Fundamental Overview

• As noted in our previous FX report, the ringgit lost some earlier gains, fluctuating between 4.34 - 4.37 against the USD. It weakened to 4.37 on Monday, impacted by strong US consumer spending data released last Friday. A cautious market stance ahead of today’s key jobs data also pressured risk-sensitive assets. However, disappointing JOLTS data led to a downward recalibration of the Fed’s terminal rate, boosting the ringgit back to around the 4.34/USD level. It also benefited from stable domestic economic conditions and BNM’s decision to hold interest rates steady.

• Yesterday's US data painted mixed picture, with services sector activity rising to 51.5 (Consensus: 51.1), while private payrolls saw their smallest gain since 2021. Attention now turns to tonight’s nonfarm payrolls and unemployment figures. If job gains align with the 165.0k consensus and unemployment drops to 4.2%, the likelihood of a 50 bps Fed rate cut in September is likely off the table. Markets currently expect a sub-100.0k jobs report; should this occur, it could amplify expectations of a 50bps cut, likely pressuring the USD. Next week’s core CPI report, expected to hold steady at 0.2% MoM, will be the next key test. The Harris-Trump debate and potential ECB rate cut may also sway market sentiment, possibly buoying the USD. Barring any major surprises, the MYR should remain stable near the 4.33 to 4.35 against the USD.

Technical Analysis

• The USDMYR outlook has shifted to neutral, with the pair likely to consolidate near the 5-day EMA of 4.343.

• The pair may range between (S2) 4.310 and (R2) 4.381. However, this is subject to potential shifts depending on US job data releases.

Source: Kenanga Research - 9 Sep 2024