Fundamental Overview

▪ MYR experienced strong selling pressure and weakened by 2.11% WoW, the fastest pace of depreciation in 109 weeks. The ringgit breached the 4.30 threshold for the first time since June 2020 as the USD index (DXY) climbed above the 101.0 level due to weak global economic sentiment as Fed's Powell hinted that a 50 basis points hike in May is “on the table”. In addition, the ringgit was also pressured by the weakening of the yuan, mainly due to China’s capital outflows.

▪ For this week, the DXY is expected to remain strong and consolidate around the 100.0 level, while the Chinese yuan may continue to remain weak near the 6.50 threshold, a combination that may continue to pressure most Asian currencies including the ringgit. Amid heightened market volatility, the ringgit may remain on a bearish trend and hover between 4.30-4.35. However, the local note’s depreciation may be limited by the lack of pro-dollar catalysts and a potential market correction.

Technical Analysis

▪ According to our 5-day EMA, MYR may potentially reverse its weakness and appreciate by 0.9% against the USD.

▪ The safe-haven USD may face a short-term pullback due to its overbought position, with the USDMYR pair projected to trade in the range of (S2) 4.226 – (S1) 4.276. Inversely, a break above the (R1) 4.350 level may signal USD’s bullish continuation.

Source: Kenanga Research - 25 Apr 2022