Fundamental Overview

▪ MYR managed to appreciate against the USD last week, despite China's property debt crisis and PBOC's decision to cut the reserve requirement ratio. The local note was mainly supported by rising crude oil prices and falling USD index (DXY) amid riskon market sentiment as the Omicron fears subsided. In addition, better-than-expected Malaysia IPI and retail sales readings has helped to push the ringgit higher.

▪ Upside to the ringgit appears to be limited this week as the direction of the local note will be heavily influenced by the December FOMC meeting. Emerging market currencies' sell-off may likely resume if there is a more hawkish tilt from the Fed’s Summary of Economic Projections and renewed Omicron concerns. Thus, MYR is seen to trade range-bound between 4.22-4.23 with a downside bias against the USD.

Technical Analysis

▪ Based on the EMA indicator, the ringgit is expected to depreciate slightly by 0.18% to 4.220 this week, highlighting a potential rise in the DXY post-FOMC.

▪ The dollar may see some upward momentum this week and breach the (R1) 4.226 level if investors’ sentiment turns bearish. Conversely, a break below the (S1) 4.206 support level is needed to confirm MYR extended bullish bias.

Source: Kenanga Research - 13 Dec 2021