Maybank GM Daily - 1 Jun 2016

FX

Global

      US equities opened positive before slipping into red at the release of poorer May US consumer confidence, Chicago purchasing manager and Dallas Fed Mfg activity. The data released earlier in the session including personal income, personal spending and PCE core were more positive. Personal spending, in particular, rose more than expected by 1.0%m/m in Apr, well above the consensus of 0.7%.

      The DXY index had a rather choppy session and entered Asian session, rather bid, at around the 95.80-level. Currencies seem rather technically driven with AUDUSD and NZDUSD rebounding from oversold terrains. In the meantime, USDSGD retraced from overbought conditions. USDCNH hovered around 6.5870, underpinned by the anticipation for the May PMI-mfg prints. In the meantime, India’s GDP beat consensus with a print of 7.9%y/y. Firm growth and inflation numbers weakened the case for a rate move next week. USDINR edged higher. In contrast, GBPUSD had a roller coaster ride, with early Asian bids at first above 1.47 before swinging under the 1.45-figure at last sight.

      China’s May PMI came in slight above expectations at 50.1. The Caixin version will also be released, 45mins later and slight deterioration is also expected from Apr’s 49.4. Australia releases 1Q GDP as well, in the morning. Consensus expects 2.8%y/y. Into the afternoon, Thailand and Indonesia’s CPI figures are due for May as well.  Beyond Asia, we have more PMI-mfg numbers out of the US and the Eurozone.

Currencies

G7 Currencies

      DXY – Mixed. Mixed session overnight for the USD – weaker against the CHF, SGD, AUD, NZD and gold but firmer against some AXJs (including KRW), GBP and EUR. Overnight, US and Europe equities were slightly weaker despite most Asian equities closing in positive territories yesterday. Feels a little like flight to quality but refrain from over-reading overnight FX moves especially during last day of the month due to flows distortion. DXY index ended higher (note that EUR and GBP make up nearly 70% of the dollar index). Overnight data was mixed with Chicago PMI, Dallas manufacturing and consumer confidence weaker than expected while personal spending, house prices surprising to the upside. DXY was last at 95.90 levels. Technicals are mixed - Bullish momentum on daily chart remains intact. 21 DMA cut 50 DMA to the upside– upside risk in short term. But stochastics is at overbought conditions.  Resistance at 95.90 (100 DMA, 50% fibo retracement of 2016 high to low), 96.60 (200 DMA). Support at 94.90 (38.2% fibo retracement of 2016 high to low), 93.80 (23.6% fibo). Week remaining brings ISM Mfg, new orders; Mfg PMI (May); Construction spending (Apr) on Wed; ADP (May); ISM NY (May); Fed’s Beige Book; Fed’s Kaplan speaks on Thu; NFP, unemployment rate, hourly earnings, services PMI (May); Factory orders, durable goods, cap goods orders (Apr Final); Fed’s Evans, Mester, Brainard speak on Fri.

      EURUSD – Range-Bound. EUR made an attempt higher but move was stopped in its tracks by 100 DMA at 1.1173 before closing the overnight session modestly weaker. Pair was last seen at 1.1120 levels this morning. Bearish momentum remains intact but gradually waning while daily stochastics is at oversold conditions. Support remains at 1.1090 (200 DMA) before 1.1070 (50% fibo retracement of 2016-low to high). Resistance at 1.1180 (100 DMA), 1.1220 (50% fibo), 1.1310 (50 DMA). Expect 1.1070 – 1.1180 range intra-day. Week remaining brings EC PMI Mfg (May) on Wed; ECB meeting; PPI (Apr) on Thu; EC retail sales (Apr); Services/Composite PMI (Apr) on Fri.

