US Dollar Technical Outlook – USD/PHP, USD/MYR, USD/IDR, USD/USD

PHILIPPINE PESO, MALAYSIAN RINGGIT, INDONESIAN RUPIAH, SINGAPORE DOLLAR, US DOLLAR – KEY POINTS

  • ASEAN ahead – Singapore and Malaysian CPI, industrial production
  • US Earnings session and COVID-19 case growth might boost the USD
  • USD little changed against the IDR, ASEAN FX weakened

US Dollar ASEAN RECAP

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The haven-associated USD traded sees to change very little against some of the ASEAN peers like the Philippine Peso, Malaysian Ringgit, and the Singapore Dollar. This is happening as the global securities followed the same path. On the other hand, the S&P 500, the bell-weather for the market sentiment, slightly went higher as the MSCI Emerging Markets Index (EEM) continued trading cautiously lower.

A reasonable standout was the Indonesian Rupiah that weakened to the lowest point against the USD since May. Technically, this follows the aftermath of the Indonesian bank interest rate decision where the legislators took the index 7-day rate down to the lowest recorded value. Also, USD/IDR extended the advance after the bullish technical indicators, as expected.

Last Week’s USD Performance

ASEAN

External Event Risk – Covid-19, Microsoft & Earnings Season

The primary focus of the ASEAN pairs like USD/PHP, USD/MYR, and USD/SGD might hold steady on the external factors influencing the market mood. Having said that, everything seems to point towards the USA as COVID-19 cases continue rising at the record daily numbers. Incase the government officials start being forced to impose the lockdown measures or pause a few easing efforts. This might negatively affect the future growth prospects thus pouring cold water on the swift recovery anticipations. Also, read through Japan’s International Merchandise Trade Has Lifted The Canadian Dollar Against the Japanese Yen to learn more.

Furthermore, the earnings season seems to be in full swing with a focus particularly pined on the technology corporations as they try to defend their high stock valuations. Over the past one-week, the Netflix earnings significantly frustrated with the company issuing much weaker guidance. The shares further fell to almost 11% in the after-hours trading. Any more dismal data from Microsoft will compound risk aversion hence catapulting the USD.

ASEAN EVENT RISK: SINGAPORE CPI, MALAYSIA CPI & INDUSTRIAL PRODUCTION

The ASEAN economic outlook seems bright in the next few days. Singapore and Malaysia will soon release the most recent inflation reports. Furthermore, disinflationary pressures will most likely keep the federal bank on a dovish side. Also, Singapore is poised to release the industrial production data for the period where the non-oil experts will beat the economist’s expectation. Additional upbeat data will greatly help support the world’s growth recovery bets, further pressuring the USD/SGD rate low.

Despite the gains that have been made in the MSCI emerging markets index from June. The ASEAN-based USD index started trading sideways as shown on the following chart. It is quite possible that what might be preventing the ASEAN FX from seeing more gains against the US Dollar are the failing government bond yields. Although the FED has significantly reduced rates to almost zero. The federal banks from these ASIAN regions continue cutting, weakening their currencies appeal as volatility cools.

As of last week, the 20-day correlation coefficient between the MSCI Emerging Markets Index (EEM) and the ASEAN-based USD index stood at about -0.66.

 The ASEAN-Based USD Index vs MSCI Emerging Markets Index (EEM)

US-Dollar-Fundamental-Outlook

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