Commodities & Currencies - Weakness On The US Dollar Returns… - 02/08/2010

8/9/2019 Commodities & Currencies - Weakness On The US Dollar Returns… - 02/08/2010

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Chart Intepretations On Selective Currencies:

Ringgit (RM)/ US$

♦ After registering a “bearish engulfing” candle on the

chart, the RM/US$ pair failed to extend its downswing

last week and traded flat throughout the week.

♦ On the chart, it recorded a small positive candle,

suggesting a likely technical rebound in the near term.

♦ This shows a possible pause in the recent upstrength

on the ringgit against the US dollar.

♦ However, as the pair remains so close to the critical

Apr’s low of 3.16, and the fact that it must recover to

above the 3.29 significant level to reverse the current

bullish view on the ringgit, chances of a strong

rebound on US dollar is rather low for this week.

♦ We remain bullish on the ringgit, and foresee a retestof 3.07 (Mar 2008 low), if it breaks below 3.16 soon.

Japanese Yen (JPY)/ US$

♦ As expected, the JPY/US$ pair continued to linger near

the key support level of 87, and the Downtrend

Resistance Line (DRL) near 86.5 last week, despite

recording a positive candle in the previous week.

♦ The pair recorded a negative candle on the chart,

suggesting a stronger yen against the US$ this week.

♦ Given the weaker momentum readings, further

strength on the yen could be expected if it breaches

the DRL soon.

♦ The next lower support is only seen near the 79.8

level.

♦ However, if it fails to break the DRL, further struggle

near the DRL and the 87 level can be anticipated.

Euro Dollar (EUR)/ US$

♦ The EUR/US$ pair resumed its slide after recording a “doji” candle on the chart earlier by chalking up a

bearish candle last week.

♦ The close also indicates the pair has failed to rebound

across the key 0.77 level and the 21-week SMA

nearby.

♦ It means the EUR is likely to resume its strength

against the US dollar in the near term.

♦ The next chart support is only seen at 0.73, while

resistance is fixed at 0.77 and the 21-week SMA.

♦ Given the mixed momentum readings, the trading

momentum for this week is poised to turn weaker.

Hence a possible further weakness on the greenback,

in our opinion.

Chart 3: RM/ US$ Weekly

Chart 4: JPY / US$ Weekly

Chart 5: EUR/ US$ Weekly



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US Dollar Index (DXY)

♦ The US Dollar index (DXY) prolonged its downtrend

last week as it recorded another bearish candle on the

chart, its eighth negative candle in a row.

♦ Last week’s candlestic pattern suggests follow-throughselling momentum is likely to be seen this week.

♦ Given the grossly oversold momentum on the

stochastic oscillators, the 14-week RSI has just

crossed with a fresh “sell” last week. This reinforces

the negative outlook on the index.

♦ Although the fall may suggests an “eigth-to-ten”

candle count pattern, which indicates a potential

technical rebound this week, the overall readings still

point to a slim chance for that to happen.

♦ We expect a retest of the key support level at 81.00

this week. Key resistance is at 85.00.

IMP ORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. Theopinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ orbe contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to beconstrued as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in anymanner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated personsmay from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectivesof persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluateparticular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment orstrategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents acceptsany liability for any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providinginvestment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHBGroup may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equitysecurities or loans of any company that may be involved in this transaction.

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This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflectinformation known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation basedupon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

Technical recommendation framework for stocks and sectors are as follows: -

Technical Recommendation:Trading Buy = Short-term positive opportunity spotted. It is an aggressive trading recommendation with a book to sellers’ price for short-term technical upside.Bargain Buy = Short-term positive but technical signals have yet to trigger a rally. Traders can park and queue for their desired entry level within a small range.Buy on Weakness = Short- to Medium-term positiveness anticipated, but technical readings are still negative. Traders can pick-up the stock for future rally.Sell on Strength = Short-term momentum still positive, Traders are advice to lock in profit base on current strength.Take Profit = Short-term target achieved. Traders are advice to exit before the technical readings turn bearish.Avoid = Risky situation in the short-term and high volatility expected on the share price. Traders’ best strategy is staying away until it stabilises.

Technical Time Frame:Immediate-term = short time frame within a contra period.Short-term = moderate time frame within two to three contra periods. For tracking purposes, we refer to 10 trading days.Medium-term = medium time frame usually refers to two to three weeks period. For tracking purposes, we refer to 20 trading days.

Technical recommendations are generally short-term in nature and may differ from RHBRI’s equity fundamental view and recommendation on the same company.

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Chart 6: US Dollar Index Weekly

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Commodities & Currencies - Weakness On The US Dollar Returns… - 02/08/2010