Fundamental Overview

▪ MYR appreciated by almost 0.5% to close at a five-week high against the USD last week as the USD index (DXY) fell below the 94.0 mark despite hawkish FOMC minutes. The local note's strength was attributable to the positive sentiment surrounding the gradual reopening of the domestic economy and strong commodity prices. To note, Brent crude oil price soared near the USD85.0/barrel level last Friday, a three-year high.

▪ MYR may trade in the range of 4.16 to 4.17 this week amid the possibility of continued profit-taking activities. On the external front, the local note could face some additional selling pressure if China's 3Q21 GDP data shows a significant slowdown and if the DXY climb back above the 94.0 level. However, elevated crude oil prices and Malaysia's positive economic sentiment should continue to buoy the ringgit in the near term.

Technical Analysis

▪ Looking at the EMA technical indicator, MYR is expected to depreciate marginally by 0.10% to 4.162 this week, highlighting a potential bullish comeback for the USD.

▪ The short-term technical outlook shows that the USD may test the pair’s upside at (R1) 4.167 and potentially hit (R2) 4.177 level. Conversely, a potential sell-off in the greenback could tilt the pair towards the (S1) 4.151 and (S2) 4.145 support level. 

Source: Kenanga Research - 18 Oct 2021