Risk sentiment was positive overnight with Euro Stoxx and DAX closed >3% higher. FTSE also clocked a robust gain of 2.5%, inspiring a strong open on Wall Street.

FX

Global

      Risk sentiment was positive overnight with Euro Stoxx and DAX closed >3% higher. FTSE also clocked a robust gain of 2.5%, inspiring a strong open on Wall Street. The dollar remained soft, against all Asian currencies in early trades as we write, even against the JPY. Elsewhere, some profit-taking left GBP and NZD a little lower.

      The day ahead will have some focus on RBA Minutes first before markets shift their attention towards Fed Chair Yellen’s testimony on Monetary Policy to Senate Banking Panel tonight. RBA had surprised markets by leaving out an explicit easing bias in its last sentence and markets will be looking for further confirmation that the central bank may be at the bottom of its easing cycle. Beyond Asia, Fed Chair Yellen’s testimony will be of focus but as we have noted last week, we do not expect any ideas remarkably different from her post-FOMC press conference.  

      With dollar showing significant weakness against the Asia and lessened “Brexit” fears, focus could be on Chair Yellen’s testimony later. Dollar softness could allow some breather for INR. USDINR gapped up yesterday before sliding after open, betraying the presence of the central bank in the FX market. 1M NDF still shows downside pressure on the rupee even as SENSEX rallied after the announcement by PM Modi to allow 100% foreign ownership of civil and defense aviation. However, we think the uncertainty of the Governor succession, the style of departure by RBI Governor that indicates the government’s disapproval of RBI’s independence and challenge to maintain the credibility that Rajan has built suggests INR could trade on the backfoot. Few other data of focus on the docket today.

Currencies

G7 Currencies

      DXY – Downside Pressure. Dollar index remained on a back foot in quiet data session overnight. Focus next on Fed Yellen’s Testimony to the Senate Banking Panel on Tuesday.  We doubt she would give any ideas remarkably different from her post-FOMC press conference.  DXY index was last seen at 93.60 levels. Daily momentum and stochastics indicators are indicating mild bearish bias. Next support at 93.50 before 92 levels. Resistance at 94.90 (21 DMA), 95.65 (100 DMA, downward sloping trend-line resistance from Feb and May) and 96.50 (200 DMA). Week ahead brings Yellen testimony on Monetary Policy to Senate Banking Panel on Tue; Fed Yellen testify on monetary policy to House Financial Service; Existing Home Sales (May) on Wed; New Home Sales (May); Chicago Fed Nat Activity Index (May); PMI-Mfg (Jun P); New Home Sales (May) on Thu; Fed's Kaplan Speaks; Durable Goods Orders (May P); Univ. of Mich. Sent. (Jun F) on Fri.

       EURUSD – Upside Risk Intra-day. EUR was a touch firmer this morning amid broad USD weakness. Last seen around 1.1320 levels. Daily momentum is showing tentative signs of upside risk. Resistance at 1.13 (50 DMA), 1.1360 (23.6% fibo retracement of Dec low to May high), 1.1450 levels before 1.15. Support remains at 1.1230 (21 & 100 DMAs). Week ahead brings EC Construction output (Apr); ECB Yves Mersch speaks; EC ZEW Survey (Jun) on Tue; Consumer Confidence (Jun A) on Wed; EC Markit PMI-mfg (Jun P) on Thu.

