors. Also noted evidence of spare capacity; low wage growth; lower than expected 3Q inflation outcome and that inflation outlook may afford some scope for further monetary easing if that is appropriate to lending support to demand. AUD was last seen around 0.7102 levels (lows this morning was 0.7090 levels). Weekly, daily momentum continues to indicate a bullish bias. Next resistance around 0.7140 levels (21, 50 DMA), before 0.72 levels (50% fibo retracement of Oct high to Nov low). Support at  0.7030 levels (upward sloping trend-line support on Sep lows). Expect 0.7050 – 0.7140 range intra-day. Week ahead RBA’s Debelle speaks (Wed); 3Q wage price index (Thu).

      USD/CAD – Rising Wedge (Bearish Reversal)? USDCAD remained firmed; last seen around 1.3330 levels at time of writing. Daily chart reveals possible rising wedge formation in the making; and is nearing the apex 1.3360. While daily momentum remains bullish bias; it is showing some signs of waning. Stochastics is entering overbought areas. Favor establishing tactical shorts on rally towards 1.3350 levels for a move towards 1.3220 (61.8% fibo retracement of Sep high to Oct low). Tight stop at 1.3385. Week ahead brings Sep retail sales; Oct CPI (Fri).

      NZD/USD – GDT Auction in Focus; Bias to Sell Rallies.  Kiwi stayed soft amid a firmer USD overnight. Focus for the day on GDT auction which we are looking for another back to back decline.  NZD was last at 0.6480 levels at time of writing. Bearish momentum and stochastics on daily chart remains intact. Interim base at 0.65 may appear to have been broken but remain too soon to call; we continue to watching price action. Overall we remain better seller on rallies towards 0.6550 levels (50, 100 DMAs), for a move towards 0.6390 objective. Week ahead brings GlobalDairyTrade Auction (Tue); 3Q PPI (Thu).

Asia ex Japan Currencies

      The SGD NEER trades 0.95% below the implied mid-point of 1.4089 with the top end estimated at 1.3850 and the floor at 1.4374.

      USD/SGD – Mild Downside Pressure.  USD/SGD slipped lower and could head back towards the 1.42-figure as risk appetite improved. Pair is currently seen around 1.4213-levles with intraday MACD showing mild bearish momentum and stochastics bearish bias. This suggests that mild downside pressure could persist. Further dips should find support around 1.4190 (50DMA) before the next at 1.4120 (61.8% fibo retracement of Oct high to low). Any rebound is likely to be capped around 1.4240 (trendline resistance) with a daily close above that level could see the pair headed higher towards 1.4266 (previous high). Remaining week has 3Q15 Final GDP due sometime 18-25 Nov. NODX slipped back into negative territory in Oct, contracting by 0.5% y/y (Sep: 0.3%) but was better than the -3% market was expecting. Electronics shipments fell by 3.2% y/y in Oct, while those for petrochemicals dropped 9.0%. A bright spot was pharmaceuticals, which rose by 44.6% y/y.

      AUD/SGD – Capped. AUD/SGD is whippy this morning, seen around 1.0100, still unable to clear the barrier at 1.0133 (61.8% Fibo retracement of the Aug-Sep sell off). Intraday MACD is showing bullish momentum and stochastics bearish bias. With pressure still to the downside, any further upside should be capped. A break of the 1.0133-barrier is needed for the pair head higher towards 1.0235. Support is seen around 1.0066 (50DMA) before the next at 1.0050 (50% Fibo retracement).

      SGD/MYR – Range-Bound. SGD/MYR was a touch softer; last seen at 3.0770 levels this morning. Momentum indicators remain flat but stochastics is showing tentative signs of turning lower from overbought areas. Immediate resistance at 3.0810 (76.4% fibo of Sep high to Oct low); if broken above on daily close basis could see the pair push higher towards 3.13 (previous high in Sep). Support remains at 3.05-3.06 levels (21, 50 DMAs). See intra-day range of 3.06 – 3.08.

