Fundamental Overview

• While the local market remained subdued, global developments actively shaped FX dynamics this week. The USD Index (DXY) initially rallied, driven by Trump's threat of a 100.0% tariff on BRICS nations, stronger-than-expected JOLTs data, the collapse of the French government, and South Korea's unexpected political turmoil. These events bolstered demand for safe-haven, high-yielding US assets. However, dovish remarks from Fed Waller hinting a potential rate cut and a weaker ISM Services PMI pushed the DXY below 106.0, enabling the ringgit to strengthen to around 4.43/USD.
• The market is not fully pricing in (~70.0%) a December rate cut by the Fed yet, with tonight's key labour data, particularly the unemployment rate (consensus: 4.1%), will be pivotal. A higher-than-expected unemployment figure could nudge the Fed towards a rate cut at its December 18 meeting, potentially weakening the USD. Meanwhile, Marine Le Pen's commitment to deliver a budget within weeks has lifted eurozone sentiment, boosting the euro and adding pressure on the DXY. However, persistent market volatility may continue to attract investors to the USD as a haven. Fed Chair Powell's comments on US economic resilience and next week's expected 0.3% MoM core inflation reading could further reinforce the USD strength, capping the ringgit's scope for further gains. EMA (5): 5-day Exponential Moving Average EMA gives more weight to the most recent periods, places more emphasis on what has been happening lately. Old data points retain a multiplier even if they are outside of the selected data series length.

Technical Analysis

• The USDMYR's RSI indicates a mid-range position, signalling a neutral outlook and potential consolidation near the 4.440 level.
• While the USD's movement is likely data-driven, sustained safe-haven demand may keep the pair within (S1) 4.413 - (R1) 4.456.

Source: Kenanga Research - 6 Dec 2024