Maybank GM Daily - 25 Apr 2016

FX

Global

      Broad USD strength into last week’s close led by gains against the JPY on media reports that BOJ may adopt negative rates for loans to banks. USDJPY jumped to 111.80, from 109.30 levels. Most USD/AXJs were also firmer. Both US and EU Equities were a touch softer amid disappointing earnings. There seem to be some follow-through on sentiment with Asian equities opening in the red this morning. Commodities including oil eased off recent highs.

      Day ahead, both Australia and NZ are out for ANZAC day holidays. No major data for release today for Asia. On FX this week we still see technical rebound for USD against most AXJs, in particular SGD, MYR, KRW, THB. We also expect USD to trade firmer against most G7s including EUR, AUD, NZD in the lead-up to FOMC meeting (28 Apr).

      Other data we watch for the week includes US New Home Sales (Mar), GE IFO Survey (Apr). For Tue, focus on Durable Goods Orders (Mar P), Markit US Services PMI (Apr P), Consumer Confidence Index (Apr) out of US. On Wed, focus on US Pending Home Sales (Mar), Australia and UK’s 1Q GDP. For Thu, US releases its 1Q growth print, Personal Consumption, Core PCE (1Q), RBA Debelle speaks, EC economic confidence and GE CPI (Apr), Natl CPI (Mar), Retail Sales (Mar), Industrial Production (Mar). For Fri, Fed's Kaplan Speaks, US Personal Income, Real Personal Spending (Mar), PCE Core (Mar), U. of Mich. Sentiment (Apr F), Euro-area GDP (1Q). In Asia, we watch China’s industrial profits for Apr on Mon, Singapore’s Mar CPI, followed its Mar industrial production on Tue. Philippines will release its imports and trade balance for Feb.

Currencies

G7 Currencies

      DXY – Technical Rebound Underway. Broad USD strength despite gains in commodity prices including oil, copper, silver) as US equities ended flat last Fri led by drop in earnings results. The move higher in USD is also consistent with our technical call for technical rebound as well as the lead up to FOMC meeting this week. We continue to see USD inching higher this week. DXY was last at 95 levels. Daily momentum and stochastics are indicating a bullish bias. Next resistance at 95.50 (38.2% fibo retracement of Mar high to Apr low), before 96 levels (50% fibo). Support at 94.80 (23.6% fibo). Week ahead brings New Home Sales (Mar), Dallas Fed Manf. Activity (Apr) on Mon; Durable Goods Orders (Mar P), Markit US Services PMI (Apr P), Consumer Confidence Index (Apr) on Tue; Pending Home Sales (Mar), FOMC Rate Decision (Apr 27) on Wed; GDP, Personal Consumption, Core PCE (1Q) on Thu; Fed's Kaplan Speaks, Personal Income, Real Personal Spending (Mar), PCE Core (Mar), U. of Mich. Sentiment (Apr F) on Fri.

      EURUSD – Bearish Bias. EUR fell amid broad USD strength, ECB’s reassurance that rates remain low at current or even lower levels for extended period and no deal for Greece. EUR was last seen at 1.1230 levels. Daily momentum and stochastics are bearish bias. We continue to see further downside risk towards 1.1150 (50% fibo retracement of Mar low to Apr high). Firmer support at 1.1070 (61.8% fibo, 100 and 200 DMAs). Resistance at 1.1315 (23.6% fibo). Week ahead brings EC, GE, FR Flash PMI (Apr) on Fri. Week ahead brings GE IFO Survey (Apr) on Mon; GE GfK Consumer Confidence (May), FR Consumer Confidence (Apr) on Wed; EC Economic Confidence (Apr), GE CPI (Apr P) on Thu; FR GDP (1Q A), EC CPI Estimate, GDP (1Q A) on Fri.

