Maybank GM Daily - 3 Jun 2016

FX

Global

      The DXY index touched a low of 95.15 before rebounding towards the 95.60-level after ADP reported an addition of 173K private employment for May, smack in line with projections and an improvement from the previous 166K (which was revised higher as well). Initial jobless claims fell to 267K from the previous 268K. Elsewhere, ECB did not change its policy mix. USDJPY remained under pressure at the 109-handle. OPEC did not reach an agreement on crude output. The only consensus is their “optimism that global oil markets are improving”.

      With implied probability of a Fed hike in Jun slipping back to 22%, the USD remained in consolidation mode. 1M UST yield was last seen around 0.18%. Early Asian sentiment has been positive so far, likely keeping a lid on the USDAXJs. Risk appetite seems poised to remain resilient into US NFP release tonight. USDAXJs could be capped with USDCNY tilted to the downside.

      Apart from the NFP release, we also watch the average hourly earnings for May, Apr factory orders, the final print of durable goods orders. In Asia, China releases its Caixin PMI-non mfg print for May, followed by Malaysia’s Apr trade numbers. Beyond this weekend, market players are likely keeping their eyes on US-China Strategic and Economic Dialogue on 6-7 Jun, China’s fx reserves for May and Fed Chair Yellen’s speech on the Tue.

Currencies

G7 Currencies

      DXY – May NFP Eyed But UK referendum In the Way. The DXY index touched a low of 95.15 before rebounding towards the 95.60-level after ADP reported an addition of 173K private employment for May, smack in line with projections and an improvement from the previous 166K (which was revised higher as well). Initial jobless claims fell to 267K from the previous 268K. DXY was last seen at 95.55 levels. With markets viewing fear of Brexit as a high hurdle for the Fed to move in Jun, stronger NFP, durable goods order and factory order numbers may not lend USD bulls further support. Bullish momentum on daily chart is waning and stochastics has fallen from overbought conditions. Support is still seen at 94.90 (38.2% fibo retracement of 2016 high to low), 93.80 (23.6% fibo). Resistance at 95.90 (100 DMA, 50% fibo retracement of 2016 high to low), 96.60 (200 DMA). Week remaining brings 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 – Shallow Dips. ECB did not adjust any of its monetary policy mix yesterday – keeping rates unchanged as at last adjustment in Mar and keeping all parameters of the QE unchanged. Markets were unmoved by the event. The EURUSD bounced off the 200-DMA and hovered around 1.1150. Bearish momentum on daily chart is waning and daily stochastics is rising from oversold conditions. Support remains at 1.1090 (200 DMA) before 1.1070 (50% fibo retracement of 2016-low to high). Resistance at 1.1220 (50% fibo), 1.1310 (50 DMA). Week remaining brings EC retail sales (Apr); Services/Composite PMI (Apr) on Fri.

      GBPUSD – Double Topped. GBP retained a heavy tone around the 1.44-figure, finding support at the 50-DMA. Eyes are on the opinion polls in the lead-up to referendum day on 23 Jun. 1m vols remained at 7-month highs, north of 20 vols. Daily momentum and stochastics are indicating a mild bearish bias. Should the support at 1.44 (50 DMA) break, the next at 1.4330 (100 DMA) is not far away. Resistance at 1.4520 921 DMA). Week remaining brings Services/Composite PMI (May) on Fri. We also like to express GBP bearish bias against EUR longs. 

      USDJPY – Capped. USDJPY move beyond the upper bound of the trench channel was not sustained and the pair is now back within the channel. Pair was weighed by market disappointment that PM Abe did not provide details of any supplementary budget at the same time as his announcement about the sales tax hike delay. Also, BOJ board member Sato’s comments yesterday that reiterated his opposition to further rate cut and that the sales tax delay did not affect monetary policy, dampening prospects of further BOJ easing. These resulted in the continued sell-off in equities over the past two days, though there is some relief for equities with the Nikkei futures higher this morning. This suggests some upside pressure on the pair. USDJPY was last seen just a tad below the 109-handle at 108.97. Pair has lost most of its bullish momentum and stochastics continues to fall from overbought conditions. Further upside should meet barrier around 109.70 (upper bound of the trench; 50 DMA) before 111.70 (38.2% Fibo retracement of the Jan-Mar downswing). Support is at 105.60 (year’s low). May Nikkei PMI Services is on tap later today.