       GBPUSD – Watch 200 DMA. According to our estimates from betting odds (30% Brexit) and opinion polls (45% Brexit) as of last known, we believe markets were pricing around 35 – 40% of a Brexit. But to account for the past 24 hours of action, which we saw some unwinding of GBP shorts, we believe the market are probably pricing in about 30 – 35% chance of Brexit. FX liquidity is likely to remain poor especially when some banks have sent out memos to clients advising against taking GBP orders; some retail FX brokers have also raised margin requirements starting this Wed; some GBP option desks have also ceased quoting till further notice. GBP’s 600pips (past 3 days) rally met with resistance near its 200 DMA at 1.4680. Pair has eased slightly this morning’ last seen around 1.4650 levels. Daily momentum and stochastics are now indicating a bullish bias. Next resistance at 1.4680 (200 DMA), 1.4880 (50% fibo retracement of Jun high to Mar low). Support at 1.4350 (100 DMA, 23.6% fibo). Week ahead brings May public finances data, CBI trends orders/ selling prices (Tue); EU referendum (voting on Thu; results on Fri). It remains our long-standing view that UK is expected to vote to remain in EU. And we expect sentiment to be restored, IPO/M&A deals to come back in the pipeline and lend further strength to GBP. We remain better buyers on GBP dips. But in the lead-up to Referendum day (23 Jun) and results day (24 Jun), we continue to caution for choppy moves (2-way direction) amid poor liquidity conditions amplifying GBP movements.

       USDJPY – Still Dictated By Risk Events. USDJPY is back on the slide as markets refocused on the dollar amid increasing expectations that the UK will remain in the EU. US Fed Chair Yellen's semi-annual testimony to Congress today and tomorrow could be providing the impetus to long the JPY this morning against the majors. With risks off the table for now, the 20Y yields remains in positive territory at +0.19%, though the 5Y remains in negative territory at -0.24%. Nikkei futures are lower this morning, suggesting potential for further downside moves intraday. Pair is inching closer to re-test the year's low of 103.55, and was last seen around 103.90 levels. Bearish momentum continues to gain and stochastics remains in oversold levels. We see potential for the pair to reach 101-figure (50% Fibo retracement of the 2012-2015 rally). We still look for a move by BOJ in Jul after the Upper House elections on 10 Jul. Before that, the EU referendum will be in focus. A Bremain scenario - our base scenario - could swing the pair towards the first barrier at 105.55 (May low) and then to 107.50 (21DMA). A Brexit however could see the pair push past the key 100-levels towards the 90 levels (76.4% Fibo). For a true bullish reversal, markets need to turn more optimistic on PM Abe and BOJ Kuroda on fiscal and monetary packages. Week ahead has BOJ Kiuchi speak on Thu; BOJ Nakaso on Thu.

       NZDUSD – 70 – 72 Cents Range. NZD was little changed from yesterday’s close. Last seen around 0.7120 levels. Bullish momentum on daily chart remains intact. Stochastics is near overbought conditions. Resistance at 0.7130 (61.8% fibo). A break above this level puts next resistance at 0.7360 (76.4% fibo). Support at 0.6930 (50% fibo retracement of May-2015 high to Aug-2015 low). Expect the pair to trade in recent range of 0.70 – 0.72. Week ahead brings Finance Minister Speaks on Wed; Mfg PMI (May); Consumer Confidence (Jun) on Fri.

       AUDUSD – RBA Minutes. AUDUSD has broken above the 50-DMA overnight and was last seen around 0.7470. MACD shows a revival of bullish momentum though stochastics is falling from overbought conditions. Only RSI indicates further room for upside. An extension towards 0.76 levels (23.6% fibo). Eyes are on Minutes of the Jun meeting. RBA had surprised markets by leaving out an explicit easing bias in its last sentence and markets will be looking for further confirmation that the central bank may be at the bottom of its easing cycle. Support is seen at 0.7267 (200-DMA) beyond support at 0.7328 (50% Fibonacci retracement of the 2016 rally) give way. Week ahead brings RBA Jun Minutes, RBA’s Heath Speech in Sydney on Tue; RBA Ellis Panel Participation, RBA Debelle Remarks at Sydney on Thu.

       USDCAD – Two-Way Swivels. USDCAD extends its decline and was seen around 1.2800. The looney was underpinned by the bounce in oil prices. Brent reverted to the USD50-handle. Daily stochastics are still in oversold conditions and MACD forest is at the zero level, suggesting room for two-way moves. The 1.2530-1.3460 range still holds with the 50-DMA at 1.2856 still acting as a pivot point.  Strong support is still seen at 1.2660 before year low of 1.2460. Apr retail sales are due tomorrow – the only data of note this week. Consensus expects a rebound to 0.8%m/m from the previous -1.0%. Provincial Finance ministers have agreed to unspecified expansion of the Canada Pension Plan.

