Potential signal:
- I would be a buyer of the US dollar at MYR 4.53.
- I would have a stop loss at MYR 4.47 and a target of MYR 4.65.
Looking at emerging markets, the US dollar continues to be a thorn in the side of many currencies, with the Malaysian ringgit no different. It is worth noting that we are trading at the MYR 4.50 level, which has been important several times. That being the case, I think it’s a currency pair that you’ll need to pay close attention to, as it could set off a bit of a “chain reaction” across Asia as it would show a strengthening US dollar stance among Asian traders.
Technical Analysis
The technical analysis for this pair is quite strong and we have been squeezing for some time, showing the idea that maybe the market is trying to move up. If and when that happens, then I think you have a situation where the US dollar could really start to pick up some significant momentum. This would make some sense, mainly due to the fact that the US dollar is currently outperforming every other currency, so why should the Malaysian ringgit be any different?
On short-term pullbacks, there is significant support near the MYR4.45 level, especially now that the 50-day EMA is racing toward that area. It’s probably worth noting that in Friday’s session, the US dollar broke above the 200-day EMA against the Malaysian ringgit, and now we’re facing a major resistance barrier just above. In fact, based on the candlesticks for Friday’s session, my guess is that it’s probably only a matter of time before you start seeing the US dollar actually rise against this currency.
If we were to turn around and start falling, a move below the 50-day EMA could open a move to the MYR4.40 level, an area that has been important in the past as well. That being said, I don’t see that actually happening, at least not without some sort of major macroeconomic event that would punish the US dollar. I remain bullish on this one.
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