Maybank GM Daily - 26 Jan 2016

FX

Global

      Oil was the party pooper again as both Brent and WTI slipped back towards the USD30-handle.  Overnight action has proved that the recent rally was never meant to be sustained. Oil dropped after Saudi Aramco commented that its investment projects for energy will continue in spite of the low prices.  The slide dragged European and US equities into red. Jittery market sentiments lifted the EUR back towards the mid-1.08. USDJPY was more resilient, still seen above the 118-figure ahead of BOJ meeting this week.

      Vietnam Prime Minister Nguyen Tan Dung is dropped from the candidate list for the Communist Party’s next central committee. The Congress will vote on a new central committee today which will in turn elect the new general secretary. USDVND continues to drift lower and was last seen around 22355.

      Still, Asian currencies have strengthened this morning THB leading at +0.2% against the USD. Equity-related outflows are likely to check AXJ gains. South Korea’s growth slowed to 0.6%q/q from previous 1.3%, matching consensus. Day ahead has fewer data releases with only US consumer confidence due tonight. FOMC starts its two-day meeting tonight. Nearer to home, Singapore had industrial production due.

      In the absence of cues, expect currencies to trade in ranges ahead of FOMC statement tomorrow night, along with RBNZ and BOJ decisions towards the end of the week. With USDCNY kept steady, oil continues to dictate directions and volatility.

Currencies

G7 Currencies

      DXY – Mixed. USD was mixed amid softer risk appetite, lower oil prices overnight. USD was firmer against risk proxies (i.e. AUD, NZD, AXJs) but softer against EUR, JPY. Key focus this week on FOMC – no expectation for rate move but focus on accompanying statement if Fed will strike a cautious tone, given recent market development. US inflation outlook will also be of interest, given renewed oil price declines and recent concerns from FOMC voters (Bullard, Dudley). DXY was last seen at 99.36 levels. Weekly technicals are not providing any fresh cues. Cautious of resistance at 100.39 levels which has previously served as double-top in 2015. Support at 99.24 (61.8% fibo retracement of Dec high to low), 98.85 (50 DMA, 50% fibo). Break below the latter support could see further downside. Week ahead brings Consumer Confidence Index (Jan) on Tue; MBA Mortgage Applications (Jan-22); New Home Sales (Dec) on Wed; FOMC Rate Decision, Initial Jobless Claims (Jan-23); Durable Goods Orders (Dec P); Pending Home Sales (Dec) on Thu; GDP Annualized QoQ (4Q A), Core PCE (4Q A), U. of Mich. Sentiment on Fri.

      EURUSD – Still Caught Between A Rock and A Hard Place. EUR rebounded amid soft risk appetite. Most European and US equities were softer, dragged lower by decline in oil prices. EUR was last seen at 1.0850. Momentum is not showing much cues on both weekly and daily charts.  Cautious risk sentiment could keep the pair supported on dips but ECB Draghi’s recent comments last week suggested another rate cut could be imminent. 2Y EUR bond yields are now at all-time lows of -0.45%. Near term support at 1.08 (upward sloping trend-line support from Dec to Jan lows); resistance at 1.0980 levels (100 DMA). Week ahead brings GE consumer confidence (Wed); GE Jan CPI; EC Jan consumer confidence (Thu); EC Jan CPI estimate (Fri).

      GBPUSD – BoE Carney Speaks. Pound remains on a back-foot as the rebound over the past few days appears to have stalled at 1.4360 levels (23.6% fibo retracement of Dec high to Jan low). Concerns of Brexit and slowing growth momentum continue to weigh on the GBP. Weekly momentum remains bearish bias but on the daily chart bearish momentum appears to be waning. Support remains at 1.4080 (Jan lows), while resistance at 1.4350/60 levels (23.6% fibo and downward sloping trend-line resistance from Dec to Jan) before 1.4520 (38.2% fibo). Break above 1.4350/60 could see weak GBP-shorts (positions) getting flushed. Week ahead has BOE Carney Speaks on Tue; Nationwide House Px (Jan) on Wed; GDP (4Q A) on Thu.

