Fundamental Overview

▪ Despite S&P Global Ratings’ revision of Malaysia’s credit ratings outlook to stable from negative, the ringgit depreciated marginally against the USD as Fed’s Powell’s hawkish reaffirmation has pushed the USD index (DXY) back above the 105.0 level. Nevertheless, S&P’s confidence in Malaysia, coupled with the improvement in the country’s manufacturing activity have helped the local note to limit its losses.

▪ The ringgit may strengthen below the 4.40 level against the USD as the Bank Negara Malaysia (BNM) is expected to impose its first ever back-to-back 25 basis points (bps) overnight policy rate hike. To add, the local note may also benefit from a potential improvement of Malaysia’s macroeconomic indicators. However, risks remain skewed to the downside as the DXY may continue to benefit from safe-haven flows, especially if the tone of the FOMC minutes turn out to be more aggressive and if the US recorded a stronger-than-expected jobs growth in June.

Technical Analysis

▪ 5-day EMA indicator suggests that the MYR may appreciate slightly by 0.06% against the USD.

▪ Technical-wise, the USDMYR pair may move towards (S1) 4.400 and test (S2) 4.393, which indicates an upside pattern for the local note. Nonetheless, a rally towards (R1) 4.411 will reaffirm the greenback’s strength.

Source: Kenanga Research - 4 Jul 2022