Fundamental Overview

• Malaysia's better-than-expected 3Q23 GDP reading (3.3% YoY: Consensus: 3.2%) and trade figures, coupled with a weaker greenback, have bolstered the MYR against the USD. The USD index fell below the 104.0 mark as investors unwound their USD long positions, fuelled by a firm expectation that further Fed tightening is improbable. However, after appreciating close to the 4.65/USD level, the ringgit erased some gains following the FOMC's cautious policy approach and an unexpected drop in US initial jobless claims.

• The potential stabilisation of Malaysia's inflation readings around its long-term average, combined with a relatively robust economic growth, is likely to encourage the BNM to maintain the current status quo on the OPR. In the upcoming week, the ringgit may oscillate between gains and losses due to the absence of pro-ringgit catalysts. However, market participants will closely monitor the US core PCE data, where a softer-than-anticipated reading could prop up the ringgit. Additionally, investors are expected to scrutinise Manufacturing PMI data from both Malaysia and China for insights into the countries’ latest economic conditions. Any indications of recovery may positively impact the ringgit.

Technical Analysis

• The USDMYR outlook remains neutral, with the pair likely to trade near 5-day EMA of 4.678 as its RSI sits in the middle of the range.

• Given the neutral short-term bias, the pair is projected to trade in the range of (S2) 4.644 – (R2) 4.699 next week. However, downside risks to the local note remained due to the disconnect in US macroeconomic readings.

Source: Kenanga Research - 24 Nov 2023