Fundamental Overview

▪ The ringgit weakened close to the 4.42 level against the greenback on April 11 as the USD index (DXY) continued to rise following a hawkish statement from Fed's William. However, the release of the dovish FOMC minutes and a consensus-matching core CPI reading of 0.4% MoM (Feb: 0.5% MoM) has caused the DXY to fall around the 101.0 level, which has benefited the local note. Additionally, the ringgit has also been supported by the strengthening of the yuan, thanks to positive surprises in China's trade figures.

▪ Although the DXY may continue to trend lower below the 101.0 level, the ringgit is still expected to trade range-bound near the 4.40 psychological threshold against the USD as the market is still expecting one more 25 basis points rate hike by the Fed in May. That being said, the trajectory of the DXY is still expected to be data driven. For today, a weaker-than-expected US retail sales reading (consensus: -0.4% MoM; Feb: -0.4% MoM) may exert downward pressure on the USD. To add, the direction of the ringgit may also be influenced by China’s 1Q23 GDP reading next week.

Technical Analysis

▪ The USDMYR outlook remained neutral for the week ahead, with the pair likely to hover around its 5-day EMA of 4.405 as its RSI is in the middle of the range, indicating that the pair is neither oversold nor overbought (See ST Technical table).

▪ The pair faces an immediate support level at (S1) 4.395, followed by (S2) 4.389. Conversely, a breach above the (R1) 4.413 level may signal a reversal of ringgit’s bullish trend.

Source: Kenanga Research - 14 Apr 2023