Ringgit Could Struggle On The Lack Of Domestic Catalysts

The ringgit breached the 4.65 thresholds against the USD for the first time in more than seven months as the local note was dragged by the weakening of the yuan amid China’s weak economic outlook and PBoC’s easing measures. Even though the USD index (DXY) has continued to hover around the 102.0 level, the ringgit failed to shed any of its losses as Fed’s Powell hawkish testimony and the ongoing global tightening bias has sustained the risk-off shifts in sentiment, pushing investors away from risky emerging market assets.

Kenanga says the ringgit may continue to struggle for direction and trade between 4.64 – 4.67 against the USD due to the lack of domestic catalysts and prevailing risk-off market sentiment. In the upcoming week, the market may continue to focus on US macroeconomic data, Fed’s Powell speech, and China’s PMI reading. A combination of weak US data and signs of improvement in China’s economic activity may help to partially bolster the local note. Additionally, the ringgit may also benefit from any news on China’s plan to roll out additional stimulus measures to support its faltering economy.

The technical outlook for the USDMYR is neutral-to-bearish, with the pair expected to hover around its 5-day EMA of 4.646 as its RSI is approaching an overbought level. MYR is expected to reverse some of its losses and trade marginally
stronger against the USD, with the pair’s support level at 4.639. Conversely, a breach above 4.663 level may signal an extension of the bullish USD trend.