      NZDUSD – Sell on Rally. The kiwi bulls were capped by the 50-DMA. Momentum indicators are tilting north and stochastics are turning from overbought conditions. NZD was last seen at 0.6814 levels. Resistance at 0.6840 (50 DMA). That said the bias remains to sell on rally. 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 – Death Cross. AUDUSD softened and was last seen just below the 200-DMA still, at 0.7226. The pair is sticky around the 200-DMA. Still, there could be more upside. Bullish divergence is panning out now. 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). We prefer to sell on rally for this pair as the 21-DMA is poised to cut the 200-DMA, a death cross.

      USDCAD – 1.3160 Caps. This pair was still little moved and there seems to be a mini-double top for this pair at 1.3160. Last seen around 1.3100. Overbought conditions are flagged by the stochastics and suggest that bias could be to the downside in the near-term. In additions, we see mini bearish divergence for this pair, adding to the risks to the downside. Resistance at 1.3312 (100-DMA). Support is seen at 1.2913 (50-DMA) before year low of 1.2460.

Asia ex Japan Currencies

      The SGD NEER trades 0.28% below the implied mid-point of 1.3796 with the top end is estimated at 1.3521 and the floor at 1.4071.

      USDSGD – Still Rangy Within 1.3650-1.3850.  USDSGD is slipping lower this morning on expectations that the equity market would track the US markets higher. Pair was last seen around 1.3750 levels. Daily momentum is still showing very mild bearish bias and stochastics continues to fall from overbought levels. Continue to expect the pair to trade range-bound within 1.3650-1.3850 intraday ahead of US NFP. Support is at 1.3650 (38.2% Fibo retracement of the Jan-Apr downswing). The 100DMA resistance at 1.3800 continues to cap upside with a break here exposing the next barrier at 1.39-handle (50% Fibo). May Nikkei PMI is due later today. PMI for May came in at 49.8, the same as in Apr, suggesting that a recovery in manufacturing was still not in sight yet. Electronics PMI slipped lower to 49.1 in May from Apr 49.5. A reading below 50 signals manufacturing activity is contracting.

      AUDSGD – Short-term Upside risks. AUDSGD was last seen around 0.9940 with momentum indicators turning higher. Daily MACD has turned bullish and stochastics is rising from oversold levels. Rebounds to meet first barrier around 1.0005 (21-DMA) before the next at 1.0150 (100-DMA). However, we still prefer to sell on rallies as the 21-DMA has cut the 50,100,200-DMA, keeping a lid on topsides. Support is seen at 0.9830.

       SGDMYR – Limited Downside. SGDMYR briefly hit a new high of 3.0340 yesterday before retreating. Cross’ retreat continues this morning amid the relative strength of the MYR. Move remains well within the upward slopping trend channel (formed since mid-Apr 2016). Cross was last seen at 3.01350 levels. 21 DMA cuts 100 DMA to the upside. Bullish momentum on daily chart remains intact while stochastics now at overbought conditions. Resistance remains at 3.0260 (76.4% Fibo retracement of 2016 high to low). Support at 2.99 (61.8% Fibo); 2.98 (lower bound of the trend channel).

