Maybank GM Daily - 4 May 2016

FX

Global

      Cautious risk sentiment overnight with global equities in the red. USD index rebounded from 16-month low, with most currencies reversing gains. In overnight Fed speaks, Fed’s Williams said will support Jun hike if data consistent with expectations; Lockhart says Jun meeting is live and street’s estimate could potentially be under-pricing Fed rate hike in Jun. Elsewhere RBA cut rate by 25 bps citing low inflation as a factor. AUD fell by nearly 3%. NZD was dragged lower amid renewed weakness in GDT auction prices overnight. Oil prices were weaker amid rising stockpiles.

      In FX on the day ahead, we reiterate that we are growing a bit cautious on the dollar index as it could be entering oversold conditions soon. We think EUR as well as EUR-crosses against risk proxies and AXJs including AUD, MYR, KRW, PHP have scope to go higher. In USDCNY fix this morning, PBoC adjusted the CNY fix to the weaker side by most in 9 months (6.4943 vs. 6.4565 yest fix).

      On data for the day ahead, focus on US durable goods orders, Apr ADP; and in Asia, focus on Indonesia 1Q GDP.

Currencies

G7 Currencies

        DXY – Cautious at Oversold Conditions; ADP in Focus. USD index fell to 16-month low of 91.92 (a touch beyond our first objective of 92.20) before rebounding off the back of Fed’s Williams and Lockhart’s comments. Williams said will support Jun hike if data consistent with expectations; Lockhart says Jun meeting is live and street’s estimate could potentially be underpricing Fed rate hike in Jun. DXY was last seen at 93 levels.  Daily momentum remains bearish bias but stochastics is showing signs of rising. We reiterate that support at 92.20 (38.2% fibo retracement of 2014 low to double top in 2015) should hold and we remain cautious of USD at oversold conditions. Resistance at 94.15 (21 DMA), 95.70 (50 DMA). Week remaining brings ADP, Services PMI (Apr); Durable goods (Mar); Fed’s Lockhart speaks on Wed; Fed’s Kashkari, Bullard, Kaplan speak on Thu; Fed's Bullard, Kaplan, Lockhart, Williams speak; NFP, unemployment, wages (Apr) on Fri.

        EURUSD – Favor EUR Longs vs Risk Proxies, AXJs. EUR touched an intra-day high of 1.1616 (levels not seen since Aug 2015) before easing off amid USD rebound. EUR was last seen at 1.1505 levels. Daily momentum indicators remain bullish bias. We had previously mentioned that a break beyond 1.15 resistance could see an extension of the rally. Next resistance at 1.17 (Aug 2015 high), before 1.1850 (38.2% Fibonacci retracement of 2014 high to 2015 low), before the final objective of 1.2260 (50% fibo). Support at 1.1230 (50 DMA), 1.1100 (100, 200 DMAs). Week remaining brings EC, GE, FR services PMI (Apr); ECB Weidmann speaks; EC retail sales (Mar) on Wed; ECB Economic Bulletin; EC Retail PMI (Apr) on Thu; GE, FR Retail PMI (Apr) on Fri. We prefer to strip away the USD, and express our EUR long view against AXJs (including SGD, MYR, PHP) and risk proxies.

        GBPUSD – Waning Momentum. GBP traded to an intra-day high of 1.4770 before taking a turn lower. UK PMI came in weaker than market expectation. Pair was last seen at 1.4550 levels. Bullish momentum on daily chart is waning and stochastics is showing signs of turning lower. Attempt to close above 1.4670 failed on 2 occasions could suggest the pair try the downside for now. Support at 1.4470 (76.4% fibo retracement of 2016 high to low), 1.4350 (61.8% fibo), 1.4250 (50% fibo). Resistance at 1.4670 (2016 high). Week remaining brings Construction PMI (Apr) on Wed; Services PMI (Apr) on Thu.

