Fundamental Overview

▪ After settling around the 4.389-4.397 level, the ringgit appreciated by 0.23% WoW against the USD on May 27 as the USD index (DXY) fell below the 102.0 threshold due to a lack of surprise in the latest FOMC minutes. On top of that, the ringgit also benefited from a 6.1% WoW rise in Brent crude oil price amid tight global supply. However, due to the lack of pro-ringgit catalysts and global central banks’ shift towards monetary tightening, the MYR weakened against most major currencies.

▪ Uncertain global economic conditions and gloomy market sentiment may continue to induce volatility for risk-off assets, exerting downward pressure on the ringgit. For this week, the DXY may regain some of its losses as the US unemployment rate is projected, according to consensus, to fall to a pandemic low of 3.5%. The expected improvement in the DXY and the potential for further weakness in the yuan may push the USDMYR pair back above the 4.390 level.

Technical Analysis

▪ Based on the EMA, the ringgit is expected to depreciate by 0.25% to 4.389 this week, highlighting a potential sell-off in risk assets.

▪ The USDMYR pair may see some upward momentum this week and ascent above the (R1) 4.391 level if safe-haven buyers continue to seek shelter in the greenback. Inversely, a break below the (S1) 4.373 support level is needed to confirm MYR extended bullish bias.

Source: Kenanga Research - 30 May 2022