Fundamental Overview

▪ After trading above the 4.200 level against the USD from Monday to Thursday last week, the ringgit strengthened to 4.196 on Friday as real-world data from the UK indicate that Omicron infections are less severe than Delta. To note, most risky assets resume their risk-on rally as investors turned more optimistic about the global economic outlook. To add, the local note also benefitted from a 3.6% WoW rise in Brent crude oil price.

▪ Even though the USD index is expected to remain elevated due to the recent hawkish turn by the Fed, the ringgit may continue its positive momentum against the greenback this week as global economic sentiment improves. Additionally, MYR may be supported by higher crude oil prices, favourable bond yield differentials, better-than-expected trade figures and improving domestic COVID-19 situation.

Technical Analysis

▪ Despite the current risk-on environment, MYR may reverse last week’s bullish trend and trade lower against the USD by 0.24%.

▪ Our technical analysis suggests a short-term bullish bias for USD this week, with an immediate resistance at (R1) 4.216. Conversely, should inventors’ risk appetite continue to improve, a rally towards the (S1) 4.186 level will negate the bullish greenback pattern.

Source: Kenanga Research - 27 Dec 2021