The USD/MYR has seen a bullish trend emerge this week after hitting important support levels. On Monday the 4.1050 juncture was touched below, which essentially saw the forex pair hit values it has not seen since late January. However, before speculators decide to wager on another countermove downward, as they assume the sudden bull run is only part of a cyclical short term trading pattern, it might be wise to take a step back and looks at a couple of things with a conservative approach.
Political hijinks are now being experienced in Malaysia as parliamentary control is being wrestled for by political parties. On top of that there is also the heightened sense of risk adverse trading which has crept into the global markets this week as equity indices led by declines in the US have produced negative numbers and put investors into a cautious mode.
The outcome of the political wrangling in Malaysia is not clear, and more than anything financial institutions do not appreciate unknowns regarding government leadership. The mix of nervous trading internationally adds to the uncertainty, and the combination of political news in Malaysia and investor nervousness makes for an unstable USD/MYR.
Yes, the USD/MYR has been within a solid bearish trend and it has returned to values which can be considered pre-pandemic technically. However the past couple of days are a solid reminder that short term trends can lurch wildly against mid-term results and future outlooks. Speculators who assume the bearish momentum will resume may not be wrong, but it is a question of when it will happen and this is a dangerous riddle that must be solved.
Short term the USD/MYR is challenging resistance and if the 4.1700 level proves vulnerable traders may believe the 4.18 mark could be the next target. The USD/MYR has enjoyed a progressive downward trend with strong selling, but short term traders should keep in mind the forex pair was trading at the 4.1800 juncture on the 21st of August.
The Malaysian Ringgit remains comfortably within a technical bearish trend and the downward move may develop again near term, but for the time being it may be a better option to buy the USD/MYR and look for additional moves higher if risk adverse trading continues to dominate. Buying the USD/MYR around the 4.1630 level with a limit order and looking for the 4.1700 mark to be challenged may be an opportunistic speculative position.
Malaysian Ringgit Short Term Outlook:
Current Resistance: 4.1700
Current Support: 4.1575
High Target: 4.1800
Low Target: 4.1510
