Fundamental Overview

▪ MYR further strengthened its position to below the 4.11 level against the USD as the 10-year US Treasury (UST) yield fell to below 1.5% despite a higher-than-expected increase in US CPI. The local note was also supported by record high Malaysia's IPI and retail sales readings, increased pace of vaccinations and higher Brent crude oil price.

▪ The local note could advance further against the greenback this week as the Fed's policy is expected to remain easy as we think that it is a little bit too soon for the Fed to be hawkish. However, stronger-than-expected readings in the US industrial production and retail sales data could potentially push the UST yields higher, prompting the MYR to trade lower against the USD.

Technical Analysis

▪ If the USDMYR pair can break above the 5-day EMA of 4.118, it is possible that we will see a short-term USD bullish reversal above the 4.120 level.

▪ Based on our technical analysis, the USD may test the pair’s upside at (R1) 4.122 and potentially hit the (R2) 4.135 level if there is a surprise hawkish shift in the Fed’s tone during the FOMC meeting. Conversely, a potential downside could tilt the pair towards the (S1) 4.102 and (S2) 4.096 support level.

Source: Kenanga Research - 14 Jun 2021