      USDJPY – Two-Way Trades. USDJPY edged close to our barrier at 118.88 yesterday on better risk appetite, but retraced overnight towards the 118-levels as risks appetite flipped underpinned by softer oil prices, trigger safe-haven flows. Pair was last seen around 118.14 with daily charts still showing bullish momentum, though weekly technicals continue to exhibit bearish conditions. We still see two-way trades ahead with volatilities still elevated for the whole week. Aside from FOMC on Thu, we have BOJ meeting on Fri but we do not think that the BOJ will act at this point. We expect the uncertainties of the BOJ’s next move will keep the USDJPY in range. Presser by BOJ Kuroda following the announcement will be closely watched. Support is seen around 117.77 (23.6% Fibo retracement of the Dec-Jan sell-off). Bids to continue to meet resistance around 118.88 (38.2% Fibo). Week ahead has Dec retail trade; Dec jobless rate; Dec household spending; Dec CPI, Dec P industrial production; BOJ policy meeting and Kuroda press conference (Fri).

      AUDUSD – Sideways, Eyes on CPI. AUD softened below mid-0.69. Momentum is still flat. Onshore markets are away for Australia Day break today. Medium term, range-trading have shifted lower from 0.69-0.74 to 0.68-0.72. Support at 0.6950 (23.6% Fibonacci retracement of the Jan sell-off) has been taken out and next is seen at 0.6896. Resistance is seen at 0.7018-barrier. Expect two-way risks in this pair and volatility to remain high.  Key data to watch is the 4Q CPI due tomorrow. A downside surprise to the consensus at 1.6% y/y could trigger rate cut speculations and downside risks to the AUD. Week ahead has PPI(4Q) on Fri.

      NZDUSD – Sell on Rallies. NZD was softer overnight, dragged by softer sentiment. Key focus for the week on RBNZ meeting (Thu morning, 4am SGT). Consensus is for no cut but focus on accompanying statement – if RBNZ reiterate its desire for lower NZD given recent declines in dairy prices. That said, we do not rule out profit-taking on recent NZD shorts ahead of RBNZ meeting. Pullback could re-visit 0.6550 (38.2% fibo retracement of Dec high to Jan low), which we favour fading into. Support at 0.6430 levels (lows in Nov and Jan). Week ahead brings PM Key speaks on Wed; RBNZ Meeting; trade (Dec) on Thu; Building Permits (Dec) on Fri.

      USDCAD – Sideways. USDCAD rebounded from the 1.4140-support and was last seen around 1.4300. As usual, the slide in oil prices also poses a drag on the CAD. Resistance is now seen around 1.4350 (38.2% Fibonacci retracement of Dec-Jan rebound), ahead of the next at 1.4480 (23.6% fib). MACD still flags bearish conditions for this pair and that could slow upmove. Next support is at 1.4012. Key data due this week is Nov GDP on Fri. Consensus expects growth to pick pace to 0.3%m/m from a flat growth in the month prior.

     Asia ex Japan Currencies

      The SGD NEER trades 1.45% below the implied mid-point of 1.4114. The top end is estimated at 1.3828 and the floor at 1.4401.

      USDSGD – Capped.  USDSGD continues its climb higher back above the 1.43-levels after risk appetite waned amid declining oil prices. Daily MACD continues to exhibit bearish condition, and stochastics continues to fall from overbought levels. This suggests that further upticks could be capped ahead. Immediate barrier is at 1.4324-support turned resistance ahead of the next at 1.4368 (Oct 2015 high). Support nearby is around 1.4254 (last week’s low) before the next at 1.4178 (100DMA). Remaining week has Dec industrial production later today. Yesterday, MAS/MTI reported that CPI fell 0.6% y/y in Dec, though this was better than Dec’s -0.8% and consensus’ -0.7% call. This improvement was due to the stronger pick-up in the cost of petrol and overall prices of services. Core inflation edged up 0.3% y/y in Dec from Nov’s 0.2% on higher services inflation, which rose 0.9% y/y in Dec from 0.7% in Nov.  Importantly, while MAS/MTI are uncertain of global oil prices outlook in 2016, they maintain their forecast of -0.5% to 0.5% for headline and 0.5-1.5% for core “at this stage” for this year. The tone of this outlook suggests that any intermeeting moves are unlikely at this point of time and are likely to seek further signals before deciding on policy in Apr. Our economic team is expecting mild lift to inflation of 0.5% for 2016, up from -0.5% in 2015.

