Fundamental Overview

▪ MYR depreciated to a two-week low last week, weighed by the cloudy local political scene and a weaker oil price. Rising COVID-19 infections further weaken the local note amid strengthening USD. Meanwhile, FTSE Russell’s decision to keep Malaysia on the watch list of the FTSE WGBI alongside RM10.0b KITA PRIHATIN fiscal stimulus has managed to support MYR from further downside.

▪ The ringgit is expected to remain under pressure due to domestic political uncertainty and fears of COVID-19 resurgence as evident by the rising number of new cases domestically and globally. Nevertheless, China's ongoing recovery may boost confidence in Asian currencies, and probably giving a lift to the ringgit upside.

Technical Analysis

▪ Notwithstanding the current risk-off environment, MYR has the potential to bounce back by at least 0.35% and trade at around 4.156 this week, based on our 5-day EMA.

▪ From a technical point of view, the USD could be at the cusp of reversing its gains against the MYR and trade around the (S1) 4.138 level. Conversely, if the (R1) 4.187 level is broken, then the pair might attempt to move higher and test the (R2) 4.203 level.

Source: Kenanga Research - 28 Sept 2020