Fundamental Overview

▪ MYR traded in a tight range of 4.181-4.186 last week due to the lack of market catalysts. The local note managed to appreciate by 0.2% against the USD mainly due to falling USD index amid Fed's cautious rate comments, weak US private jobs data and ECB's Lagarde's hawkish tilt. To add, the ringgit was also supported by a 3.6% rise in the Brent crude oil price.

▪ The USDMYR pair may trade below the 4.180 level this week, due to the short-term USD weakness, an expected improvement in the Malaysia macroeconomic indicators and a continuous rise in crude oil prices. While the ringgit may strengthen ahead of the 4Q21 GDP release, the current spike in domestic COVID-19 cases may put downward pressure on the local note. To note, new daily cases jumped by more than 100.0% WoW on Feb 6.

Technical Analysis

▪ On the contrary, our 5-day EMA indicator suggests that MYR might reverse its uptrend and depreciate slightly against the USD by 0.09% to 4.184 this week.

▪ From a technical perspective, the USD may see some upward momentum if risk aversion grows, with an immediate resistance observed at (R1) 4.184 level. Inversely, a break below the (S1) 4.179 support level is needed to validate the bearish reversal pattern for the USD.

Source: Kenanga Research - 7 Feb 2022