Forex - Malaysia Flows: USD/MYR remains in consolidation between 4.1520 and 4.1660

 04:07 (GMT) 13 Jun

  [Forex Flows]

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Malaysia Flows: USD/MYR remains in consolidation between 4.1520 and 4.1660 (0101-LSWV-C01)

USD/MYR opened higher at 4.1580 and rose to an intra-day high at 4.1630 at the beginning of Thursday's Asian session. Pair has since reversed just before the 4.1660 WTD high, slipping slightly to 4.1605 at last look. Pair remains in consolidation and range bound between 4.1520 and 4.1660 on a broader perspective. Pair is approaching the lower limit of the range. We expect pair to eye the 4.1520 support. If broken, attention will be on the 4.1450 support next. Falling oil prices and the current political scandal surrounding Malaysia's economic minister Azmin Ali are likely to provide upside support for USD/MYR and 4.1450 support is likely to be safe. 1M NDFs was trading at 4.1606 at last sight, while KLCi was down 0.20% at last look.

Forex - Asia Open - Overnight Highlights

 00:32 (GMT) 07 Jun

 [Forex Highlights]

Asia Overnight Highlights - 07 Jun 2019


FX Highlights:

The ECB adjusted its forward guidance by indicating that rates would remain unchanged until mid-2020, and announced details of the new TLTRO3, which were slightly less generous than TLTRO2, with the base at 10bp above the refi rate. The EUR rose on the news, helped by a modest rise in short term yields. EUR/USD peaked at 1.1308 and after slipping back to near 1.1250 stabilized a little below 1.13.

EUR/GBP ended firmer but without threatening .89, EUR/CHF however slipped back after being rebuffed at 1.12. In a largely news less session ahead of the ECB meeting in the afternoon. German industrial orders for April showed a modest 0.3% gain, and a small upward revision to the March rise, but of little significance after sharp declines in Jan and Feb.

US data was overshadowed by the ECB, with its most notable feature being a significant downward revision to Q1 unit labor costs. Equities were resilient and USD/JPY dips failed to test 108.00. A bounce above 108.50 came on a report that the US was considering a delay to tariffs on Mexico, breaking the day's range but in reality a modest move. The move was subsequently more or less retraced after the White House said that the US will proceed with tariffs on Mexico as planned, USD/JPY stabilised around 108.35. The situation still appears to have room for a deal before tariffs kick in on Monday as talks will resume on Friday. Mexico Foreign Minister Ebrard confirmed to send 6,000 troop to Southern border, which gave JPY pairs a nudge higher as things look to be shaping up for a deal at this time, though still short of the NY high.

Apr's Canadian trade deficit was lower than expected at C$0.97bn. While there was no strong instant reaction to the data USD/CAD fell as low as 1.3356 while AUD/CAD edged lower with AUD/USD unable to reach .70.

Data/Events Highlights:

- US Apr trade deficit $50.8bn vs $50.7bn exp from $51.7bn in Mar.

- US initial claims unchanged at 218k vs 215k exp.

-US Q1 unit labor costs revised to -1.6% from -0.9% vs -0.9% exp, non-farm productivity revised to 3.4% from 3.6% vs 3.5% exp.

- Fed's Williams said the outlook for the U.S. economy remains solid but downside risks have risen

- President Trump to decide on further tariffs on China after the G-20 Summit at the end of June

- U.S. Vice President Mike Pence said Mexico tariffs still on track for Monday as Mexico seeks to reach a trade resolution before deadline

- VIX index: 15.93 (-0.99%)

- Gold Spot: $1,334.17/oz (-0.09%)

- ICE Brent front contract: $62.27 (+$0.60)

- Nymex WTI front contract: $53.16 (+$0.57)

- Reuters/Jefferies Commodities Index: 173.87 (+0.89%)

- 10y UST: 2.123% (+1bp) (Asia morning)

- DJI: 25,720.66 (+0.71%); S&P: 2,843.49 (+0.61%); Nasdaq: 7,615.55 (+0.53%)

Data/Events Ahead:

- The US employment report will be the primary focus on Friday, with market attention increased after the much-weaker-than-expected ADP report on Wednesday, which typically provides some sort of lead (albeit not a terribly accurate one) on the official employment numbers. We look for a number slightly below market forecasts at 155k, as most other indicators of employment have remained quite solid, though May numbers do have a tendency to suffer from seasonal weakness. There will be as much interest in the average earnings data as in the employment numbers, but our forecast is line with the median at 0.3%, and this would leave the y/y rate at 3.2%, which isn't going to change anyone's view of Fed policy.

