Fundamental Overview

▪ MYR appreciated for the third straight week against the USD as the USD index (DXY) almost fell below the 105.0 level on August 11, following a lower-than-expected July US inflation data. On top of that, the ringgit was also supported by a better-than-expected Malaysia’s 2Q22 GDP data, yuan’s appreciation and buoyant market sentiment. To note, the market is now pricing a 55.0% chance of a 50 basis-point Fed rate hike in September.

▪ The local note may trade in a tight range of 4.445 - 4.455 against the USD as the DXY is expected to stay bid around the 105.5 - 106.0 level ahead of FOMC minutes release. The ringgit may be under pressure due to the recent resurgence in COVID-19 infections in China and worsening Sino-US relations. However, a potential slowdown in the US retail sales, a less hawkish FOMC minutes and expectations of a strong domestic trade figures should limit any ringgit’s depreciation.

Technical Analysis

▪ 5-day EMA indicates a potential corrective pullback in the USDMYR trend, with the ringgit expected to depreciate slightly against the greenback by 0.11% to 4.450 this week.

▪ The short-term technical outlook shows that the USD may test the pair’s upside at (R1) 4.454. Inversely, a potential sell-off in the greenback could tilt the pair towards the (S2) 4.435 - (S1) 4.440 support level.

Source: Kenanga Research - 15 Aug 2022