      AUDSGD – Range. AUD/SGD waffled around 0.9940, weighed by weaker Australia data. Sideway action is likely to dominate this week with MACD forest last seen at 0 still. Barrier at 1.0041 (38.2% Fibonacci retracement of the Jan sell off) still deters bids. Next barrier is seen at 1.0100 and then at 1.0150 (50-DMA). Support is seen around 0.9960 and then at 0.9900.

      SGDMYR – Oversold Conditions. SGDMYR fell to low of 2.9715 yesterday, driven by MYR strength (thanks to recent rebound in oil prices). But looking out, daily stochastics is showing the cross at oversold conditions, and may see some pull-back intra-day. Cross was last at 2.9940. Resistance at 3.0020 (38.2% fibo retracement of Sep high to Oct low), before 3.0260 (50% fibo). Support should remain firm around 2.97 levels (23.6% fibo).

      USDMYR – Wary of Pullback. USDMYR retraced back recent moves following the pullback in oil prices. Pair was last seen at 4.2880 this morning (vs. low of 4.2430 yesterday). Weekly, daily momentum are bearish bias but we are slightly cautious of risk of further pullback, with stochastics nearing oversold conditions.  Near term support at 4.2430 (previous lows). Resistance at 4.31 levels (50, 100 DMAs), before 4.3420 (50% fibo). There are no data of note in the week ahead.

      1s USDKRW NDF – Slight Bias to the Downside. KRW fell against USD, driven soft risk sentiment overnight. This is despite 4Q prelim GDP (released this morning) meeting market expectation. 4Q GDP expanded 0.6% q/q; 3% y/y. 1s KRW was last seen at 1202 levels. Daily momentum is showing a slight bias to the downside. Support seen at 1198 levels (23.6% fibo retracement of Oct low to Jan high), before 1183 (38.2% fibo). Resistance remains at 1220 levels. Week ahead brings Feb business survey manufacturing and non-manufacturing; and Dec industrial production (Fri).

      USDCNH – Capped. USD/CNH was steady around 6.6120. This pair has been on the downtick this morning. Conditions are still bearish but gradually losing momentum and we suspect this pair could remain in choppy trades within 6.5650-6.6300. Upmove is gradual but persistent as we see higher lows. Gap with USDCNY has widened above 300pips at last sight. USD/CNY was fixed 9 pips lower at 6.5548 (vs. previous 6.5557). CNY/MYR was fixed 8 pips lower at 0.6505 (vs. previous 0.6613). The RMB index based on the basket of currencies was last at 100.84 as of 22 Jan, according to CFETS. A Mofcom researcher Mei Xinyu opined that “China is willing to stand temporary fluctuations in currency rates to gain independence over its monetary policy”.

      SGDCNY – Sideways. SGDCNY remained elevated around 4.6060. Action is still trapped within the 4.5590-4.6200 range. The 200-DMA supports at 4.5655 and the next support is seen at 4.5220 (61.8% fib retracement of the Nov-Dec rally). Given the lack of momentum, expect this cross to remain in sideway trades this week.

      1s USDINR NDF – Sideways. Onshore markets are away for Republic holiday. This pair edged higher overnight and was last seen around 68.15. Next support is still seen around 67.6565 (38.2% Fibonacci retracement of the Dec-Jan rally). Expect this pair to remain within 67.60-68.60 for the rest of the week. Foreign investors sold USD108.3mn of equities and USD89.6mn of debt on 22 Jan.  There is no tier-one data of note for India this week. PM Modi said he discussed economic ties, security, climate with Hollande (BBG). In other news, India bank recapitalization could be raised to INR1trn.

