Fundamental Overview

▪ MYR strengthened marginally against the USD after moving in a very tight range between 4.420 to 4.425 (from Monday to Thursday), mainly due to the return of risk appetite amid China’s reopening optimism. Despite doubts on China’s exit from the infamous zero-COVID-19 policy due to a surge in new infections, the yuan appreciated to 6.964 against the USD, benefiting risk-on currencies (especially the ringgit).

▪ The direction of the ringgit for next week would mainly be influenced by the latest US job reports, December FOMC minutes and China manufacturing data. MYR's sell-off is likely to continue if the US job readings turn out to be stronger-than-expected and if China’s PMI point to a continued downtrend. A more growth optimistic Fed minutes may also help to boost the dollar and weaken the ringgit. However, the local note may benefit from the risk-on market sentiment and trade around its current level.

Technical Analysis

▪ The USDMYR pair's outlook continued to remain neutral and is likely to hover around its 5-day EMA of 4.423 as the pair’s RSI remained in the middle of the range, indicating that the pair is neither oversold nor overbought (See ST Technical table).

▪ Technically, a sustained move over (R1) 4.426 will signal the presence of sellers for the MYR and trigger an uptick to (R2) 4.428, while a sustained dip below the (S1) 4.420 level may suggest a return of risk-on in the FX market.

Source: Kenanga Research - 30 Dec 2022