Asia ex Japan Currencies

      The SGD NEER trades 1.15% above the implied mid-point of 1.3585 with the top estimated at 1.3316 and the floor at 1.3853.

       USDSGD - Capped.  USDSGD was a tad softer this morning as waning Brexit concerns were mitigated by market anticipation of Fed Chair Yellen's testimony to Congress tonight and tomorrow. Pair was last seen around 1.3430 levels. Momentum suggests bearish bias and oversold conditions still. This suggests a potential bounce ahead for this pair. However, retracement may be on a short-leash and barriers are seen at 1.3610 (23.6% Fibo retracement of Jan-Mar downswing, 50DMA); ahead of 1.3700 (100DMA). Key support remains around the 1.34-handle with a break here exposing the next at the year's low of 1.3350. Expect a largely rangy week with potential for whippy action on Fri (UK referendum).  Week ahead has May CPI (Thu); May industrial production (Fri).

       AUDSGD – Higher. AUDSGD edged above parity overnight. MACD is slight bullish momentum although stochastics continue to fall from overbought conditions. Upmove may be tentative and we eye the RBA Minutes. There are room for two-way trades. Support is seen at 0.9900 before 0.9700. Barrier around 1.0120 is strong.

       SGDMYR – Little Momentum. SGDMYR fell amid Ringgit outperformance (on supported oil prices, USD pullback and Brexit fears abating). Cross remains well within its trend channel; last seen around 3.0270 levels. There are little cues from momentum indicators for now while stochastics is at overbought conditions. We remain bias to lean against strength. Resistance remains at 3.0480 (trend-line resistance from the highs of Nov and Jan) before 3.0640 (76.4% fibo retracement of Oct high to Apr low). Support at 2.99 (50% fibo), 2.9570 (38.2% fibo, 100 DMA).

       USDMYR– Drifting Lower. With FoMC event risk out of the way, eyes remain fixated on development arising out of EU referendum (results to be known on 24 Jun during Asia time). We believe risk sentiment is likely to remain cautious as such, keeping USDMYR broadly supported above 4.05/4.06 levels. Resistance at 4.1420 (50% fibo retracement of 2016 high to low) before 4.18 levels (200 DMA). But post-referendum on the base case scenario that UK remains in EU, we think sentiment could recover and couple with reduced expectation for Fed to hike as well as supported oil prices, MYR could rally. Next support at 4.0550 (100 DMA) before 4.01 (50 DMA). Other factors we continue to watch include oil prices (which remains a driver for MYR). Data we are watching for the 2 weeks ahead includes Jun FX reserves (21 Jun); Jun PMI and May trade data (1 Jul).

       1s USDKRW NDF – Watch Support at 1150. 1s KRW fell amid USD weakness and Brexit fears abating (supporting sentiment). Last seen around 1160 levels. Focus this week on the outcome of UK’s vote on EU referendum (results to be known on 24 Jun during Asia time). We expect the UK event to result in global sentiment being cautious and USDKRW to trade in wider range of 1150 – 1180, in absence of clear bias in the lead up. More clarity should be restored post-referendum results. We think in an environment of falling yields globally, no impetus from Fed to hike yet, and assuming a Bremain outcome, we think USDKRW could drift lower as sentiment recover. Break below 1150 should see next support at 1130. Data to be released In the fortnight ahead includes May PPI (20 Jun); Jul business survey indicators (29 Jun); May IP (30 Jun); Jun PMI, CPI, trade as well as May current account balance (1 Jul).