       USDJPY – Still Bearish. 101 the Next Target? Onshore Markets are closed from Tue – Thu and re-opens on Fri. USDJPY is whippy this morning, pulled in both directions. Pair had slipped to new lows of 105.55 overnight – not seen since Oct 2014 - before bouncing to an intraday high of 107.46 this morning, possibly on a rebound in the dollar as well as on expectations of intervention. Finance Minister expressed concerns about abrupt JPY movements as undesirable and said that the government was monitoring speculative JPY trades and would respond if needed. The BOJ governor also reiterated that the focus of the BOJ was price stability, not exchange rate, and warned that the central bank could take additional easing steps as necessary to achieve it inflation target. Pair was last seen around 106.63. Monthly, weekly, daily momentum indicators are bearish bias. Next support remains at 101 levels (50% Fibo retracement of end-2012 – when PM Abe came into power to 2015 high). Resistance at 109 (21 DMA). Week ahead is quiet on the Japanese calendar with Monetary base, PMI (Apr) in focus on Fri.

      NZDUSD – GDT Auction Prices Fell. NZD fell amid renewed weakness in GDT auction prices, higher than expected unemployment rate and USD rebound overnight. GDT auction showed prices fell -1.4% from previous. Pair was last seen at 0.6920 levels; still trading well-within the upward sloping trend channel - lower bound at 0.6820; upper bound at 0.7130. Daily momentum is flat – not indicative.  Break below 0.69 (21 DMA) could see an extension of the decline towards 0.6810 (50 DMA).

      AUDUSD – Bearish Bias. RBA cut cash rate by 25bps to record low of 1.75%, with low inflation being cited as a factor. We think RBA could be concerned as wholesale funding cost has been on a rise and could rise further should Australia’s triple A credit rating be jeopardized.  AUD fell over 2% to a low of 0.7484 overnight amid RBA cut, USD rebound and renewed weakness in commodity prices.  AUD was last at 0.7505 levels. Bearish momentum on daily chart remains intact. We reiterate that a break below the key support at 0.7550 (50 DMA, upward-sloping trend-line support from Jan and Mar lows) on daily close basis could open doors for further downside towards 0.7450 (38.2% Fibonacci retracement of Jan low to Apr high), 0.7330 (50% fibo, 100 DMA). Firmer support seen near 0.7260 (200 DMA). Resistance remains at 0.7720 before 0.7835 (2016 high). Week remaining brings RBRetail Sales, Trade balance (Mar) on Thu; RBA Statement of Monetary Policy on Fri.

     Asia ex Japan Currencies

      The SGD NEER trades 0.03% above the implied mid-point of 1.3515. The top end is estimated at 1.3245 and the floor at 1.3785.

       USDSGD – Temporary Dip.  After climbing back above the 1.35-handle overnight amid a rebound in the dollar, USDSGD is inching lower this morning. There could be possible profit-taking and market positioning after yesterday’s sharp upmove. Pair was last seen at 1.3510 levels. Momentum and stochastics are now bullish bias. Support nearby is at 1.3490 (21DMA) before the next at 1.3405 (50% Fibo retracement of 2014 low to 2016 high). Resistance remains at 1.3630-50 (50 DMA, 38.2% Fibo). Manufacturing PMI continued its climb higher, rising to 49.8 in Apr from 49.4 in Mar, suggesting some improvement in the manufacturing sector even as the sector remains in contraction. Electronics PMI also saw an uptick, rising to 49.5 in Apr from 49 in Mar.

       AUDSGD – Watch RBA and Budget for Cues. AUDSGD remained on a backfoot amid AUD weakness on RBA cut yesterday.  We reiterate that a sustained close below 1.0150 (200 DMA) - 1.0180 (23.6% fibo retracement of 2014 high to 2015-16 double bottom) area of support temporarily negates our long bias (previously looking for a move towards 1.05, 1.07). Next support is at parity. Daily momentum and stochastics are indicating a bearish bias for now.

