Fundamental Overview

▪ Despite improving China macroeconomic data readings and positive sentiment surrounding the US-China virtual meeting, MYR depreciated against a strengthening greenback as the USD index (DXY) soared to above the 96.0 level amid a better-than-expected US retail sales and growing safe-haven demand. To add, the local note was also dragged lower by a 4.0% weekly decline in the Brent crude oil price.

▪ The ringgit may resume its bearish momentum above the 4.18 level against the USD this week as the DXY may continue to trade around the 96.0 level amid positive US economic outlook, strengthening Fed rate hike expectations and prevailing global risk-off mood due to Europe’s worsening COVID-19 situation. On top of that, lack of pro-MYR catalysts and faltering crude oil prices may put further downward pressure on the local note.

Technical Analysis

▪ According to the EMA technical indicator, MYR is expected to reverse last week’s weak performance and strengthen slightly against the USD by 0.16% to 4.176 this week.

▪ Our technical analysis indicates a potential corrective pullback for the USD this week. From here, the (S1) 4.169 support level is critical as a break here could signal a deeper retracement towards (S2) 4.154. Inversely, a rally towards the (R1) 4.190 level will invalidate the bearish USD signal.

Source: Kenanga Research - 22 Nov 2021