Fundamental Overview

▪ After depreciating from Monday to Thursday last week, the local note rebounded near the 4.22 level against the greenback on Friday as the USD index retreated amid Powell's dovish comments. The MYR was also supported by higher Brent crude oil price and lower 10-year US Treasury yield. However, the gains were limited due to the Malaysia's worsening COVID-19 infections and heightened political uncertainty.

▪ MYR is expected to weaken around the 4.23 – 4.25 level against the USD this week as domestic political concerns grow. On top of that, continuous rise in the number of Malaysia’s COVID-19 ICU cases and deaths, coupled with lack of positive catalysts, are seen to drag the local note lower. However, higher crude oil prices should limit ringgit’s losses.

Technical Analysis

▪ Due to the unfavourable fundamental outlook, EMA technical indicator signals a bearish MYR trend, with the ringgit expected to depreciate against the greenback by 0.20%.

▪ The pair faces an immediate resistance level at (R1) 4.233, followed by (R2) 4.245. Alternatively, should the USD bearish trend continue due to a shift in investor sentiment, the USDMYR pair could trade around the (S2) 4.209 - (S1) 4.215 level.

Source: Kenanga Research - 2 Aug 2021