      GBPUSD – Brace for Swings. GBP was the biggest mover yesterday falling to a low of 1.4465 from a high of 1.4725 as opinion polls took a turn favouring Brexit. ICM poll showed 47% opined to Leave while 44% opined to Stay. We reiterate that GBP is expected to be caught up in 2-way directional swings in the lead-up to referendum day. GBP was last at 1.4472 levels. Daily momentum and stochastics is starting to indicate mild bearish bias. Next support at 1.44 (50 DMA), 1.4330 (100 DMA). Resistance at 1.4520 921 DMA). Week remaining brings PMI Mfg, Nationwide House prices (May) on Wed; Construction PMI (May) on Thu; Services/Composite PMI (May) on Fri. UK markets are closed on Mon for Bank holiday.

      USDJPY – Limited Downside. USDJPY is softer amid a mild retracement in the dollar this morning and possible flight to quality overnight. Pair continues to also take its cues from the Nikkei futures which are lower this morning. This morning, most of the majors were sold off against the JPY, putting downside pressure on the pair. The pair could also have weighed by better-than-expected capital spending in 1Q of 4.2% (cons.: 2.4% and 4Q: 8.5%). Note that PM Abe is poised to speak later today to announce a delay in the consumption tax hike delay without calling for an election and this could be possible mitigate the pair’s upmoves. It was reported that the ruling party has come out to say that the Upper House election will likely take place on 10 Jul. USDJPY was last seen at 110.70 levels. Daily momentum remains bullish bias while stochastics is at overbought conditions. Support is at 109.70 (50DMA). Upticks continues to be capped at 111.70 (38.2% Fibo retracement of the Jan-Mar downswing); 112.30 (100DMA). Remaining week has BOJ Sato speaks on Thu; Apr cash earnings, May Nikkei PMI Services on Fri.

      NZDUSD – Sell on Rally. Kiwi saw a continuation of yesterday’s move higher towards 0.68 levels this morning. Move higher was due to better than expected 1Q terms of trade and May house prices. With ToT jumping to more than 3-year high. The jump was led by lower import prices due to fuel price sub-component.  NZD was last seen at 0.6780 levels. Bearish momentum on daily chart is waning while stochastics is rising from oversold conditions. Resistance at 0.68 (upper bound of trend channel) before 0.6840 (50 DMA). Bias to sell on rally but probably a better preferred short against long AUD (target to buy on dips towards 1.0650 for a move towards 1.0775, 1.0870; S/L at 1.0590). Support at 0.6730 (100 DMA), 0.6660 (200 DMA). Week remaining brings 10-month Government Financial Statement; ANZ Commodity Price (May) on Fri.

      AUDUSD – Bullish. AUDUSD rose in anticipation of stronger growth print for 1Q. Bullish divergence is panning out now, notwithstanding the USD strength. Support is seen at recent low of 0.7145. The 200-DMA should continue to be retested on the way up towards the next barrier at 0.7340 (100DMA). Week ahead GDP (1Q), Commodity Index (May) on Wed; Trade (Apr) on Thu; Retail Sales (Apr) on Fri.

      USDCAD – Retracements. This pair is still stuck within the 50 and the 100-DMA, last seen around 1.3080. Overbought conditions are flagged by the stochastics and suggest that bias could be to the downside in the near-term. Resistance at 1.3070 (100-DMA). In the longer-term, we are more wary of downside trades as we notice a bearish cross over of the 100-DMA on the 200-DMA chart. Support is seen at 1.2920 (50-DMA) before year low of 1.2460. Growth contracted more than expected by -0.2%m/m in Mar. For 1Q, growth picked pace to 2.4%q/q (annualized) albeit undershooting the expected 2.8%increase.  The contraction was largely due to the fall in mining, quarrying, oil and gas extraction sectors. RBC Canadian manufacturing (May) is due today.

Asia ex Japan Currencies

      The SGD NEER trades 0.17% below the implied mid-point of 1.3810. The top end is estimated at 1.3534 and the floor at 1.4085.

