Fundamental Overview

▪ Despite the Fed’s less hawkish stance which sent the USD index back to below the 102.0 level, the ringgit was relatively unchanged against the USD on a WoW basis (ended Thursday) as the local note continued to be pressured by the prospect of the global economic slowdown. That being said, another sharp appreciation of the yuan due to China’s strong capital inflows, coupled with ECB’s hawkish guidance has helped to support the ringgit to trade below its resistance level of 4.27.

▪ The local note may trade range-bound between 4.24 – 4.28 due to the dissipation of market volatility post-FOMC meeting. Locally, the ringgit will be influenced by the release of important macroeconomic indicators (i.e. 4Q22 GDP, IPI, labour and retail sales), in which a better-than-expected reading may help to boost demand for the Malaysian currency. However, the ringgit’s direction would also be subjected to the outcome of tonight’s US non-farm payroll numbers (consensus: 185.0k; Dec: 223.0k).

Technical Analysis

▪ The USDMYR outlook is neutral-to-bullish as it is expected to trade near its 5-day EMA of 4.254 as its RSI reading is just slightly above its oversold level (See ST Technical table).

▪ The short-term technical outlook shows that the USDMYR may test the upside at (R1) 4.262 and potentially hit (R2) 4.277 level. Conversely, a potential sell-off of the greenback could tilt the pair towards the (S1) 4.238 and (S2) 4.228 support level.

Source: Kenanga Research - 3 Feb 2023