- Theresa May to step down as Conservative Party leader on Friday

- ECB's President Draghi and Coeure will be attending the G7 Finance Ministers and Central Bank Governors meeting in Fukuoka, Japan

- Fed's Daly speaks with students and faculty at Singapore Management University at 12:00 SGT


FX Highlights:

Asian currencies gained against the USD overnight, before dollar recovered slightly.

USD/CNH slid to a 6.9228 overnight but rebounded to 6.9287 subsequently. Pair, however, remains stuck in a broader consolidation range, we expect 6.9000 support and 6.9500 resistance to hold. 1Y NDFs slipped to 6.9775 during NY hours before rebounding to 6.9780. USD/CNY onshore spot traded with a slight downside bias before closing at 6.9037. Onshore markets are closed for market holiday: Dragon Boat Day on Friday.

USD/SGD retested the 1.3626 low on Wednesday, but rebounded slightly to 1.3647. We expect further recovery and pair to eye the 1.3670 resistance next

USD/IDR 1M NDFs fell to 14255 but were bid up again to 14262 in NY close. Onshore markets remain closed this week for Ramadan. We continue to see limited downside below 14300 and a worsening trade rhetoric can lead the pair towards 14500 levels again.

USD/INR 1M NDFs rebounded after touching 69.30 support on Thursday and closing higher at 69.37. USD/INR rebounded slightly towards the 69.2813 at the end of Thursday, focus now turning to July 5 budget announcement. Some rupee strengthening to 68.8000 may be warranted, but we continue to see limited room for rupee strength as economic conditions remain challenging.

Data/Events Highlights:

Reserve Bank of India (RBI) decided to cut interest rates again for a third straight time to bring the repo rate to 5.75% and reverse repo rate to 5.50%. This came along with a change in stance from neutral to accommodative, which signals that the easing cycle has room to run. The CRR was however left unchanged at 4.00%.

Data/Events Ahead:

China's May Foreign Reserves will be of interest in the Asia session. We expect a slight slip to 3090 CNY bn from April figures of 3094.95 CNY bn.


- n/a GMT - CN: Foreign Reserves (May) 4cast: 3090CNY bn (Mkt: 3090 Prev: 3094.95)

- 01:30 GMT - AU: Housing Finance (Apr) [Mkt: -1, Prev: -2.8]

- 05:00 GMT - JP: Leading Indicator (Apr P) 4cast: index (Mkt: 95.8 Prev: 95.9)

- 07:30 GMT - UK: Halifax House Price Index (May) 4cast: % 3m y/y (Mkt: 5 Prev: 5)

- 07:30 GMT - UK: Halifax House Price Index (May) 4cast: % m/m (Mkt: 0 Prev: 1.1)

- 12:30 GMT - US: Average Hourly Earnings (May) 4cast: 0.3% m/m (Mkt: 0.3 Prev: 0.2)

- 12:30 GMT - US: Non-farm Payrolls (May) 4cast: 155k (Mkt: 195 Prev: 263)

- 12:30 GMT - US: Private Payrolls (May) 4cast: 155k (Mkt: 178 Prev: 236)

- 12:30 GMT - US: Unemployment (May) 4cast: 3.7% (Mkt: 3.6 Prev: 3.6)

- 12:30 GMT - CA: Capacity Utilization (Q1) 4cast: % (Mkt: 81 Prev: 81.7)

- 12:30 GMT - CA: Net Change in Employment (May) 4cast: 15k (Mkt: -5 Prev: 106.5)

- 12:30 GMT - CA: Unemployment (May) 4cast: 5.7% (Mkt: 5.7 Prev: 5.7)

- 14:00 GMT - US: Wholesale Inventories (Apr F) [Mkt: 0.2, Prev: 0.7]

- 19:00 GMT - US: Consumer Credit (Apr) 4cast: USD bn (Mkt: 12 Prev: 10.281)


- EU: ECB's Coeure speaks in Fukuoka

- 03:30 GMT - JP: 3mth Bills Auction

- 04:00 GMT - US: Fed's Daly speaks in Singapore (12:00 SGT)

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