      USDMYR – Rising Wedge (Bearish) or False Setup? USDMYR is a touch softer this morning. Last seen at 4.3750 levels. While momentum remains bullish; there is some signs of stochastics falling from overbought areas – possible near-term downside pressure. Price action from recent weeks suggests a potential rising wedge (bearish) formation in the making. But remains too early to tell if this is a false setup as prices is still above the 50% fibonacci retracement (4.28 levels) of Sep high to Oct low. That said, we continue to watch this potential bearish setup. Immediate resistance at 4.3870 levels (76.4% fibo). Next support at 4.3280 (61.8% fibo) before firmer support at 4.28 (50% fibo). Sustained price action below the 4.28 levels will suggest further downside pressure towards 4.23 (38.2% fibo), 4.1750 (23.6% fibo) before 4.11 levels (100 DMA). A move towards 4.08 (Oct low) cannot be ruled out if the pattern proves to be valid. However price pattern will be invalid should prices remain well above 4.28, or see a sustained rally towards 4.48 levels (previous high in Sep). Week ahead brings Oct CPI; FX reserves (Fri).

      1s KRW NDF – Range-Bound. 1s KRW NDF made a 1-month high of 1175 yesterday but has since eased below 1170-handle as fear of cautious sentiment arising out of Paris attack was milder than expected. Pair was last seen at 1169.70 levels at time of writing. Daily momentum remains bullish bias but stochastics is indicating tentative signs of falling from overbought areas. Key support at 1162.50 (50% fibo retracement of Sep high to Oct low). Resistance at 1172 (61.8% fibo), before 1184. Expect 1165 – 1172 range to hold intra-day. Week ahead brings Oct PPI (Thu).

      USD/CNH – Edging Lower. USD/CNH plunged to an intraday low of 6.3853 yesterday on the back of rumoured intervention by the PBOC after the discount between the CNH and CNY widened above 400pips. Since then, the pair has recovered some of its losses but remains below the level at which it opened on Mon. Pair is currently edging lower below the 6.40-levels at 6.3973. Both intraday MACD and stochastics are bearish bias, suggesting that risks remains to the downside. CNH is trading at a discount to CNY against the USD of around 273 pips ahead of the onshore market open. USD/CNY was fixed 10 pips lower at 6.3740 (vs. previous 6.3750). CNY/MYR was fixed 13 pips higher at 0.6851 (vs. previous 0.6838).

      SGD/CNY – Whippy. SGD/CNY is whippy this morning and was last seen around the 4.4800 levels. Pair has lost most of its bullish momentum, though stochastics is tentatively turning higher, suggesting that range-bound trades could be likely ahead. Upside moves is likely to be capped by 4.4840 (50DMA). Support nearby is seen around 4.4710 (yesterday’s low).

      1s INR NDF – Rangy. 1s USD/INR is edging higher this morning after slipping lower yesterday as risk appetite improved. NDF is seen around 66.33 this morning with intraday MACD showing very mild bearish momentum. Pair is trapped within an intraday ichimoku cloud which suggests that range-bound trades are likely. Nearby support is seen around 66.18 (lower bound of the cloud) with a daily close below that level needed for a move towards the next support at 66.05 (100-DMA). Barrier is seen at 66.53 (upper bound of the cloud) ahead of the next around the 67-figure. Exports contracted by 17.5% y/y in Oct, though this was an improvement from Sep’s -24.3%. Imports also improved, falling by 21.2% y/y in Oct from Sep’s -25.4%. The trade deficit improved as a result to USD9.77bn in Oct from –USD10.48bn in Sep.

      USD/IDR – Rangy. USD/IDR is on the downtick this morning as risk appetite improved. Pair is seen around 13717 currently with both intraday MACD and stochastics showing bullish momentum. This suggests that further downmoves could be limited ahead. Moreover, pair is trapped within an intraday ichimoku cloud, which suggests range-bound trades are likely. Ahead of the BI decision later today, we expect range-bound trades to prevail with support seen around 13610 (21DMA) before the next around 13550 (lower bound of the cloud). Resistance remains around 13800. 1s IDR NDF is slipping lower this morning to 13870 levels with intraday MACD showing waning bullish momentum and stochastics still at overbought levels. The JISDOR was fixed higher at 13732 yesterday from Fri’s13633. Risk appetite waned yesterday with foreign funds selling a net USD30.98mn of equities. Latest data showed that foreign funds added a net IDR4.85tn to their outstanding holding of government debt on 13 Nov.  We have BI rate decision today and our economic team does not expect BI to move on rate this time round given the upside pressure on the IDR and ahead of the Fed FOMC meeting in Dec.

