Kenanga Research & Investment

Ringgit Weekly Outlook - Under Pressure as Fed Pare Down Dovish Signal and Middle East Crisis

kiasutrader
Publish date: Fri, 04 Oct 2024, 04:12 PM

Fundamental Overview

  • The ringgit initially strengthened to its highest level in over 39 months, reaching 4.12/USD on Monday, before sharply retreating to 4.22/USD yesterday. A pro-ringgit boost, driven by a weaker- than-expected US PCE inflation report and China’s sweeping stimulus measures last week, proved short-lived as the USD rebounded. This came after Fed Chair Powell pushed back against expectations of another 50 bps rate cut by year-end, further supported by an unexpected rise in August job openings. The dollar also found safe-haven demand amid escalating tensions in the Israel-Hezbollah-Hamas-Iran conflict.
  • Despite slightly higher-than-expected jobless claims yesterday, the acceleration in the US service sector suggests the economy remains resilient. With markets still pricing in two rate cuts this year, including at least one 50 bps cut, a potential less dovish shift in the Fed's outlook could further bolster the USD, barring major downside surprises in US data. Attention now turns to tonight’s payroll, expected to meet market consensus, while next week’s focus will turn to core inflation and FOMC minutes. The USD may also benefit from the risk-off sentiment linked to Middle East tensions. While domestic factors may still offer some support to the ringgit, the stronger dollar could keep it pressured, likely trading between 4.23 and 4.25 in the near term.

Technical Analysis

  • The pair is set to turn neutral-to-bearish, likely consolidating around its 5-day EMA of 4.198 as the RSI approaches overbought levels.
  • The ringgit is expected to remain pressured next week, with immediate resistance for the USDMYR pair at (R1) 4.272.

Source: Kenanga Research - 4 Oct 2024

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