Fundamental Overview

▪ MYR extended its bearish momentum and weakened marginally against the USD due to growing global recession fears amid aggressive central bank rate hikes. The local note was also pressured by volatile Brent crude oil price. However, a slight fall in the USD index (DXY) and a stronger yuan has helped the ringgit to limit its losses. The hawkish comments from Fed's Powell during his testimony has failed to push the DXY higher.

▪ Even though the DXY experienced a slight correction of -0.5% WoW last Friday, it may continue to trade above the 104.0 level as the market may continue to hear hawkish statements from a slew of Fed speakers this week. As such, the USDMYR pair may turn muted and is expected to trade around the 4.40 level. However, a further decline in the US Core PCE (consensus: 4.8%; Apr: 4.9%) may prompt the Fed to tone down its aggressive monetary policy tightening, possibly lifting the ringgit.

Technical Analysis

▪ Looking at the EMA technical indicator, MYR may continue to depreciate by 0.02% to 4.404 this week, highlighting a potential ascent of the DXY.

▪ The short-term technical outlook shows that the USD may test the pair’s upside at (R1) 4.407 and potentially hit (R2) 4.411 level. Conversely, a potential sell-off in the greenback could tilt the pair towards the (S1) 4.397 and (S2) 4.392 support level.

Source: Kenanga Research - 27 Jun 2022