Indonesia bond market closed higher supported by stronger China inflation and announcement of appointment of Mr Jonan and Mr Arcandra as the new Minister and Vice Minister of Ministry of Energy and Mineral Resources.

FX

Global

      The DXY index ended on a high last Fri, buoyed by stronger-than-expected quarterly earnings result of JPMorgan Chase, Wells Fargo and Citigroup. The greenback shrugged off Fed Chair Yellen’s words on allowing a “hot economy” to undo the recessionary damage. Her comments hint of a possibility for the Fed to keep its current monetary stance. Still, markets are not totally convinced. The probability of a 25bps move by Dec implied by Fed Funds futures pared marginally to 66% as of last check. The UST curve bear steepened. The third and last presidential debate will held on 19 Oct (Wed).

      We expect ECB to keep monetary policy status quo at the upcoming meeting. As stated in our recent note, ECB is in no urgency to rush into adding or removing stimulus especially when inflation outlook for 2017 has been recently downgraded. ECB Vice President Constancio also clarified that the report (on tapering) was “not correct”. He dismissed it as nothing but rumors. For BI meeting, we think the risk of another 25bp rate cut remains and a move at this meeting cannot be ruled out as another cut should be supportive of loan growth and hence investment and economic growth.

      We suspect 3Q China GDP could come in firmer than the consensus, given the improvement in 3Q activity data thus far. IMF and ADB have also recently upgraded China growth outlook. Consensus expects 3Q GDP to hold steady at 6.7% (unchanged from 2Q). Other Sep activity data is also due for release on Wed. Expect USDAXJs to keep an upside bias into Dec.

Currencies

G7 Currencies

      DXY – Bias Upside. Recent moves have been choppy of late though bias remains to the upside. Fed Chair Yellen commented on the ‘plausible ways’ a ‘high-pressure economy’ could ‘heal recession scars’.  The DXY index shrugged off her words and instead, was buoyed by the strong earnings reports by major banks. In line with increasing sanguinity, the UST yield curve bear steepened last Fri. The DXY index opened on a firm tone this morning, last printed 98.14. Strong barrier is seen around 98.48 (76.4% fibo retracement of the Dec- May sell off).  Support is seen around 97.23 (61.8% fibo retracement) before 96.2. Week ahead brings Empire Mfg (Oct); IP, Capacity Utilisation (Sep) on Mon; CPI (Sep); NAHB Housing Market Index (Oct) on Tue; Housing Starts, Building Permits (Sep); Fed’s Williams speaks; Beige Book on Wed; Philly Fed Business Outlook (Oct); Existing Home Sales; Leading Index (Sep) on Thu; Fed’s Williams speaks on Fri.

      EURUSD – Hold 1.0940 Objective. EUR slipped to levels around 1.097 against the USD, at last sight. We keep our target at 1.0940. With Brexit hard landing fears being triggered by UK PM Theresa May, worries of political contagion in Europe (possibly starting from Italy given that they are scheduled to hold their referendum Constitution reforms on 4^th Dec) should continue to spill over to EUR. Daily momentum and stochastics are bearish bias. Resistance at 1.1070 (50% fibo retracement of Dec low to May high) before 1.12 (38.2% fibo). Support at 1.10 before 1.0940 (61.8% fibo). Day ahead brings Trade (Aug). Week ahead brings CPI (Sep) on Mon; ECB Bank lending on Tue; Construction Output (Aug) on Wed; ECB Meeting; Current Account (Aug) on Thu; Govt debt to GDP ratio on Fri.

      GBPUSD – Tactical Long. GBP remained heavy around 1.2160. Foreign Secretary Boris Johnson said leaving EU negotiations can be successfully completed in 2 years (the timescale outlined in Article 50). Momentum indicators indicate diminishing bearish bias and stochastics on daily chart suggests the pair is at oversold conditions. This could still suggest the potential of rebound in the short term. Resistance now at 1.25, 1.2650 levels. Support at 1.20. Suggest tactical GBP long (spot ref 1.2240) for a move towards 1.2480, 1.26 levels (SL below 1.20). But we caution this trade is highly volatile. Week ahead brings CPI (Sep) on Mon; ECB Bank lending on Tue; Construction Output (Aug) on Wed; ECB Meeting; Current Account (Aug) on Thu; Govt debt to GDP ratio on Fri.

