Elevated Volatility Anticipated For USD, MYR Pair
The US dollar faced downward pressure early in the week without a clear immediate catalyst. However, a stronger Euro, bolstered by defensive reallocations ahead of the August 1 deadline for potential US-EU tariffs, appears to have driven the greenback's weakness. Markets seem to be favoring the Euro in light of these trade uncertainties. Concurrently, the Japanese Yen also gained ground following a newly inked US-Japan trade agreement, further contributing to the US dollar's softening. These movements provided a tailwind for risk assets, prompting a rotation of investments from the US into emerging markets.
From a data perspective, the US labour market remains firm, contrasting with emerging signs of weakness in housing data. Ahead of the Federal Reserve's upcoming policy decision – where a no-change in interest rates is widely expected – market attention will be fixed on key economic reports. These include the JOLTS (Job Openings and Labor Turnover Survey) report, ADP private sector jobs data, and the advance Q2 2025 GDP reading. A string of positive surprises from these indicators could reignite hawkish Federal Reserve expectations, potentially strengthening the US dollar. The outcome of the US-EU tariff deal, along with other pending negotiations, will also be closely watched in the run-up to Friday's deadline.
Outlook for the Ringgit
Kenanga Research indicates that softer US data will be necessary to support their call for a September Fed rate cut. For now, the consensus points towards a resilient US economy. A favorable US-EU trade deal is expected to further support the Euro and overall risk sentiment globally.
For the Malaysian ringgit, a significant near-term risk remains the ongoing trade talks with the US. As Minister of Investment, Trade, and Industry Tengku Zafrul Abdul Aziz recently confirmed, negotiations are intensifying to reduce an impending 25% US import tariff to below 20% before the August 1 deadline. A 'no-deal' outcome from these discussions could exert considerable downward pressure on the ringgit.
Given the data-heavy week and the politically sensitive trade negotiations, currency analysts expect elevated volatility for the USD/MYR pair, anticipating it to trade within the 4.20–4.25 range. Technically, the USD/MYR is currently anchored near its 5-day Exponential Moving Average (EMA) at 4.23, with immediate support at 4.22 and resistance at 4.23. Related
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