Fundamental Overview

▪ Despite Malaysia's accelerated vaccine roll-out and falling US 10-year Treasury yield, MYR depreciated against the USD to its lowest level since mid-August 2020 as domestic COVID-19 cases continue to set new daily records. In addition, the ringgit also closed lower against most major currencies as investors turned cautious amid renewed domestic political uncertainty.

▪ The local note is expected to remain volatile this week on the back of Malaysia’s worsening COVID-19 situation, uncertain political climate and lack of pro ringgit catalysts. Nevertheless, rising crude oil prices may continue to provide support to petrocurrencies, and should help to limit further ringgit downside.

Technical Analysis

▪ In spite of the current risk-off environment, if the USDMYR pair dive towards the 5-day EMA of 4.175, it is possible that we will see a MYR bullish reversal below the 4.170 level.

▪ From a technical point of view, should there be any ringgit buying interest, the local note is expected to reverse its bearish position and trade around the (S2) 4.142 – (S1) 4.167 level. Inversely, a break above the (R1) 4.204 level is needed to confirm MYR extended bearish bias.

Source: Kenanga Research - 12 Jul 2021