      USDJPY – Risks Of Pullback; Buy On Dips.  USDJPY traded to a high of 104.64 (13 Oct) before easing lower. Pair has since been in consolidative mode within 103-105 range. Pair was last seen around 104-levels. We remain bullish bias in the pair in the medium term. But there is a risk of a pullback this week. Technically, the daily chart is showing stochastics is in overbought conditions. Daily momentum remains bullish bias but is waning. A pullback could see the pair possibly headed towards the 103.30 levels (100DMA), or even the 101.50 levels (50% fibo retracement of the 2012-2015 upswing). But we remain better buyers on dips, on the view that the UST yield curve is steepening as rate hike expectations regain momentum. Inflationary expectations are also expected to gradually pick-up, with oil prices at the $40-50 levels supportive. Any rebounds should meet resistance around 105.50; 108 levels. Week ahead has IP, capacity utilization (Aug) today; all industry activity index (Aug) on Wed; machine tool orders (Sep) on Thu.

      NZDUSD – Rebound Risks To Sell Into. NZD waffled around 0.7090 as we write. Daily stochastics indicated the pair at oversold conditions. We still see scope for bullish correction. Resistance levels are seen at 0.7170 (100 DMA), 0.7220 (21 DMA). Support remains at 0.7050 (trend line support from the lows of Jan and Jun) before 0.6940 (200 DMA). This week has 3Q CPI and GDT auction results. We caution that weaker than expected numbers can fuel further Kiwi downside. Odds of RBNZ cut now stands at 87% and there could still be room for markets to increase rate cut bets. Elsewhere US Fed is on the cusp of a rate hike soon. This suggests that monetary policy divergence between Fed and RBNZ should continue to keep the Kiwi heavy.

      AUDUSD – Resilience. AUDUSD slipped this morning in the face of USD strength. Last seen around 0.7586, we still see sideway range for this pair. Its resilience suggest upside potential against the SGD and NZD. Resistance at 0.76 (21, 50 DMAs), 0.7670 (76.4% fibo). Support at 0.7490 (50% fibo) before 0.7430 (200 DMA). Week ahead brings RBA Minutes on Tue; Westpac Leading Index (Sep) on Wed; Employment Change (Sep) on Thu.

      USDCAD – Capped. USDCAD hovered around 1.3170, on the uptick as oil prices ticked lower. Pair is back under the 200-DMA. Daily momentum and stochastics are still not providing a clear bias.  We expect the range of 1.3000 – 1.3310 (38.2% fibo retracement of 2016 high to low) to hold. Price action shows a potential rising wedge formation in the making. This is typically a bearish reversal. We look for opportunities to sell on rally towards 1.3310 for  a target at 1.2850. Week ahead has BoC rate decision on Wed. Aug retail sales and Sep CPI are due on Fri.

     Asia ex Japan Currencies

      SGD NEER trades around 0.99% below the implied mid-point of 1.3781. We estimate the top at 1.3503 and the floor at 1.4059.

      USDSGD – Defying Gravity; Validating Our Long USDSGD Bias.  USDSGD traded higher to levels not seen since Mar 2016 on the back of the weaker domestic growth outlook ahead.  Advanced estimates showed that the economy expanded by just 0.6% y/y in 3Q16. On a q/q saar basis, GDP shrank 4.1% as the services sector posted the third consecutive quarter of contraction. It also did not help that NODX fell 4.8% y/y in Sep from zero growth in Aug (though this was better than the 5.8% contraction market was expecting). This was even as the MAS held policy steady on Fri, in line with our expectations, while keeping the rate of appreciation of the SGD NEER band at zero percent and the width of the policy band and the level at which it is centred unchanged. For now, our economic team is maintaining their full-year estimates for 2016 and 2017 at 1.8% respectively. However, they are mindful of the heightened uncertainties over major economies’ monetary policies and politics. We have also revised our USDSGD forecast (see our report Maybank FX Flash – SGD: MAS Maintains Zero Appreciation Stance dated 14 Oct 2016). We now expect the USDSGD to end the year higher at 1.3850 compared to our previous forecast of 1.3750. Our expectations for a gradual upward trajectory in 2017 on modest Fed rate hikes expectations remain intact and this should see the pair climb even higher towards 1.4000 by end-2017.  Pair was last seen at 1.3930 levels. Weekly, daily momentum and stochastics indicators continuer to indicate a bullish bias though stochastics is at overbought conditions. We have been bullish on the pair for a while and the recent move has met most of our objectives. A sustained weekly close above the 1.39 levels could see an extension of the upswing towards 1.40 levels (61.8% fibo retracement of the 2016 high to low). Support at 1.3880 (50% fibo) before 1.3750 (38.2% fibo); 1.37 (21 & 200DMAs).

