USDMYR Technical Analysis

The US Dollar edged higher against the Ringgit on Friday and is now trading at 4.4990. Despite being a bullish move, indecision is evident as the price failed to break above yesterday’s high at 4.5045 and shows a small candlestick on the daily chart. From a macroeconomic point of view, the speech by Federal Reserve (FED) Chairman Jerome Powell brought more details about what to expect over the next few months with regard to US monetary policy. Powell reiterated his commitment to maintaining price stability and containing inflation. Also, according to Powell, the job market is very heated right now. The labour market situation can be seen with the release of data from the Initial Jobless Claims for the US, which came in well below expectations (222k real against 240k forecast). A lower-than-expected reading tends to be positive for the USD, as the Central Bank basically has 2 goals: to control inflation and keep the unemployment rate low. When unemployment is under control and inflation is high (as is the case now), the natural course is to raise the interest rate a little to contain the rise in prices. Overall, the US economy is doing better than many of the more developed countries. Therefore, the US macroeconomic scenario still points to higher interest rates for the USD. Another important element is that the recent cut in gas supplies from Russia to Europe adds an element of uncertainty for the European countries as a whole, which are experiencing high inflation. The effect of contrast and comparison makes the smart money leave Europe in search of places with greater prospects for security and growth. So at the moment, investors are preferring to sell other currencies to buy the USD and thus invest in the US. This adds more strength to the USD in the short to medium term. From a technical point of view, it would be necessary to wait for USDMYR to break below 4.4800 for a possible sell or above 4.5050 for a buy.