      USDSGD – Still Capped By 100DMA.  USDSGD is back on the uptick this morning on the back of possible profit-taking after the overnight move lower. Pair continues to test but failed to break above the 100DMA resistance at 1.3810 levels. The 100DMA continues to cap upside with a break here exposing the next barrier at 1.39-handle (50% Fibo retracement of the Jan-Apr downswing). Last seen around 1.3790 levels, pair has lost most of its bullish momentum and stochastics continues to fall fro3 levels (21DMA). Pair should continue to trade range-bound within 1.3650-1.3850 ahead. May PMI and May Nikkei PMI are on tap tomorrow and Fri respectively.

      AUDSGD – Upside risks. AUDSGD was last seen around 0.9980 with momentum indicators turning higher. Similar to AUDUSD, daily MACD is near to zero and stochastics show tentative signs of climbing higher from oversold levels. Rebounds to meet first barrier around 1.0005 (21-DMA) before the next at 1.0150 (100-DMA). Support is seen at 0.9830.

       SGDMYR – Upside Pressure Continues. SGDMYR continues to climb higher amid SGD strength vs MYR renewed weakness. Move remains well within the upward slopping trend channel (formed since mid-Apr 2016). Cross was last seen at 2.9880 levels. 21 DMA cuts 100 DMA to the upside. Bullish momentum on daily chart remains intact while stochastics is near overbought conditions. Resistance remains at 2.99 (50% fibo retracement of 2016 high to low), before 2.9980 (200 DMA). Support at 2.97 (lower bound of the trend channel, 2.9570 (38.2% fibo, 100 DMA, lower bound of uptrend channel). Break outside of range on weekly close puts next support at 2.92 levels (50 DMA). But short-term could see upside pressure (21 DMA about to cut 100 DMA to the upside) towards 2.9980 levels.

       USDMYR – Interim Upside Pressure. Ringgit remains modestly weak driven by investor sentiment. Pair was last seen at 4.12 levels. Bullish momentum on daily chart remains intact while stochastics is near overbought conditions. 21 DMA looks on track to cut 100 DMA to the upside in coming days and could suggest upside pressure. Resistance remains at 4.14 (50% fibo retracement of 2016 high to low). We caution that a break above 4.14 on daily close could trigger stop-buy orders and expose the pair to 4.1880 (200 DMA). Support at 4.08 (100 DMA), 4.0720 (38.2% fibo).

      1s USDKRW NDF – Upside Risk Remains. 1s USDKRW was little changed this morning. Pair was last at 1191 levels. Daily momentum remains bullish bias. 21 DMA cut 200 DMA and is about to cut 100 DMA to the upside. Resistance 1200 (61.8% fibo retracement of 2016 high to low). Support at 1185 (50% fibo), 1177 (200 DMA). Expect 1185 – 1195 range intra-day. Data released this morning looks negative for KR, May CPI inflation slipped, exports fell by more than expected and trade surplus disappointed to the downside.  Week remaining brings 1Q GDP (Thu); May FX reserves (Fri).

      USDCNH – Upside Bias. USDCNH remained elevated around 6.5885-level, still within the 6.55-6.60 range. Bullish momentum on the wane and stochastics shows signs of turning lower from overbought levels. Still correction could be shallow as this pair seems more determined to keep an upside bias. Eye the break of the 6.5912 (38.2% Fibonacci retracement of the Oct-Jan rally). A failure to break there could mean a potential mini double top there. Support is at 6.5590 (100-DMA). Resistance is at 6.5820 (19 May high). USDCNY was fixed 99 pips higher at 6.5889 (vs. previous 6.5790). CNYMYR was fixed 2 pips higher at 0.6234 (vs. previous 0.6790). NBS PMI-mfg came in slightly above consensus at 50.1. PMI non-mfg came in at 53.1, a slight deterioration to 53.1. Next, Caixin PMI-mfg is due. Caixin PMI-services is due on Fri.

      SGDCNY – Upside Risks. This cross closed at 4.7794. This cross could head further north, beyond the 50-DMA at 4.7801. Next barrier is seen at 4.8101.  Stochastics indicate oversold conditions so initial bias should be to the upside before the bearish reversal of the 2015-2016 rally resumes. Next support is seen at 4.6960.

