Kenanga Research & Investment

Ringgit Weekly Outlook - To hold steady with downside bias amid US policy uncertainty

kiasutrader
Publish date: Fri, 24 Jan 2025, 03:44 PM

Overview

  • Performance: The ringgit strengthened to around 4.49/USD on Monday, supported by robust external trade data. The USD Index (DXY) came under pressure as Trump's Day 1 failed to deliver immediate universal tariffs, triggering a positioning squeeze. However, threats of tariffs on Mexico and Canada stabilise the USD's decline. The combination of USD weakness, Malaysia's stable CPI, and BNM's unchanged policy boosted the ringgit to 4.44/USD.
  • Market Dynamics: The delay in tariff announcements has injected cautious optimism, though investors remain wary of Trump's next move. Despite the market's strong directional bias, uncertainty over tariff timing has kept USD holdings intact, limiting additional downside pressure.
  • Data Impact: Market attention now shifts to the US 4Q24 advance GDP release for signs of economic strength. A potential 25 bps ECB rate cut could offer support to the DXY, while a possible rate hike by the BoJ today may cap gains. With the Fed is widely expected to maintain its policy stance, near-term DXY stability is likely.
  • Outlook: We expect the DXY to hold around current levels next week, with key risks tied to Trump's tariff policies and central bank decisions. A more aggressive stance from the administration could drive USD strength, while a more measured approach may support continued gains for the ringgit.
  • Technical: USDMYR is turning bearish, likely to test its five-day EMA at 4.451 as the RSI nears oversold territory. Immediate resistance stands at (R1) 4.471, with a potential move towards (R2) 4.516 if Trump's policy rhetoric unsettles investors. 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.

Source: Kenanga Research - 24 Jan 2025

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