Fundamental Overview

▪ Most currencies, including the ringgit ended Thursday in the red against the greenback as the USD index (DXY) ascent back to above the 103.0 level amid a surprisingly strong US job report. The depreciation was made worse by the continued hawkish rhetoric from a slew of Fed speakers throughout the week, which narrowed the 10-year MY-US yield premium to below 20 basis points. The local note was also battered by the increasing US-CN geopolitical tensions due to the Chinese balloon incursions.

▪ The ringgit is expected to remain pressured above the 4.30 threshold against the USD as the market awaits the release of US core inflation (consensus: 0.3% MoM; Dec: 0.3%) and retail sales (consensus: 0.9% MoM; Dec: -1.1%) data, in which a higher-thanexpected reading may solidify the Fed's higher-for-longer narrative and push the DXY closer to 104.0 level. For today, the direction of the local note will be mainly influenced by MY 4Q22 GDP reading (KIBB: 6.6% YoY; consensus: 6.7%; 3Q22: 14.2%).

Technical Analysis

▪ The USDMYR is expected to turn neutral-to-bearish next week, with the pair likely to hover around its 5-day EMA of 4.301 as its RSI reading is nearing overbought level (See ST Technical table).

▪ Technical-wise, MYR is expected to trend higher against the USD should US inflation surprise on the downside, with the pair's immediate support awaits at (S1) 4.278, followed by (S2) 4.240. Conversely, the pair may test (R1) 4.335 if DXY trend higher.

Source: Kenanga Research - 10 Feb 2023