      1s USDINR NDF - Retracements.  1M NDF hovered around 67.60 as we write this morning, on the upmove. Stochastics indicate overbought conditions are pressure is to the downside for now with next support at 67.175 ahead of the next at 66.94.  Barrier is seen at 67.59 before 67.71. India’s GDP beat consensus with a print of 7.9%y/y. Firm growth and inflation numbers weakened the case for a rate move next week. PMI-mfg for May is due today.

      USDIDR – Upmoves Within Range. USDIDR is rebounding this morning as it plays catch-up to the overnight dollar move. Pair continues to stay elevated on the possibility of further BI easing (not our base case) following the dovish comments after the BI meeting on 19 May. Pair was last seen around 13665 levels. Daily momentum shows waning bullish bias and stochastics remains at overbought levels. In the absence of fresh cues, range trades within 13500-13710 are likely for the rest of the week. A break of the 200DMA resistance at 13660, which has capped upside so far, on a weekly close could see bullish extension towards 13760 (76.4% Fibo retracement of the Jan-Mar downswing). Support is at 13615 (61.8% Fibo). The JISDOR was fixed higher at 13615 yesterday from 13641 on Mon. Equities continued to find favor with foreign investors who purchased USD27.79mn in equities yesterday. May CPI is on tap later today and our economic team expects headline inflation to climb slightly higher m/m ahead of Ramadan in May. As in previous years, foodstuffs prices rose ahead of Ramadan. But on a y/y basis, base effects are likely to see headline inflation moderate to 3.28% y/y. Core inflation is expected to increase m/m as well in May due to rising gold jewellery prices, car prices, and housing rent but remain relatively unchanged in May at 3.37% y/y (Apr: 3.41%). In the news, the government intends to launch its 13^th stimulus package later this week. This package will focus on standardizing housing terms for the lower income group and road maps for e-commerce industry among others.

      USDPHP – Still Trapped Between 50- and 100-DMAs.   USDPHP is slipping lower this morning as it plays catch-up with its regional peers. Last seen around 46.750 levels, pair has lost most of its bearish momentum and stochastics is showing no strong bias in either direction. Look for range trades to hold intraday. 46.530 (50DMA) should continue to be supportive. Upside remains capped at 46.970 (100DMA and 50% Fibo of the retracement of the Jan-Mar downswing). Foreign funds bought a net USD49.36mn in equities yesterday as risk sentiments continued to be positive. Data-quiet week ahead.

      USDTHB – Rangy.  USDTHB a tad softer this morning, tracking the USD lower. Pair though continues to trade within a wide range of 35.540-35.800 in the absence of fresh cues. Last seen around 35.740 levels, pair is showing waning bullish momentum and stochastics remains at overbought conditions. Expect rangy trades to continue for the rest of the week as it waits for directional cues. Support nearby is at 35.670 (200DMA); 35.570 (50% Fibo retracement of Jan-Mar downswing). Resistance is at 35.850. Dips are opportunities to buy. Foreign funds continued to favor Thai assets, purchasing THB1.61bn and THB0.70bn in equities and government debt yesterday. We have May CPI due later today and our economic team is expecting headline inflation to pick by 0.5% y/y (cons.: 0.27%) due to the low base effect, improving domestic demand, the impact of drought on raw food prices, and the THB weakness. Remaining week has 27 May foreign reserves on Fri. In the news, the current account posted its 19th consecutive month of surplus in Apr of USD3.16bn (cons.: USD2b & Mar: +USD4.95b), owing to the low fuel import value. Also, the tourism sector was robust with international tourist arrivals rising by 9.8% y/y in Apr (Mar: +15.4%). A breakdown of the arrival print showed that Chinese tourist arrival were up 16.38% y/y (30.87% of total tourist arrivals), ASEAN by 9.35% y/y (26.96% of total), and European by 0.51% YoY (16.33% of total).

Rates

Malaysia

      Local government bonds continued to trade softer during the afternoon session as USDMYR broke the recent high. The uncertainty surrounding the upcoming US FOMC is causing jitters in the market as players were seen cutting losses at current levels.