       USDMYR – Interim Upside Pressure but We Suggest Selling on Rally Soon. USDMYR is inching lower this morning on the back higher global oil prices with Brent back above the USD50/bbl levels. Pair was last seen at 4.1447 levels, still well within the trend channel formed since Apr 2016. Bullish momentum on daily chart remains intact while stochastics is at overbought conditions. 21 DMA cutting 100 DMA to the upside looks imminent and could suggest interim upside pressure. But a rising wedge appears to be in the making – and is typically a bearish reversal. We look for opportunities on this run-up to fade into. Support at 4.0720 (38.2% Fibo retracement of 2016 high to low), 3.9850 (23.6% Fibo). Resistance remains at 4.1870 (200 DMA).

      1s USDKRW NDF – Range Still. 1s USDKRW is climbing higher this morning as concerns about the economy continues to mount following weak exports and factory  output prints, increasing speculation of a possible BoK rate cut. FX reserves fell 0.4% to USD370.96 in May. Pair was last at 1189 levels. Daily momentum shows no strong bias in either direction and stochastics is falling from overbought conditions. Resistance at 1200 (61.8% Fibo retracement of 2016 high to low). Support at 1185 (50% Fibo), 1177 (200 DMA). Still expect 1185 – 1195 range intra-day.

      USDCNH – Upside Bias. USDCNH was last seen around 6.5900-level. This pair is stubbornly elevated despite the downside surprise in the USDCNY fixing. Expect any correction to 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). Support is at 6.5590 (100-DMA). Resistance is at 6.5820 (19 May high). USDCNY was fixed 201 pips lower at 6.5688 (vs. previous 6.5889). CNYMYR was fixed 62 pips higher at 0.6296 (vs. previous 0.6234). Caixin PMI-services is due later. NDRC has issued a guideline ordering Beijing, Shanghai, Tianjin and neighboring regions to lower coal consumption and their share of overall energy consumption. China’s logistics prosperity index showed that business volume remained unchanged at 54.2. New orders rose to 55.0 from previous 53.5.

      SGDCNY – Upside Risks. This cross closed at 4.7888, beyond the 50-DMA. Next barrier is seen at 4.8101.  Stochastics are rising from oversold conditions so we continue to see upside risks before the bearish reversal of the 2015-2016 rally resumes. Next support is seen at 4.6960.

      1s USDINR NDF – Correction In The Near-Term First. The 1M NDF softened to 67.60 from highs of 67.90. The pair tracked the softer dollar. Technical still signals further downside pressure for this pair and support at the 100-DMA, 67.58 is being tested. Next support is seen at 67.175 ahead of the next at 66.94.  Barrier is seen at 68.36 (23.6% Fibonacci retracement of the Oct – Feb sell off). Foreign investors bought U$51mn on 1 Jun  and sold USD159.4mn of debt after the news broke that RBI Rajan did not want to stay on as Governor. I news, RBI has allowed Non-Bank Financial Companies can refinance infrastructure loans using take-out loans in the latest bid to crowd in private investment for infrastructure. Take-out loans allow new lenders to stretch the loan repayment over a longer period.

      USDIDR – Bearish Bias. USDIDR is edging lower this morning, playing catch-up with the rest of its regional peers. Firmer oil prices are also weighing on the pair. Pair was last seen around 13610 levels. Daily momentum continues to show waning bullish bias and stochastics is falling from overbought levels. Pair should continue to trade range bound within 13550-13710 intraday ahead of US NFP. Support is at 13490 (61.8% Fibo retracement of the Jan-Mar downswing). Immediate resistance is at 13660 (200DMA) ahead of 13760 (76.4%). The JISDOR was again fixed higher at 13695 yesterday from 13671 on Wed. Positive risk sentiments saw foreign investors purchased USD32.57mn in equities yesterday. They also added IDR0.3tn to their outstanding holding of government debt on 1 Jun (latest data available).

      USDPHP – Bearish.   USDPHP is sliding lower this morning, tracking its regional peers broadly lower. Pair was last seen around 46.480 levels. Daily momentum and stochastics are showing bearish bias. Pair is now testing the 50DMA support at 46.540 and a break here on a weekly close could expose the next support at 46.410 (23.6% Fibo retracement of the Jan-Mar downswing); 45.900 (2016 low). Resistance is at 46.730 (38.2% Fibo; 21DMA). Foreign funds bought USD5.05mn in equities yesterday.