      USD/PHP – Closed For APEC.  Onshore markets are closed for APEC-related holidays for the rest of the week and re-opens on Mon. 1s PHP NDF is inching slightly higher this morning to 47.28 after slipping lower overnight. Intraday MACD is exhibiting waning bullish momentum and stochastics is bearish bias, suggesting that further upticks could be capped. Foreign funds sold a net USD15.50mn in equities yesterday.

      USD/THB – Capped. USD/THB came off from yesterday’s intraday high of 36.060 but currently whippy. Currently seen around 35.980, pair has lost most of its mild bullish momentum and stochastics is mildly bearish bias. This suggests that any upmoves could be capped with resistance seen around 36.082 (61.8% Fibo retracement of the 36.670-35.130 downswing). Any retracement should find support nearby around 35.905 (21DMA) before the next around 35.835 (50DMA).Risk aversion continued with foreign funds selling a net THB2.27bn and THB1.21bn in equities and government debt yesterday. Next up in terms of data releases is 13 Nov foreign reserves (Fri). GDP rose by 2.9% y/y in 3Q15 (2Q: 2.8%), better than the 2.5% market was expecting and just a tad off the 3.0% our economic was looking for. Growth in 3Q was driven primarily by government spending as well as tourist spending even with the Aug terrorist attack in Bangkok. For the full-year, the NESDB is expecting growth of 2.9% and 3-4% in 2015 and 2016 respectively vs. the BoT’s 2.7% and 3.7% for 2015 and 2016 respectively. In contrast, our economic team thinks that growth of above 3.0% in 2015 and then to above 4.0% in 2016 cannot be ruled out given the government’s stimulus programme.

Rates

Malaysia

      Local government bond yields ended mixed in a day of light trading and dry liquidity. Market lacked direction as players refused to add or offload risk.

      IRS curve saw slight pressure due to the risk-off sentiment from the weekend. Some keen receivers seen in the short end up to the 5y IRS. Basis kept tightening possibly due to foreign lending of excess cash from expansionary monetary policies. There was not much impact from the higher 3M KLIBOR which remained at 3.75%.

      Local PDS space was very quiet as risk-off sentiment weighed on regional bond markets. Only MYR145m traded in the secondary market. Maybank Islamic’s subdebt maturing in 2021 traded 10bps wider, while Alliance Bank’s MTN maturing 2025 was dealt 5bps wider. 

 Singapore

      SGS prices moved up, tracking the movement in UST after the Paris attack drove investors to safe assets, with yields ending -2bps across the curve. The long end saw some late buying. SGD rates were also down by 2-4bps.

      Asian credit market traded softer, affected by the weekend event as well as the weakness in Latam last Friday. The new HRAM papers bore the brunt of the selling with spreads widening 5-8bps from previous close. O&G, Tech, MALAY, Chinese and Korean names also traded softer. While prices of INDON sovereign papers held up, spreads were worse off by 7-10bps. Still looks heavy on rallies as players appear to prefer trading from the short side on supply side fears.

 Indonesia

      Indonesia’s government bond was relative muted yesterday although a negative sentiment came from the terrorist attack in Paris last Friday. The negative effect from Paris’ news was insignificant to the IDR Government bond markets. Meanwhile, the domestic news that came from Indonesia’s trade data also didn’t have much impact to the market move. Indonesia’s trade balance reached US$ 1.02 billion in Oct-15 or higher than market consensus at US$725 million. After the trade data, the market players’ focus will shift to BI’s monetary meeting agenda. It is expected that BI will keep the reference rate unchanged at 7.50% to guard national macro stability.