Fundamental Overview

• The ringgit strengthened against the USD, closing yesterday at 4.67, but failed to appreciate further towards the 4.65 level due to rising bets of a Trump presidency following a failed assassination over the weekend. Weaker China economic data and a sharp moderation in Malaysia's exports also weighed on the ringgit. As expected, Powell's dovish remarks acknowledging that the past three inflation prints bolstered the central bank's confidence that inflation is on track to 2.0% helped boost the ringgit. Despite hotter-than-expected US PPI and above-consensus retail sales figures, the market still expects a September rate cut, currently priced at over 90% probability.

• Today's potentially strong Malaysia’s advance 2Q24 GDP reading may help keep the ringgit stable below 4.68/USD. The market will closely watch US macro readings next week as the FOMC's blackout period begins tomorrow. Consensus forecasts a stronger US 2Q24 GDP print at 1.8% QoQ (1Q24: 1.4%) and a higher core PCE reading at 0.2% MoM (May: 0.1%). Any below-consensus figures may further strengthen the case for a Fed rate cut and boost the ringgit. The PBoC is expected to maintain the status quo next week, providing no catalyst from China. Domestically, despite inflation potentially edging slightly higher at 2.2% YoY, BNM's policy outlook is expected to remain unchanged, benefiting the ringgit.

Technical Analysis

• The USDMYR outlook has turned neutral, with the pair likely to trade near the 5-day EMA of 4.675 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) 4.660 – (R2) 4.686 next week.

Source: Kenanga Research - 19 Jul 2024