Fundamental Overview

• The ringgit extended its weakening streak from last Friday through yesterday, depreciating to 4.44/USD despite a soft US jobs report. Geopolitical uncertainty, stemming from Syria's regime change and political turmoil in South Korea, has bolstered demand for the safe-haven USD. This trend is further amplified by expectations of monetary policy divergence between the Fed and most G10 central banks. The USD also found support from surging optimism in the NFIB Small Business Index, reflecting US companies' enthusiasm for potential tax cuts and deregulation in 2025.
• US inflation, though elevated at 0.3% MoM, aligned with market expectations, leading traders to fully price in (~96.0%) a Fed rate cut next week. A strong retail sales report ahead of the meeting could reinforce this outlook. However, the rate cut itself is unlikely to cause significant market reactions. Instead, focus will turn to the updated Fed dot plot, which is expected to indicate a shallower path for rate cuts in 2025 (KIBB projects three cuts), alongside risks linked to Trump's presidency. Elsewhere, a likely status quo decision by the BoJ could further support the USD. In contrast, the BoE's anticipated pause in its rate-cut cycle may slightly limit the dollar's gains. Overall, the ringgit is expected to remain under pressure around the 4.50/USD level next week amid strong USD demand. 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 reflects a mid-range position, suggesting a neutral bias and potential consolidation near the 4.439 level.
• That being said, with USD demand expected to stay robust, the pair is likely to test the (R1) 4.458 and (R2) 4.466 in the coming week.

Source: Kenanga Research - 13 Dec 2024