Fundamental Overview

▪ MYR notched a third straight week of losses and closed the holiday-shortened week at its weakest level against the USD since January 1998. This was attributable to a higher 10-year US Treasury yield and USD index amid hawkish Fed bets after the release of higher-than-expected US CPI data (8.3% YoY; consensus: 8.1%). The local note was dragged down by offshore yuan’s depreciation past the 7.00 per USD psychological threshold due to persistent capital outflows.

▪ The ringgit may trade around the 4.52-4.55 against the safehaven USD amid growing risk-off sentiment on expectations that that the Fed may continue to jack up rate by another 75 basis points (bps). On the flip side, the continuation of rate hiking cycle by other major central banks (i.e. BoE, SNB), coupled with strong domestic trade figures should limit ringgit’s further losses. However, if the Fed hike by an unprecedented 100 bps, the USDMYR pair may move closer to the 4.60 level.

Technical Analysis

▪ 5-day EMA indicator suggests that the MYR may appreciate by 0.24% against the USD, highlighting a potential bullish correction.

▪ The short-term technical outlook indicates that the USDMYR pair may reverse its direction and test the immediate support at (S1) 4.513. On the downside, the resistance zone between (R1) 4.546 and (R2) 4.557 is likely to be tested if USD uptrend continues.

Source: Kenanga Research - 19 Sept 2022