Fundamental Overview

▪ Despite a relatively weak USD index due to disappointing US housing data and the Bank of Japan's surprise policy shift, the ringgit depreciated against the USD, potentially due to elevated recessionary fears and a marginally weaker yuan. The ringgit was also pressured by the narrowing of MY-US yield premium (below 40 bps). The local note may continue to hover around the 4.30 – 4.40 level for today as the market awaits US PCE readings.

▪ For next week, the ringgit may continue to trade range-bound against the USD due to lack of catalysts and looming global economic uncertainties. That being said, the local note may benefit from USD year-end seasonal weakness. However, the worsening COVID-19 outbreak in China may cast doubts on China’s COVID-19 exit plan, potentially weakening the yuan and dragging the ringgit.

Technical Analysis

▪ The USDMYR pair's outlook continued to be neutral for the week ahead, with the pair likely to hover around its 5-day EMA of 4.426 as the pair’s RSI remained in the middle zone, indicating that the pair is neither oversold nor overbought (See ST Technical table).

▪ Technical-wise, the bias for the USDMYR pair remained neutral for this week, with the pair’s immediate support level at (S1) 4.418 and resistance level at (R1) 4.434. However, a potential USD’s downside may tilt the pair below the 4.420 level.

Source: Kenanga Research - 23 Dec 2022