      USDIDR – Capped. USDIDR is bouncing higher this morning, playing catch-up with its regional peers. Comments yesterday by Deputy Governor Perry Warjiyo of further monetary easing, either in the form of a rate cut or macroprudential measures, probably also is supporting the pair today. Pair was last seen around 13910 with daily MACD showing mild bearish momentum, though stochastics continue to fall. This suggests that further upticks could be capped ahead. Resistance is around the year’s high so far of 14000. Support is seen around 13840 (38.2% Fibo retrace of the Oct downswing). The JISDOR was fixed lower at 13844 yesterday from 13874 on Fri. The improvement in risk appetite saw foreign funds purchase a net USD26.81mn of equities yesterday. They however removed a net IDR0.42tn from their outstanding holding of government debt on 22 Jan (latest data available). There is little data of note for the week ahead.

      USDPHP – Limited Downside.  USDPHP took out our resistance at the 48-figure yesterday but has since slipped lower to hover around 48.000 at last sight, probably helped by comments made by the BSP governor that lower interest rates were not needed to support the economy but instead to allow fiscal policy to do the heavy work. However, global risk aversion is likely to limit further downsides intraday. Daily MACD is showing waning bullish momentum, though stochastics remains at overbought levels. This suggests the potential for a retracement in the near term. Further slippages ahead should find support around 47.840. Any rebound should meet resistance around the multi-year high of 48.053. Risk appetite improved yesterday with foreign funds buying a net USD0.03mn in equities. Eyed in the remaining week will be 2015 & 4Q GDP on Thu. In the news, imports rose by 10.1% y/y in Nov, allowing the trade deficit to narrow to USD0.98bn from USD1.94bn in Oct.

      USDTHB – Upticks Within Range. After slipping further below the 36-figure to touch a new low of 35.850 for the year yesterday, USDTHB is back on the rebound towards the 36-figure this morning as risk appetite waned on falling oil prices. Daily and weekly technicals are both still bearish bias, suggesting that further upside could be capped in the near term. Pair has also slipped into a ichimoku cloud, which suggests range-bound trading is likely. Support nearby is seen around 35.850 (year’s low) before the next at 35.718 (38.2% Fibo retracement of the Oct high to low). Immediate resistance is around 36.043 (50DMA) ahead of the next at 36.082 (61.8% Fibo). Investor sentiments were mixed yesterday with foreign funds selling a net THB93.81mn in equities and buying a net THB9.63bn in government debt. Week ahead has Dec customs trade data on tap sometime this week; Dec mfg production; Dec BoP current account balance; Dec trade; and 22 Jan foreign reserves (Fri).

Rates

 Indonesia

      Indonesia bond market closed with a mixed tone as there were minimum market sentiments and ahead of the FOMC meeting this week. We are expecting IGS prices to move sideways this week and see that the movement will be based on data dependent as well as an aggressive either inflow or outflow. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 8.255%, 8.326%, 8.626% and 8.661% while 2y yield shifts up to 8.150%. Trading volume at secondary market was seen moderate at government segments amounting Rp10,656 bn with FR0056 as the most tradable bond. FR0056 total trading volume amounting Rp2,358 bn with 90x transaction frequency and closed at 100.325 yielding 8.326%.

      DMO will conduct their bi-weekly sukuk auction today with five series to be auctioned which are SPN-S13072016 (Coupon: discounted; Maturity: 13 Jul 2016), PBS006 (Coupon: 8.250%; Maturity: 15 Sep 2020), PBS009 (Coupon: 7.750%; Maturity: 25 Jan 2018), PBS011 (Coupon: 8.750%; Maturity: 15 Aug 2023) and PBS012 (Maturity: 15 Nov 2031). We believe that the auction will be oversubscribe by 1.5x – 2.5x from its indicative target issuance of Rp4 tn while our view on the indicative yield are as follows SPN-S13072016 (range: 7.18% – 7.38%), PBS006 (range: 8.75% – 8.95%), PBS009 (range: 8.56% – 8.76%), PBS011 (range: 8.97% – 9.17%) and PBS012 (range: 9.30% – 9.50%).

      Corporate bond trading traded thin amounting Rp271 bn. BACA02SB (Subordinated Bank Capital II Year 2015; Rating: idBBB-) was the top actively traded corporate bond with total trading volume amounted Rp87 bn yielding 11.999%.