      GBPUSD – Sell on Rally. GBP was a touch firmer, helped by “Obama intervention on Brexit” on his recent trip to London as markets reducing Brexit bets. GBP was last seen at 1.4440 levels. Daily momentum and stochastics indicators continue to indicate a bullish bias. Resistance is seen at next at 1.4470 (76.4% fibo retracement of Feb high to Mar low). Support at 1.4350 (61.8% fibo), 1.4250 (50% fibo).  Could see downside risks on GBP amid possible USD strength in the lead-up to FOMC meeting mid-week.  Week ahead brings GDP (1Q A) on Wed; Nationwide House (Apr) on Thu; GfK Consumer Confidence (Apr), Mortgage Approvals (Mar) on Fri.

      USDJPY – Upside Risk. USDJPY spiked on Fri on the possibility that the BOJ was considering lending to banks at negative interest rates. BOJ policy decision is on 28 Apr. We think that the BOJ will stand pat on policy for now as they evaluate the impact of negative interest rates on the economy as well as with any eye to the Upper House election in early summer. Pair has since retreated, possibly on profit-taking after Fri’s spike. The Nikkei futures have slipped lower and is weighing on the pair and the majors were sold off against the JPY this morning. Pair is currently seen around 111.40-levels. Daily momentum is exhibiting increasing bullish momentum and stochastics is climbing higher. Monthly and weekly momentum indicators though are all still bearish bias. We continue to see bullish risk ahead towards 113-levels. (50% Fibo retracement of the 2014 low to 2015 high). Support at 110.39 (61.8% Fibo; 21DMA). Week ahead brings leading index (Feb F); Coincident Index (Feb F) on Mon; CPI (Mar), retail sales (Mar), industrial production (Mar), BOJ Policy Decision on Thu.

      NZDUSD – RBNZ the focus. Local markets are closed for ANZAC day today. Focus this week on RBNZ (Thu 5am SG/Kl time). Implied probability from OIS for a rate cut is now higher at 47% (vs. 33% a week ago). NZD was last at 0.6850. Daily momentum and stochastics are showing a mild bearish bias. Next support at 0.6750 (lower bound of the upward sloping trend channel and 38.2% fibo retracement of 2015 high to low). Resistance at 0.6935 (50% fibo). Week ahead brings CPI (1Q) on Mon; ANZ Consumer Confidence (Apr); credit card spending (Mar) on Thu.

      AUDUSD – Watch Out for Further Pullback. AUD slipped amid broad USD strength. Last seen at 0.77 levels. Daily momentum and stochastics are mild bearish bias. Next support at 0.7660 (21 DMA), before 0.76 (23.6% fibo retracement of 2016-low to high), 0.7450 (38.2% fibo). Resistance at 0.7835 (previous high). Watch out for further pullback. Week ahead is quieter in terms of data with only the release of the ANZ Roy Morgan Weekly Consumer Confidence Index (Apr 24), CPI (1Q) on Thu; RBA Debelle Gives Speech on Fri.

      USDCAD - Consolidate. USDCAD appeared to have found a short-term bottom around 1.26 levels. Last seen at 1.2690 amid broad USD strength. Daily momentum and stochastics are not indicating a clear bias. Could see the pair consolidate around 1.26 – 1.29 (21 DMA).  Week ahead brings IP, GDP data on Fri.

     Asia ex Japan Currencies

      The SGD NEER trades 0.06% above the implied mid-point of 1.3563. The top end is estimated at 1.3292 and the floor at 1.3835.

      USDSGD – Bullish Divergence.  USDSGD touched a new low of 1.3352 last week before reversing higher. The upmove was aided in part by the market speculation that the BOJ could lend to banks at negative interest rates. Downtrend remains intact but we see signs of bullish divergence in this pair, in line with hat seen in the DXY index. Pair now back above the 1.35-levels and with the pair breaking above the 21DMA, next barrier is seen at 1.3650 (61.8% Fibo retracement of 2014 low to 2016 high). Support is at 1.34-handle (50% Fibo). Week ahead has CPI (Mar) on Mon; industrial production (Mar) on Tue.

