Fundamental Overview

▪ Despite a sharp drop in Brent crude oil price, MYR reversed last week's losses and trade 0.21% higher against the USD due to a technical rebound. The local note was trading in a tight range of 4.11-4.12 as Asia’s FX markets struggled for direction after the 10-year treasury yield breached the 1.7% level despite Fed's dovish stance.

▪ MYR’s sideways trend is expected to continue but with a downside bias this week, as the US Treasury yields may continue to move higher and prompt a repricing of risk assets. Additionally, the local note’s direction may be influenced by crude oil prices, PBoC's meeting outcome and Fed Chair Powell’s speech today (22 Mar).

Technical Analysis

▪ Looking at the EMA technical indicator, MYR is expected to depreciate slightly by 0.05% to 4.112 this week, highlighting a potential bullish comeback for the USD.

▪ From a technical perspective, the US dollar is expected to see some upward momentum as risk aversion grows. The pair faces an immediate resistance at (R1) 4.118, followed by (R2) 4.125. Inversely, a break below the (S1) 4.106 support level is needed to validate the bearish reversal pattern for the USD.

Source: Kenanga Research - 22 Mar 2021