Westpac recommends going long MYR/JPY and targets a move back to the 25.50 level with a stop below 24.00; the MYR/JPY is last at 24.57. The medium-term dynamics for MYR remain favorable, particularly compared with other currencies in the region, it says. Malaysia's trade surplus remains healthy and the degree to which data momentum has cooled in Malaysia is less dramatic compared with other economies in the region, it adds. "There is obviously a lot of risk associated with this trade and clearly things can get worse before they get better. However, the 24.00 level has been an important support level for MYR/JPY in the past few years (including the 2008 financial crisis). Given the degree to which the markets are priced for bad news, even the slightest bit of positive news could drive a quick sharp move higher in risky assets and this is what we are attempting to capture."
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