Fundamental Overview

▪ MYR weakened against the USD and posted the lowest weekly close since 31st July 2020 as the ringgit faced strong selling pressure amid rising domestic COVID-19 cases. Even though the US 10-year Treasury yield fell below the 1.3% level, the local note broke above the 4.20 per USD threshold due to the rising USD index (DXY) and falling Brent crude oil price.

▪ MYR will likely trade in a tight range between 4.19 and 4.21 this week as Malaysia’s new COVID-19 cases are expected to remain in the five-digit territory in the near term amid increased testing capacity. The direction of the local note may continue to be influenced by crude oil prices, DXY and market sentiment, potentially leading to further depreciation for the ringgit if investors turn more cautious.

Technical Analysis

▪ Looking at the EMA technical indicator, MYR may rebound, albeit slightly to 4.198 this week, highlighting an oversold situation or a potentially bullish comeback for the local note.

▪ Overall, our technical analysis indicates a short-term bearish bias for USD trend this week. The bearish pattern could persist towards the (S2) 4.187 level if the (S1) 4.196 support level is breach. Conversely, a rally towards the (R1) 4.210 level will negate the bearish pattern.

Source: Kenanga Research - 19 Jul 2021