Fundamental Overview

▪ The USDMYR pair was fluctuating in a tight range above the 4.23 level over the past week as annual inflation rate in the US accelerated to 8.5% in March, hurting risk appetite. The inflationary pressure in the US has fuelled bets of a more hawkish Fed at its next meeting in May, prompting the 10-year US Treasury yield above the 2.8% threshold, a level last seen in December 2018. On top of strengthening USD, the ringgit was also pressured by China’s stringent zero-COVID-19 policy and volatile crude oil prices.

▪ The ringgit may continue to trade above 4.23 against the USD as downside risk for the local note remains intact, but any weakness should be limited near the 4.24 territory due to positive domestic economic prospects. The USD index may maintain a foothold above the 100.0 level in the near term amid heightened global economic uncertainty brought about by the Russia’s invasion of Ukraine and China’s worsening COVID-19 outbreaks.

Technical Analysis

▪ MYR may strengthen marginally by 0.11% against the USD, trading near its 5-day EMA of 4.231.

▪ Technically, MYR may see a short-term rebound due to its oversold position and trade around the (S2) 4.229 – (S1) 4.232 level. However, a breach above the (R2) 4.239 resistance level may invalidate the ringgit’s upside potential.

Source: Kenanga Research - 18 Apr 2022