Potential signal
- If the pair breaks above the 50 Day EMA, then I am a buyer of this market.
- I would have a stop loss at the 4.24 level, and would be aiming for a move to the 4.50 level, longer-term.
- The USD/MYR currency pair hover around the 4.28 level.
- This is a market that had been sold off quite viciously, and much like my analysis in the USD/SGD pair today, I see very similar action which makes a certain amount of sense considering that we are talking about the United States versus a very specific part of Asia.
That being said, it’s worth noting that both Singapore and Malaysia have fairly strong economies, but they are not insulated completely against the global noise that we will undoubtedly see over the next several months. Because of this, I think a lot of this will come down to what people believe is going to happen in the United States as far as interest rates are concerned. While the Federal Reserve has cut interest rates by 50 basis points, that may not necessarily be a good thing. Historically speaking, when the Federal Reserve cut by 50 basis points like they just did, bad things are coming down the road, despite the narrative that Jerome Powell has been preaching.
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Technical Analysis
Looking at the technical analysis, you can see quite easily that the US dollar has been in trouble for several months against the Malaysian ringgit. This is true against many other currency such as the Swiss franc, Singapore dollar, and many others. However, it’s also worth noting that if we do get a sudden drop in risk appetite, it would make a certain amount of sense that the US dollar sees a lot of inflows, as people will be rushing toward safety and away from smaller markets like Malaysia. This is typically because what happens is traders will start to buy US Treasuries, and of course those are denominated in US dollars.
If we can break above the 50 Day EMA, it opens up a move to the 4.3750 level, and then after that I think the tide finally turns in favor of the US dollar. That doesn’t mean it would be easy to go higher, but we could go as high as 4.70 before it was all said and done. On the other hand, if we turn around and break down below the 4.23 level, I think that the US dollar could drop down to the 4.1250 level.
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