       USDCNH – Softening with the dollar. USDCNH remains considerably elevated even as the USD index slips, last seen around 6.5870. Sentiments are likely to remain cautious and there are still plenty of bearish bets on CNH. Barrier remains at 6.6181 while dips to meet support at 6.5779 (21-DMA). As of 20 Jun, USDCNY was fixed 87pips lower at 6.5708 (vs. previous 6.5795). CNYMYR was fixed 16 pips lower at 0.6198 (vs. previous 0.6214). The Financial News, a paper run by PBOC, warned of wider two way fluctuations “are unavoidable”. PBOC reiterated that it will stay the course of market-oriented reforms and improving the exchange rate flexibility, stressing that there is no basis for long-term depreciation in the yuan. The local press (China Daily) also reported that the second tranche of SOE earmarked for pilot reform is expected to be announced soon. This came after reshuffles in senior managements in several SOEs.

       SGDCNH – Uptrend. SGDCNH remained strong against the CNH, extending its uptrend and was last seen around 4.9038. Stochastics in overbought levels but trend shows no signs of reversing. Next barrier is seen around 4.9151 before 4.9420. Pullbacks to meet support at 4.8827 before 4.8400.

       1s USDINR NDF – Bullish. While spot prices gapped up to 67.6850 before sliding down, betraying the presence of the central bank in the market, the forward markets showed a lot more exhuberance. The 1M NDF rallied to around 67.90 at last sight before inching lower. The recently announced departure of Governor RBI is likely to keep the USDINR on an uptrend. The big 70-figure seems much closer now than before. The 100-DMA has become a support at 67.4784. Barrier is seen at 68.3656 (23.6% Fibonacci retracement of the Oct-Feb rally). Expect RBI to be in the FX market to temper the USDINR upmove. Equities and debt market will be eyed. Foreign investors sold USD16.1mn of equity and USD50.2mn of debt on 16 Jun. There is no tier-one data due. India allows full foreign ownership of civil and defense airlines.

       1s USDIDR NDF – Capped. 1s NDF inching slightly higher this morning amid a mild rebound in the dollar ahead of Fed Chair Yellen’s testimonies to Congress tonight and tomorrow. Still, waning Brexit concerns is also could mitigate some of this upside pressure intraday and cap upmoves. 1s NDF was last seen around 13310 levels. Daily momentum is still showing waning bearish bias and stochastics is rising gradually from oversold levels. Further upticks should meet barrier at 13380 (100DMA) ahead of 13470 (38.2% Fibo retracement of the Jan-Mar downswing). With our support level at 13290 (23.6% Fibo) tested, a break here could expose the next at 13150 before the 13000-figure (year’s low). Expect range within 13240-13500 to still hold intraday. The JISDOR was fixed lower at 13260 yesterday from 13358 on Mon. Risk sentiments soured yesterday with foreign funds selling a net USD68.37mn in equities. They had however added IDR0.14tn to their outstanding holding of debt on 17 Jun (latest data available).

       1s USDPHP NDF – Turning Bullish.  1s USDPHP NDF is a tad firmer this morning amid a mild rebound in the dollar. Key risks events ahead are US Fed Chair Yellen's testimonies to Congress tonight and tomorrow as well as the UK referendum on 23 Jun and BSP policy meeting on 23 Jun. We do not expect the BSP to move ahead of the UK referendum and given the recent completion of the transition to an interest rate corridor framework.  Pair was last seen around 46.43 levels. Daily momentum is now mildly bullish bias and stochastics continues to climb higher. This suggests the potential for further upmoves intraday. Barrier is at 46.70 (38.2% Fibo retracement of Jan-Mar downswing; 50DMA). Support at 45.90 (double-bottom) which should provide firm support in the interim. Pair should continue to trade range within 45.3045.60.Risk sentiment remained supported with foreign funds buying USD7.62mn in equities yesterday. Week ahead has BSP meeting on Thu; imports, Apr trade balance on Fri.

       USDTHB -  Rangy.  USDTHB is inching higher this morning amid a mild rebound in the dollar ahead of Fed Chair's Yellen's semi-annual testimonies to Congress. Mitigating this gain is improving risk appetite on waning Brexit concern. Pair was last seen around 35.220 levels. Daily chart shows waning bearish momentum and stochastics is climbing higher from oversold levels. Pair should continue to take its cues from external events ahead - UK referendum - as well as the BoT meeting this Wed. We do not expect any changes to BoT given that rates are already near historic lows and for monetary policy to play a complementary role to fiscal policies, which should do the heavy-lifting of supporting the economy. Expect range trading within 35.000-35.370 to continue intraday. Improvement in risk appetite saw foreign funds buying THB1.18bn and THB9.11bn in equities and government debt yesterday. Week ahead brings BoT benchmark interest rate on Wed; May customs trade, 17 Jun foreign reserves on Fri.

