Malaysian Ringgit: External pressure but scope for reversal – OCBC

Christopher Wong at OCBC writes that the Malaysian Ringgit weakened during Thursday’s Asian session on a firmer US Dollar and higher US Treasury yields after the FOMC, with USD/MYR briefly trading above 4.10 in an orderly move. He notes some pressure eased as the Dollar and yields retreated and Oil pulled back. Wong expects cautious MYR trading if US yields and the Dollar rise again, but sees room for recent weakness to reverse as post-Fed moves settle and domestic fundamentals remain supportive.

USD/MYR overbought as fundamentals support

"MYR weakened on Thursday Asian time zone amid firmer USD and higher UST yields post-FOMC. USD/MYR briefly traded above 4.10, although the move remained orderly and there was little sign of Malaysia-specific stress."

"That said, some pressure eased overnight as the USD and UST yields came off their highs, while oil also pulled back. Near term, MYR may trade cautious if UST yields and the USD push higher again."

"But as the post-Fed rates move starts to settle, there should be room for some of the recent weakness to reverse, with domestic fundamentals still broadly supportive."

"Bullish momentum on daily chart intact but RSI rose into overbought conditions. Lack of follow-through to the upside may see USD/MYR turn lower and close the earlier post-holiday gap."

"Support at 4.0870, 4.0730 levels (50 DMA). Resistance here at 4.10, 4.12 levels"