       SGDMYR –Rising Wedge in the Making (Bearish)? SGDMYR was a touch higher; last seen at 2.9170 levels but remained capped there. We reiterate that price action shows a potential rising wedge in the making. This is typically bearish and the cross could possibly test lower. Next support at 2.85 levels (2016 low) before our objective at 2.8250 (50% fibo retracement of 2014 lift-off to 2015 high; a level we previously highlighted in our short SGDMYR strategy). Resistance at 2.9350 (50 DMA), 2.98 levels (100 DMA).

      USDMYR – Technical Rebound Underway. USDMYR turned higher amid USD rebound and drop in oil prices. Last seen at 3.9830 levels. Daily momentum remains mild bullish bias. We remain cautious of technical rebound. Next resistance at 3.9850 (23.6% fibo retracement of 2016 high to low) before 4.0720 (38.2% fibo). Support at 3.9060 (21 DMA), 3.8440 (2016 low). Week ahead brings trade and FX reserves data on Fri.

       1s USDKRW NDF – Upside Risks. 1s USDKRW NDF rose amid cautious risk sentiment and USD rebound overnight. Pair was last seen around 1155 levels. Bullish momentum on daily chart remains intact. Resistance at 1153 (23.6% fibo retracement of 2016 high to low) before 1171 (38.2% fibo, 50 DMA). Support at 1147 (21 DMA).

       USDCNH – 200 DMA Holds. USDCNH rose amid rebound in USD, risk-off sentiment. USDCNY fix was adjusted higher by most (+378pips)  in 9 months (6.4943 vs. 6.4565 yest fix), tracking the DXY gains overnight. We believe the USDCNY fix could have been much higher in the region of 6.5040 levels but PBoC adjusted it lower below the 6.50-handle, possibly in a bid to limit volatility. In data release yesterday, China Caixin PMI Mfg was a touch weaker than market expectation. USDCNH was last seen at 6.5080 levels. Daily momentum remains bullish bias. Next resistance at 6.5370. Support at 6.4690 (200 DMA) should continue to hold firm. Week remaining brings Caixin PMI Services (Thu); Current account (Fri).

      1s USDINR NDF – Range-bound. 1M USDINR was a tad firmer amid USD strength. Last seen at 66.95 levels. Daily momentum remains bullish and stochastics is showing tentative signs of turning higher. Resistance at 67.15 (50DMA) ahead of 67.45 levels (100DMA). Support nearby at 66.80 levels (200DMA) before 66.25 (Apr lows).  (23.6% fibo retracement of 2016 high to low).  PMI services is on tap today.

       USDIDR – Gapping Higher. USDIDR gapped higher at the opening this morning to 13235 from yesterday’s close of 13123 amid a rebound in the dollar. Onshore markets are closed tomorrow and Friday for public holidays and re-opens on Mon. Cautious trades are likely as a result. Pair is still inching higher, last seen around 13250 levels. Daily momentum is showing bullish momentum while stochastics is climbing higher. On tap later today is 1Q 2016 GDP and market and our economic team are expecting growth of 5.07% and 5.01% y/y respectively  - little changed from 4Q 2015’s 5.04%. Further upside moves should meet resistance around 13370 (38.2% Fibo retracement of the Jan high to Mar low). Support nearby is around 13200 (50DMA) ahead of the 13100 levels. JISDOR was fixed lower at 13162 yesterday from Mon’s 13192. Weak risk appetite saw foreign funds sell a net USD48.86mn in equities yesterday.

       USDPHP – Upside Risk.  USDPHP is back above the 47-figure this morning following the rebound in the dollar and amid election uncertainty. Last seen around 47.100 levels, daily momentum is bullish bias and stochastics at overbought levels. Weekly momentum indicators are also bullish bias. Further upticks should meet resistance at 47.240 (61.8% Fibo retracement of 2016 high to low). Support at 46.850 (200DMA). There is increasing uncertainty regarding the economic positions of presidential candidates particularly that of the front runner Davao Mayor Rodrigo Duterte that is weighing on foreign investment decision and on the PHP as well. Foreign funds purchased a net USD0.64mn in equities yesterday, a mild rebound from yesterday’s sell-off.

