Fundamental Overview

▪ The weakening of the USD index (DXY) below the 102.0 level, along with a drop in short-dated US government bond yields has helped the ringgit to strengthen marginally below the 4.40 psychological threshold against the USD. This was attributable to the softening of the US labour market, as indicated by the latest JOLTs and ADP reports. However, the ringgit's gains are limited due to the Fed fund futures still showing a 53.2% likelihood of a 25 basis points (bps) interest rate hike in May.

▪ The market focus for today is the US non-farm payrolls figure. A higher-than-expected reading (consensus: 230.0k; Feb: 311.0k) may solidify the case of another 25 bps hike by the Fed in May, strengthening the USD. However, focus will shift to the US inflation report and FOMC minutes for next week, and any dovish signals from these could lead to a downward re-adjustment in market expectations, potentially causing the DXY to drop below the 101.0 level. Given the highly uncertain outlook, the ringgit may continue to hover around the 4.40 level.

Technical Analysis

▪ The USDMYR pair's outlook remained neutral for the week ahead, with the pair likely to hover around its 5-day EMA of 4.403 as the pair’s RSI has pushed above 20.0 (See ST Technical table).

▪ Technically, should there be any USD buying interest, the ringgit may shed some gains and trade around the (R1) 4.412 – (R2) 4.425 level. On the other hand, a breach below the (S1) 4.391 level is needed to confirm MYR extended bullish bias.

Source: Kenanga Research - 7 Apr 2023