Fundamental Overview

▪ MYR extended its gains, albeit slightly against the USD as the USD index (DXY) retraced below the 106.0 level on August 4, ahead of US employment report. However, the local note still struggled to trade below the 4.45 threshold due to a turnaround in risk sentiment amid renewed US-China tensions. To add, ringgit’s upside has also been limited by yuan’s WoW depreciation due to China’s weak manufacturing data.

▪ The ringgit is expected to weaken after a brief turnaround against the USD last week due to a sharp rebound in the DXY following a huge upside surprise in US non-farm payroll growth in July (528.0k; consensus: 250.0k). On top of that, rising geopolitical tensions and growing signs of a global economic slowdown may continue to keep investors away from risky assets. However, a potential moderation in US CPI reading (consensus: 8.7% YoY; June: 9.1%) may keep the USDMYR pair below the 4.46-level.

Technical Analysis

▪ EMA technical indicator signals a reversal in the USDMYR trend, with the ringgit expected to depreciate marginally against the greenback by 0.08% to 4.454 this week.

▪ The USDMYR pair may trade with a neutral-to-bullish tone this week and break either above the (R1) 4.455 level or dip below the (S1) 4.448 level. Whichever way, the price movement would be mainly influenced by the US July CPI reading.

Source: Kenanga Research - 8 Aug 2022