      AUDSGD – On the rally. AUDSGD took a peek above the 1.06-figure before inching lower.  Daily momentum indicators continue to show bearish bias while 4-hourly intra-day chart shows more bullish promise. Resistance at 1.0532 has turned into a support before the next at 1.0390 (21 DMA),1.0330 (50 DMA), 1.0220 (38.2% fibo retracement of the Fed-Apr upswing). 1.0700 is the next resistance. Bias remains to buy on dips.  

      SGDMYR – At Risk Of Pushing Higher; Bias To Lean Against Strength. SGDMYR slipped lower as the SGD underperformance continued. Last seen around 3.0278 levels, pair is showing increasing mild bullish momentum on the daily chart, while stochastics is rising. Still, the MYR underperformance could catch up with the SGD and this could see the cross push higher towards 3.0640 (76.4% fibo retracement 2015 high to 2016 low) on a decisive break above 3.05 (upper bound of the trend channel). But bias remains to lean against strength. Support at 3.009 (50DMA); 2.99 (50% fibo).  

      USDMYR – Room For Further Upside?  USDMYR broke pass many key resistance levels on its way up including 4.15, 4.20 levels. Pair was last seen at 4.2150. Weekly momentum and stochastics continue to indicate bullish bias. We caution that a decisive close above the 4.21 resistance (61.8% fibo of the 2016 high to low) could see the pair go higher towards 4.30 (76.4% fibo). Support is at 4.4130 (50% fibo). Week ahead brings CPI (Sep) on Wed; FX reserves on Fri.

      1s USDKRW NDF – Upside Bias. 1s USDKRW gapped slightly higher to 1138 at the opening from Fri’s close of 1137, continuing its break above the upper bound of its downward sloping trend channel. Last seen at 1141 levels. Bullish momentum on daily chart remains intact and stochastics remains at overbought conditions. A sustained close above the 1134 levels (upper bound of the trend channel) could see the 1-month NDF headed towards 1150 levels (38.2% fibo retracement of the Feb-Sep downswing); 1160 (200DMA). Pullbacks should find support around 1130 (100DDMA). Week ahead has PPI (Sep) on Wed.

      USDCNH – Headed Towards 6.76-Levels? USDCNH has been on the uptick and we see next resistance around 6.7618 (Jan high). Last seen around 6.7324, as USDCNH is allowed to head higher, the CFETS index has rebounded from its lows, in line with our expectations. Monetary numbers for Sep are due by tomorrow. Activity numbers are due on Wed, including 3Q GDP. We anticipate 3Q GDP to come in firmer than the 6.7%y/y (market consensus) given the marked improvement seen in the activity numbers for 3Q. USDCNY was fixed 222 pips higher at 6.7379 (vs. previous 6.7157). CNYMYR was fixed at 0.6220, 29 pips lower than the previous 0.6249.

      1s USDIDR NDF – Bullish Bias. 1s USDIDR has been trading bid for the past several sessions on rising expectations of a Fed rate hike this year. Even Pair was last seen around 13130 levels. Daily chart is and stochastic is showing bullish bias. Immediate resistance is at 13160-13170 (50DMA 50% fibo retracement of the 2014 low to 2015 high) ahead of 13210 (100DMA). Support remains at 13080 (21DMA); 12995. Expect 12950 – 13200 range to hold for the week. The JISDOR was fixed higher yesterday at 13028 from Wed’s 13023. Risk sentiments deteriorated last week with foreign investors selling USD56.63mn in equities yesterday. They had also removed IDR3.32tn from their outstanding holding of government debt on 10-13 Oct (latest data available). Week ahead brings trade (Sep) today; BI meeting (Thu).