      The SGD NEER trades 0.06% above the implied mid-point of 1.3563. The top end is estimated at 1.3292 and the floor at 1.3835.

      USDSGD – Bullish Divergence.  USDSGD touched a new low of 1.3352 last week before reversing higher. The upmove was aided in part by the market speculation that the BOJ could lend to banks at negative interest rates. Downtrend remains intact but we see signs of bullish divergence in this pair, in line with hat seen in the DXY index. Pair now back above the 1.35-levels and with the pair breaking above the 21DMA, next barrier is seen at 1.3650 (61.8% Fibo retracement of 2014 low to 2016 high). Support is at 1.34-handle (50% Fibo). Week ahead has CPI (Mar) on Mon; industrial production (Mar) on Tue.

      AUDSGD – Overbought Conditions. AUDSGD slipped amid AUD weakness. Cross was last seen at 1.0430 levels. Weekly, daily stochastics are at overbought conditions and bullish momentum on daily chart is waning. Could see further pullback towards 1.0350 levels (21 DMA). Resistance at 1.0520 (previous high). 

      SGDMYR – Upside Risks. SGDMYR continues to inch higher amid MYR weakness. Cross was last seen around 2.89 levels. Daily momentum and stochastics are bullish bias. Resistance at 2.9165 (23.6% fibo retracement of 2015 high to 2016 low), before 2.95 (38.2% fibo). Support remains at 2.85 (2016 low).

      USDMYR – Upside Pressures. USDMYR traded higher amid broad USD strength. Pair was last at 3.9150 levels. Daily momentum and stochastics are bullish bias. Resistance at 3.95 before 3.9850 (23.6% fibo retracement of 2016 high to low). Support at 3.8440 (2016 low). No key data for release this week.

      USDCNH – Watch the 6.45-6.54 Range. USDCNH climb higher mid of last week continues this morning with the pair continuing to bounce above the 50DMA. Last seen around 6.51-levels, momentum remains on the upside. Barrier is now seen at 6.5400 (100DMA). Support is at 6.4845 (21DMA) ahead of the next at 6.4575 (200DMA). We continue to observe that PBOC uses the DXY index and the RMB index to guide the USDCNY. USDCNY was fixed 222 pips higher at 6.5120 (vs. previous 6.4898). CNYMYR was fixed 16 pips lower at 0.5974 (vs. previous 0.5990). We think there that given the primary concerns on capital outflows had ebbed and an outstanding overvaluation of its REER, PBOC would be less concern of a weaker RMB against the basket and seek to adjust the fixing in order for its REER lower in episodes that the dollar is weak. This is again, in line with our observations that the RMB index is positive correlated to the dollar.

      1s USDINR NDF – 200-DMA Support Tracked. 1M NDF rebounded after touching a weekly low of 66.38 last week to hit a high of 67.06 this morning. Pair is tilting slightly lower amid dollar softness. Softer oil prices could limit any downside. Pair was last seen around 67-handle. Daily momentum and stochastics are showing mild bullish bias. This pair is still sticky around the 200-DMA at 66.70 and could remain a line of pivot in the absence of stronger market cues. Barrier at at 67.50 (100-DMA).  The 50-DMA has crossed the 100-DMA from above and we could see more risks to the downside in the medium-term.

      USDIDR – Gapping Higher. USDIDR gapped higher at the opening to 13235 from last Fri’s close of 13145, playing catch-up with its regional peers. The 50DMA had capped the pair’s upmove for most of the past two weeks. Last seen around 13233, pair is showing increasing bullish momentum and stochastics is turning higher. This morning’s breach of the 50DMA if sustained on a daily close could see further upticks towards 13373 (38.2% Fibo retracement of the Jan-Mar downswing). Support nearby is at 13198 (21DMA) ahead of the 13000-handle. The JISDOR was fixed lower on Fri at 13169 from Thu’s 13182. Risk sentiments were positive last week with foreign funds purchasing a net USD106.81mn in equities. They however had removed a net IDR0.91tn from their outstanding holding of government debt on 18-20 Apr (latest data available). No data of importance due this week.

