Fundamental Overview

▪ Despite higher crude oil prices, MYR fell to a six-week low against a firmer USD as the US 10-year Treasury yield rose to the highest level since March 2020 on positive US economic data and stimulus hopes. To add, MYR buying interest was further reduced by the extension of Movement Control Order 2.0 to 18th Feb.

▪ MYR may remain subdued this week and expected to hover between 4.05-4.08 against a strengthening USD on the back of rising US Treasury yields and high US vaccination rates. The local note could face additional pressure if Malaysia's 4Q20 GDP shrank by more than projected. However, we may see a price reversal if Brent crude oil price rise above USD60.0/bbl.

Technical Analysis

▪ Despite unfavourable fundamental outlook, EMA technical indicator signals a reversal in the USDMYR trend, with the ringgit expected to appreciate against the greenback by 0.31% to 4.057 this week.

▪ The pair faces an initial support at (S1) 4.050, followed by (S2) 4.030. Conversely, a sustained ascent above the (R1) 4.080 level may suggest an extension of the bullish USD trend.

Source: Kenanga Research - 8 Feb 2021