Ringgit Weekly Outlook - Cautious sentiment persists amid geopolitical uncertainty and reserved Fed outlook

– Despite the USD index trading stronger close to the 107.0 level, the ringgit appreciated slightly, trading within the 4.46-4.48 range against the USD. This resilience may partly reflect FX intervention and the repatriation of overseas funds. However, the negative yield differential between the 10-year MGS and UST widened to -60.0 bps, compared to -37.0 bps a month ago, prompting RM1.5b in net foreign outflows from Malaysian debt market. Meanwhile, investors continue to favour USD-long positions as the probability of a December rate cut dropped to ~60.0% from ~80.0% last week, reflecting signs of US economic resilience.

– While the USD faces risks of a technical correction, a significant retracement is unlikely in the near term. The greenback remains supported by factors such as the repricing of US rates, speculative positioning ahead of Trump 2.0, and safe-haven demand from heightened geopolitical tensions, particularly the Russia-Ukraine conflict. With no significant domestic catalysts on the horizon, the ringgit is likely to be influenced by external factors. Key market focus areas include US core PCE inflation data and the FOMC minutes. Signals reinforcing the "no urgency to cut rates" narrative could push the ringgit closer to the 4.50/USD threshold. 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.

– With the RSI nearing overbought levels, USDMYR may see a slight pull back, likely consolidating around 4.470.

– While a technical correction is probable, the lack of domestic catalysts and continued safe-haven demand for the USD could keep the pair trading within the (S1) 4.467 and (R1) 4.483 range.