      USDPHP – Gapping Higher.  USDPHP gapped higher at the opening this morning again for the third straight session to 46.720 from Fri’s close of 46.490, tracking the USDAsians broadly higher. Possibly driving the pair higher as well could be recent polls that showed that Davao Mayor Rodrigo Duterte ahead of both Senator Grace Poe and former Interior Secretary Mar Roxas. While well known for his law and order stance, little is known about his economic policies/direction and this could have weighed on foreign investors’ mind and weighed on the PHP as well. Immediate resistance is seen around 46.800-levels (200DMA) before the next at 46.985 (50% Fibo retracement of the Jan high to Mar low). The 50-DMA has crossed the 200-DMA lower and we see more risks to the downside in the medium-term. Hence this recent upmove could be one to sell into. Support nearby is seen at 46.670 (50DMA) ahead of 46.410 (23.6% Fibo). Risk appetite waned last week with foreign investors selling a net USD20.43mn of equities last week. Quiet week ahead with just imports, trade balance (Feb) due tomorrow.

Rates

Malaysia

      MYR government bonds traded softer amid thin liquidity and on the back of USD strength, with the curve ending 1-2bps higher. This week, players will look to the next auction which is the retap on 7y MGS 8/23. We anticipate a size of MYR3.5b for this issuance.

      In MYR IRS, the short end had receiving interest, while the belly to long end had paying interest. 2y IRS was dealt at 3.58% and 5y at 3.71%. However, steepeners could be difficult to put on as the local curve has often been flat. 3M KLIBOR was unchanged at 3.70%.

      PDS was very quiet as market remains directionless. Cagamas 18s traded 2bps tighter to 3.80% (G+44bps/Z+21bps) and Manjung 31s traded 1bp tighter to 4.71% (G+55bps/Z+40bps), which we think FV should be around Z+35bps. Overall for the week, GGs and AAAs were mostly unchanged, though the belly of the GG curve saw some buying. Valuations are currently a tad tight, but spreads may still grind tighter if global conditions remain stable. The AA curve was bullish, especially at the front and long ends, with the most active being IPPs such as JEP, TBEI and YTL Power.

Singapore

      SGS traded sideways on decent 2-way interest, with steady funding levels and seen as lower than expected issue size for the 7y SGS reopening lending support. SGS yields closed flat, except for the 30y which lowered 1bp. SGD IRS curve higher by 1bp at the front, while the belly and back end were down about 1bp.

      Asian credit market saw profit taking on recently issued bonds that performed, and short covering on those that underperformed. MALAYS widened slightly even as UST remained soft. EM cash bonds were lower by 25cts or more. CDS market was a touch higher, reflecting the overall market sentiment.

 Indonesia

      IGS prices declining on the final day of the trading week. As there were minimal market sentiment. We are not seeing any yield divergence yet at the moment, however if 10y yield surpasses and closes above the 7.65% level then a divergence may have occurred. This week, movement of IGS prices would be dependent on post FOMC statement, US and EU GDP number release, bi-weekly bond auction and the 12th Indonesia economy package publication. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.223%, 7.540%, 7.776% and 7.738% while 2y yield shifts down to 6.965%. Trading volume at secondary market was seen moderate at government segments amounting Rp11,120 bn with FR0056 as the most tradable bond. FR0056 total trading volume amounting Rp1,810 bn with 72x transaction frequency and closed at 105.929 yielding 7.540%.

      Corporate bond trading traded heavy amounting Rp854 bn. FIFA02BCN3 (Shelf registration II Federal Internasional Finance Phase III Year 2016; B serial bond; Rating: idAAA) was the top actively traded corporate bond with total trading volume amounted Rp480 bn yielding 9.123%.