      IRS curve steepened with a slew of panic paying. IRS levels adjusted 3-5bs higher across the curve in line with weaker MGS markets. 4y IRS traded at 3.72%, 5y IRS traded at 3.75-3.76%, 6y IRS traded at 3.85% and 7y IRS traded at 3.91%. 3M KLIBOR was unchanged at 3.67%.

      The PDS market saw better selling as yields moved higher at the belly and longer end, tracking the weaker MGS and MYR. In GG, PASB 23s widened 3bps to 4.15% (G+38/Z+20.5 bps). The Prasa curve was 1bp weaker at the belly and long end. Dana 23s was 6bps wider to 4.23% (G+38.5/Z+23.3), which is cheaper than PASB even after adjusting for duration. AAA curve was active with the front end seeing better buyers as Manjung traded 2bps tighter. Belly was weaker with Telekom and Plus being given 4-6bps wider while long end saw better sellers and closed 1-2bps wider. AA curve was quiet with some buying interest for Sime Darby perpetuals as it traded 2bps tighter at 5.33%.

Singapore

      SGS prices climbed early in the day when UST futures rose and USDSGD spot fell.  Yields were lower by up to 2bps at the open and some intermittent buying pushed yields down as much as 4bps at the trough. A retreat in USTs later in the day however took the wind out of the sails and market gave up almost all the gains into the close. IRS curve closed lower by 2-3bps whilst the SGS benchmark yield curve closed marginally lower, with swap spreads again tighter by about 1.5bps.

      In Asian credit, NOBLSP paper ironically 1 day after the CEO steps down went higher (ditto the Equity price) from real-money accounts. EM sovereigns remained a bit soft, lower by 10-20 cts in the belly and long end and more in Indons rather than Philips. A couple of SGD issues came out with interest by street (order book basis) skewed towards Starhub (an integrated telco with cable, broadband and mobile), an unrated proxy to Singtel and M1.

Indonesia

      Indonesia bond market moved sideways yesterday with IGS prices slightly incline specifically on the front end tenors. This was mostly due to expectation of May disinflation data release by Indonesia statistics today. Cautious ahead of U.S. labour data might be another reason of a shift to front end tenors IGS by Investor. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.483%, 7.811%, 8.035% and 8.029% while 2y yield shifts down to 7.219%. Trading volume at secondary market was seen thin at government segments amounting Rp6,721 bn with PBS009 as the most tradable bond. PBS009 total trading volume amounting Rp808 bn with 10x transaction frequency and closed at 100.571 yielding 7.367%.

      Indonesian government conducted their sukuk auctions yesterday and received incoming bids of Rp9.63 tn bids versus its target issuance of Rp4.00 tn or oversubscribed by 2.41x. Incoming bids during the auction was noted lower by approx. 33.6% and 22.8% compared to the last sukuk auction (two weeks ago) and compared to YTD average incoming bids during sukuk auction amounting Rp12.48 tn respectively. However, DMO only awarded Rp4.93 tn bids for its 5mo, 2y, 4y and 16y bonds. Incoming bids were mostly clustered on the PBS009 series. 5mo SPN-S was sold at a weighted average yield (WAY) of 5.43775%, 2y PBS009 was sold at 7.36693%, 4y PBS006 was sold at 7.75552% while 16y PBS012 was sold at 8.37939%. PBS011 series bids was rejected during the auction. Bid-to-cover ratio during the auction came in at 1.12X – 2.69X. Till the date of this report, Indonesian government has raised approx. Rp77.27 tn worth of debt through bond auction which represents 72.9% of the 2Q 16 target of Rp106.00 tn.

      Corporate bond trading traded heavy amounting Rp1,213 bn. FIFA02BCN3 (Shelf registration II Federal International Finance Phase III Year 2016; B serial bond; Rating: idAAA) was the top actively traded corporate bond with total trading volume amounted Rp532 bn yielding 9.148%.