Dollar Technical Pullback; Focus on Payrolls Today. A fiery way to start 2017, with USD and USTs undergoing a technical pullback, while most AXJs enjoyed a breather. Stock markets including S&P500, DAX, Nikkei, STI remain near their respective highs (Capricorn effect?). Focus for next week starts with US Dec payrolls data tonight – Consensus expects +175k for NFP (

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Please see our Maybank FX Tech Weekly. Charts can be viewed in the PDF attached.

       Dollar Technical Pullback; Focus on Payrolls Today. A fiery way to start 2017, with USD and USTs undergoing a technical pullback, while most AXJs enjoyed a breather. Stock markets including S&P500, DAX, Nikkei, STI remain near their respective highs (Capricorn effect?). Focus for next week starts with US Dec payrolls data tonight – Consensus expects +175k for NFP (vs. +178k prior); unemployment rate at 4.7% (vs. 4.6% prior) and +0.3% for hourly earnings (vs. -0.1% prior). Weaker than expected data could see an extension of the USD pullback. Next support for DXY at 101 levels. We look for opportunities to buy USD vs. SGD and KRW on dips towards 1.4260 and 1175 for a move back up to 1.44, 1205 objectives, respectively. For SGDMYR, mild bullish signs are re-emerging. Resistance at 3.14; support at 3.11 levels. For USDMYR, technical suggests some downside pressure in the interim. Next support at 4.4670 before 4.40 levels. We also look for opportunity to buy AUDNZD on dips towards 1.04 levels for a move higher towards 1.06 objective (SL below1.0330). Our in-house model shows S$NEER at about 0.7% below the implied mid-point of 1.42 levels, with the upper bound at 1.3915 and lower bound at 1.4490.

       Bias Remains to Buy USD on Dips vs. EUR, JPY. Taking stock of FX markets, the USD index has declined by nearly 2.5% since the start of the new year. But looking into the details, the decline was not entirely broad based. The USD was marginally weaker vs. MYR and INR but much weaker against the CNH, KRW, AUD and CAD. Apart from CNH which gained by around 2.5% due to unwinding of prior speculative CNH shorts (unwinding was driven by exorbitant overnight funding cost which jumped to record-high of 105%), the rest of the currencies (which gained by more than 1.5%) were mostly high beta plays (KRW and AUD) as well as oil/commodity-related (AUD and CAD). Not forgetting these currencies fell by more than 5% after Trump was elected President in Nov 20116. We believe it remains too early to call the end of the USD bull run. We reiterate that given the one-sided move and big run-up in the USD, a temporary correction in the short term is healthy and should not be ruled out. We remain biased for further USD upside and prefer to buy on dips (vs. EUR and JPY – playing the monetary divergence theme).  

       Fed Speaks; China Inflation, Trade; BoK Meeting Next Week. Some of the key data we are watching next week includes Aussie building approvals; UK house prices; Euro-area unemployment rate on Mon. Aussie retail sales; China CPI, PPI data on Tue. Malaysia IP and NZ house prices on Wed. Euro-area IP, ECB Minutes; Japan trade, current account and US import prices on Thu. BoK meeting (to keep policy rate unchanged at 1.25%), US PPI, retail sales; BoE Saunders speaks; SG retail sales on Fri Fed speaks next week includes Rosengren, Lockhart on Mon; Evans, Harker, Bullard, Lockhart on Thu and Fed Chair Yellen and Harker on Fri. Japan onshore market will be closed on Mon.