      USDTHB –  Buy On Dips.  USDTHB is mildly softer this morning but still well-within its current trading range of 35.540-35.800. Pair was last seen around 35.580. Daily momentum is showing very mild bearish bias and stochastics is falling from overbought levels. Support is at 35.370 (38.2% Fibo retracement of Jan-Mar downswing). Resistance is at 35.770 (61.8% Fibo). Dips continue to be opportunities to buy. Risks sentiments turned positive yesterday with foreign funds buying THB1.04bn and THB0.72bn in equities and government debt. 27 May foreign reserves is on tap today.

Rates

Malaysia

      Local government bonds traded largely unchanged with most trade still centered upon the belly of the curve. Buying on the 5y MGS benchmark 11/21s were still obvious as the bond ended the day unchanged from previous day close.

      IRS market was quiet with no trades reported and the curve was slightly lower at the 5y point. 3M KLIBOR was changed at 3.67%.

      PDS market was muted lacking bidding interest although the market was well offered. Some trading was seen in the GG curve with BPMB 21s trading 1bp wider at 4.02% (G+47.6/Z+23.4 bps). Longer end saw BPMB 29s and Dana 40s being traded but levels were pretty much unchanged. AA curve saw some crosses and Sabahdev 17s trading 5bps wider to 4.80% (G+183/Z+108 bps) which is significantly wider than the AA1 curve partly attributed to corruption investigation news appeared in March. PASB opened its books today to a potential MYR1.4b issuance with the revised price guidance offering some value over the existing secondary PASB and GG curve.

Singapore

      SGS continued its biddish tone from as players were seen buying at open despite a flat closing for UST overnight. SGS yields traded to a low of -6bps for the day before profit taking interest kicked in. The curve continued to be segmented as some issues traded a lot richer than others. We recommend cautiously long in the front end supported by a stable and low funding environment. Swap spreads widened as SGS bid stays resilient as IRS yields inch higher. Interestingly, the new SGS 10y benchmark continue to underperform in this mini recovery with prices still being offered below issued price.

      In Asian credit, Aussie banks seemed to be tapping the capital markets in a hurry. Westpac come to the market for a AUD 12NC7 B3T2 issuance and news that ANZ will be having a roadshow for their upcoming AT1 transaction (even though ANZ just did a 5y USD senior last week). NAB had issued SGD and HKD B3T2 last month and currently book building its AUD AT1 as well. CBA may not be far behind in the race for capital issuances. The potential ratings upgrade by S&P on Indonesia did not materialize and lead to a broad underperformance in the currency and debt compared to Philippines. INDON bonds were between 25 to 75 cts lower (it was much lower before value buyers emerged) whereas Phillip bonds were flat to +25.

Indonesia

      Indonesia bond prices decline during the day post S&P rating agency kept Indonesia’s sovereign rating at halt. However, the sell off was not significant which could be a positive signal. MoF propose to issue additional Rp21 tn worth of government bond in the revised 2016 budget. This may impact negatively to the bond market on the note of more bond supply. However, we still need to wait for more information whether the additional financing will be financed through issuance of global or domestic bond. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.523%, 7.867%, 8.044% and 8.019% while 2y yield shifts up to 7.278%. Trading volume at secondary market was seen thin at government segments amounting Rp8,904 bn with FR0056 as the most tradable bond. FR0056 total trading volume amounting Rp2,157 bn with 91x transaction frequency and closed at 103.519 yielding 7.867%.

      Corporate bond trading traded thin amounting Rp408 bn. ASDF01CCN1 (Shelf registration I Astra Sedaya Finance Phase I Year 2012; C serial bond; Rating: idAAA) was the top actively traded corporate bond with total trading volume amounted Rp74 bn yielding 7.790%.