Fundamental Overview

▪ The ringgit has continued to weaken above the 4.44 level against the USD due to the market solid expectation of another 25 basis points (bps) rate hike by the Fed in May, following hawkish remarks made by Fed's Waller last Friday. Additionally, the local note was also pressured by the narrowing of the 10-year MY-US bond yield premium, which fell below 30 bps. However, the losses were partially offset by China's stronger-than-expected 1Q23 GDP reading of 4.5% YoY (consensus: 4.0%).

▪ Due to the lack of domestic catalysts, the ringgit is expected to be influenced by the trajectory of the USD index (DXY) and trade between 4.42 - 4.45 next week. The DXY may consolidate around the 102.0 level as investors digest more US corporate earnings reports. On the macro front, the market to closely monitor the US 1Q23 GDP growth rate. A weaker-than-expected reading may raise recessionary concerns and impact risk sentiment. No reaction is expected from Malaysia’s March CPI reading today (KIBB & consensus: 3.6% YoY; Feb: 3.7%).

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 4.434 as its RSI reading is nearing overbought level (See ST Technical table).

▪ Technical-wise, MYR is expected to reverse its losses, with the pair's immediate support awaits at (S1) 4.429, followed by (S2) 4.416. Conversely, a break above the (R1) 4.447 level is needed to confirm USD extended bullish bias.

Source: Kenanga Research - 20 Apr 2023