      USDTHB – Upside Risk.  Onshore markets are closed from tomorrow for a super long weekend and re-opens on Mon, and cautious trades are likely intraday. USDTHB climbed back above the 35-figure this morning, tracking other USD/AXJ higher. Last seen at 35.130 levels, daily momentum and stochastics have turned mild bearish. Immediate resistance at 35.170 levels (50DMA) before 35.370 (38.2% Fibo retracement of the 2016 high to low). Support at 34.800 levels before 34.720 (year’s low). Positive risk sentiments saw foreign investors purchasing a net THB0.44bn and THB1.75bn in equities and government debt yesterday. Remaining week has 29 Apr foreign reserves due later today.

Rates

Malaysia

      MGS yields mostly decreased 2bps on better buying, especially after the RBA cut interest rate. Trades centered on the 7y MGS 8/23 which ended unchanged. Buying interest was also seen on the 10y MGS benchmark which -2bps with MYR321m total trades done. Issue size for the 15y GII 9/30 re-opening auction was announced at a smaller than expected MYR2.5b. WI quoted at 4.45/25% level but nothing was traded.

       MYR IRS was quiet with no trades done in the market. 3y and 5y rates lowered 1-2bps and 3M KLIBOR lowered 1bp to 3.68%.

       MYR PDS market was also muted. Sentiment skewed to the selling side with mainly offering interest seen on the GG and AAA curves, yet with little or no bid.

Singapore

      SGS opened soft with locals seen selling, but market turned better as UST futures traded higher. SGS mostly recovered ending flat in yields while the long end added about 1bp. SGD IRS curve closed unchanged at the long end and 1-2bps lower elsewhere amid a quiet market, and swap spreads narrowed.

       Asian credit market was muted amid a closed Japan market, no UST trading and narrow prices. China tech widened 5-6bps, but the new Huawei 26 held on steady while the old Huawei 25 was under pressure as the 15bps difference for 1y extension seems too steep. EM sovereign cash bonds a touch lower in line with higher UST yields. PHILIPs and Philippine CDS were under slight pressure due to the upcoming election concerns.

 Indonesia

      Indonesia bond market closed mixed yesterday. The market remains to quite ahead of the long holiday despite there were some buying activities during the day on specific series. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.376%, 7.651%, 7.866% and 7.837% while 2y yield shifts up to 7.057%. Trading volume at secondary market was seen thin at government segments amounting Rp12,738 bn with FR0056 as the most tradable bond. FR0056 total trading volume amounting Rp4,009 bn with 55x transaction frequency and closed at 105.100 yielding 7.651%.

       Indonesian government conducted their sukuk auctions yesterday and received incoming bids of Rp13.24 tn bids versus its target issuance of Rp4.00 tn or oversubscribed by 3.31x. Incoming bids during the auction was noted lower by approx. 13.5% compared to the last sukuk auction last two weeks while the result of the incoming bids were slightly higher compared to YTD average incoming bids during sukuk auction amounting Rp12.13 tn. However, DMO only awarded Rp6.33 tn bids for its 5mo, 2y, 4y, 7y and 16y bonds. Incoming bids were mostly clustered on the PBS009 series. 5mo SPN-S was sold at a weighted average yield (WAY) of 5.66336%, 2y PBS009 was sold at 7.40625%, 4y PBS006 was sold at 7.66196%, 7y PBS011 was sold at 7.93570% while 16y PBS012 was sold at 8.15137%. No series were rejected during the auction. Bid-to-cover ratio during the auction came in at 1.05X – 5.39X. Till the date of this report, Indonesian government has raised approx. Rp49.70 tn worth of debt through bond auction which represents 46.9% of the 2Q 16 target of Rp106.00 tn.

       Corporate bond trading traded thin amounting Rp434 bn. ADMF03CCN3 Shelf Registration III Adira Finance Phase III Year 2016; C serial bond; Rating: idAAA) was the top actively traded corporate bond with total trading volume amounted Rp104 bn yielding 10.243%.