Fundamental Overview

▪ The MYR strengthened slightly against the USD due to faltering greenback demand as the US economy fell into a technical recession after its 2Q22 GDP recorded a weaker-than-expected reading of -0.9% QoQ (Consensus: 0.5% QoQ; 1Q22: -1.6%). On top of that, the USD index (DXY) was also pressured by Fed’s Powell less hawkish comments. However, the ringgit still failed to trade below the 4.45-level due to lack of domestic catalysts.

▪ Despite falling DXY and 10-year US Treasury yield, the ringgit may continue to trade range-bound around the 4.45-level due to the ongoing global market instability. However, there may be some room for upside for the ringgit amid expectation that US job growth may be slowing. That being said, the local note’s upside could be limited as yuan’s volatility due to China’s property crisis and COVID-19 uncertainty, coupled with Europe’s fragile economic growth may continue to fuel safe-haven demand.

Technical Analysis

▪ EMA technical indicator signals a reversal in the USDMYR trend, with the local note expected to depreciate marginally against the greenback by 0.06% to 4.453 this week.

▪ Technical-wise, the bias for the USDMYR pair remained neutral for this week, with the pair projected to hover around the (S2) 4.446 – (R2) 4.460 zone. However, a potential ringgit’s upside may tilt the pair below the 4.450 level.

Source: Kenanga Research - 1 Aug 2022