Fundamental Overview

▪ MYR weakened near 4.45 against the USD as the safe-haven currency benefitted from higher interest rate hike prospects postUS June inflation data release (actual: 9.1%; consensus: 8.8%). The local note was also dragged by the weakening of the yuan (- 0.9% WoW) due to China’s weaker-than-expected 2Q22 GDP reading. However, the MYR managed to appreciate against most major currencies amid relatively strong domestic fundamentals.

▪ Despite a marginal fall in the USD index (DXY) last Friday, due to falling US five-year inflation expectations, the DXY may continue to remain elevated around the 107.5-108.5 range amid rising recessionary risks. However, the local note may shed some losses as markets pare back rate hike expectation for July FOMC meeting to 75 basis points (bps) from 100 bps. On top of that, the ringgit may also benefit if the European Central Bank (ECB) embark on an aggressive tightening cycle.

Technical Analysis

▪ According to our 5-day EMA indicator, the MYR is projected to reverse its weakness with a slight gain of 0.20% against the USD this week.

▪ The safe-haven dollar may face some downward pressure this week, with an immediate support observed at (S1) 4.433 level. Inversely, a break above the (R1) 4.458 resistance level is needed to confirm the resumption of USD uptrend.

Source: Kenanga Research - 18 Jul 2022