      1s USDPHP NDF – Turning Lower? 1s USDPHP slipped to a recent low of 48.50 on Fri but has since rebounded. Pair remains elevated above the 48-hanlde as investor concerns about the government’s extra-judicial killings, policy flip-flops and the president’s unpredictable temperament and US election risks remain. The sell-off in equities continued with USD58.64mn sold off by foreign funds last week reflected these concerns. 1-month NDF was last seen at 48.75 levels. Daily momentum and stochastics are now showing tentative signs of turning lower. Nevertheless, we anticipate any correction in the 1-month NDF to be shallow. Further upticks should meet resistance around 49.20 (2016 high so far), 49.75 (4 Mar 2009 high). Support nearby at 48.40 (21DMA) before 47.90 (23.6% fibo retracement of 2015 low to 2016 high). Week ahead brings overseas remittances (Aug) today; BoP (Sep) on Wed.

      USDTHB – Retracing.  USDTHB has been whippy over the last few sessions. The calm and political stability so far has helped to weigh on the pair. Pair was last seen around 35.415 levels. Daily momentum is bullish bias but waning and stochastics showing signs of falling from overbought conditions. Further rebound should meet resistance at 35.460 levels (50% fibo retracement of the 2016 high to low); 35.690 (61.8% fibo). Any retracement should find support at 35.230 (38.2% fibo).  Risk sentiments deteriorated last week with THB3.07bn and THB35.49bn in equities and government debt sold off last week. Further sell-off could continue to weigh on the THB. Pair was last seen at 35.190 levels. Quiet week ahead with just foreign reserves (14 Oct) on tap on Fri.

Rates

Malaysia

      MYR government bond market recovered from a 3-day decline to close firmer, possibly due to the rebound in oil prices and better than expected China producer prices bolstering sentiment ahead of Yellen’s speech at night. This week, market will be closely watching the CPI number and 2017 Budget.

      IRS levels lowered 1-3bps amid a calmer MYR and risk on sentiment with MGS prices higher. No trades were reported. 3M KLIBOR remained at 3.40%.

      MYR corporate bonds generally traded on a weaker note as bidders try to capture bargains. In GGs, the 7y widened 2-4bps, while the ultra-long end was slightly firmer trading unchanged to 1bp wider. AAA curve had better selling in the belly and long end. At the front end, Rantau 19s were dealt 2bps tighter. The better buying in MGS after London open may spillover to the corporate bond space.

 Singapore

      MAS left monetary policy stance unchanged. SGS yields initially lowered led by the front end, while the long end was capped by profit taking. In the afternoon, however, market gave up gains and yields climbed up further as SGD depreciated against the USD. SGS yields largely rose 1-3bps, but flat in the short tenors, as most PDs remain jittery about taking more risk. Swap spreads narrowed.

      Asian credit market mostly focused on trading recent issues. EIBKOR moved around reoffer to a touch wider, while new 5y EIBMAL tightened 4-5bps on good demand. Tenaga Nasional’s new 10y was about the same to 1-2bps wider. Thai bonds tightened 5-10bps across the curve, with KBANK 22s outperforming, tighter by 10bps. On news of Sinochem and ChemChina planning to merge, CNBGs moved as much as 30bps tighter, while Sinochem was around 3-5bps wider as market perceives the merger as credit positive for CNBG.

 Indonesia

      Indonesia bond market closed higher supported by stronger China inflation and announcement of appointment of Mr Jonan and Mr Arcandra as the new Minister and Vice Minister of Ministry of Energy and Mineral Resources. Post market close, U.S. monthly retail sales was published which grew 0.6% MoM in Sep or in line with expectation. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 6.879%, 7.001%, 7.300% and 7.471% while 2y yield moved lower to 6.690%. Trading volume at secondary market was seen thin at government segments amounting Rp11,109 bn with FR0053 as the most tradable bond. FR0053 total trading volume amounting Rp1,573 bn with 30x transaction frequency.

      Corporate bond trading traded thin amounting Rp456 bn. WOMF02ACN1 (Shelf Registration II WOM Finance Phase I year 2016; A serial bond; Rating: AA(idn)) was the top actively traded corporate bond with total trading volume amounted Rp80 bn yielding 7.660%.