Rates

Malaysia

      In MGS, there was buying interest on the 5y benchmark with off-the-run 2021s following suit. The benchmark bond ended 4bps lower from last close. Foreign players were buying front end bonds as risk-on sentiment led to regional bond buying ahead of the UK referendum.

       Local IRS market was very quiet with no trades being reported in the market. 3M KLIBOR stood pat at 3.65%.

       For PDS, GG space saw bidding interest for 7y papers. PASB 6/23 tightened 4bps to 4.14% (G+42bps/Z+30bps). AAA space had some light buying, with 8y Telekom papers tightening 1bp. Telekom 10/24 traded at 4.38% (G+58bps/Z+47bps), while Telekom 6/24 traded at 4.36% (G+57bps/Z+47bps). AA curve traded on a weaker note with CTX 17 widening 2bps and at the long end Jimah East traded unchanged to 1bp weaker. Only exception was SEB 24 which traded 2bps tighter to 4.60%.

Singapore

      Intermittent buying in SGS, lower USDSGD and forwards pressured SGD rates to stay down, despite higher US rates. But selling later returned to the SGS market as UST futures ticked lower. Bonds around the 3y got sold massively, driving the SGS yield curve higher and flatter. IRS saw paying interest though upside was capped. At the close, SGS yield curve was up 4-5bps, while SGD IRS curve lowered 1bp at the front end and rose 1-2bps further out. Swap spreads narrowed further by 2-4bps.

       Asian credits in the IG space rallied on short covering with spreads tightening 3-5bps. But there were some outliers in the SOE space whose shorts were cut. HY China SOE names tightened about 7bps, led by Sinopec’s 10y bonds. Recently issued bonds by HRAM and CITPAC also moved 7bps tighter. Indian bonds were active despite news of RBI governor Rajan departing. Market generally saw steady buying on corporates and financials which finished 2-3bps tighter from previous level. Meanwhile, RLTAIN (Rolta Americas LLC) is in default after failing to pay a missed coupon upon expiry of the grace period.

Indonesia

      Indonesia bond market close slightly higher. Market sentiment were minimal while the issue regarding brexit enveloping throughout the day. Purchasing activity might be on hold and we believe that inflows to IGS will come in today mostly through the auction. Bidders which failed to win might purchase IGS through the secondary market. We remain to see that the week would close with IGS prices hiking. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.419%, 7.574%, 7.861% and 7.849% while 2y yield shifts down to 7.194%. Trading volume at secondary market was seen thin at government segments amounting Rp7,291 bn with FR0056 as the most tradable bond. FR0056 total trading volume amounting Rp1,501 bn with 55x transaction frequency and closed at 105.61 yielding 7.588%.

       DMO will conduct their weekly auction with four series to be auctioned which are SPN12170302 (Coupon: discounted; Maturity: 2 Mar 2017), FR0053 (Coupon: 8.250%; Maturity: 15 Jul 2021), FR0073 (Coupon: 8.750%; Maturity: 15 May 2031) and FR0072 (Coupon: 8.250%; Maturity: 15 May 2036). We believe that the auction will be oversubscribe by 2.00x – 3.00x from its indicative target issuance while our view on the indicative yield are as follows SPN12170302 (range: 5.98% – 6.10%), FR0053 (range: 7.40% – 7.50%), FR0073 (range: 7.80% – 7.90%) and FR0072 (range: 7.80% – 7.90%).

       Corporate bond trading traded heavy amounting Rp1,234 bn. SANF02ACN1 (Shelf registration II SAN Finance Phase I Year 2016; A serial bond; Rating: idAA-) was the top actively traded corporate bond with total trading volume amounted Rp421 bn.