Emerging Market Currencies Are Under Pressure
Axi | Nov 11, 2016 11:12
Originally published by AxiTrader
Emerging market currencies have come under increased pressure today, as concerns about the upcoming Trump presidency have increased. While the stock markets of the developed economies have stabilized, investors are not so optimistic about emerging markets, which is understandable given Trump's planned protectionist policy. It is difficult to say at the moment how far Trump will go, but the possibility of it happening has been already enough to scare off EM investors.
There have been some big moves today in EMFX:
USD/KRW (Korean Won) is approaching the 76 % Fibo of the 1195-1085 decline. A break above would pave the way for a test of the current yearly high at 1195. The Bank of Korea has been intervening in the markets the past two days, but it hasn't really be able to slow the Won decline significantly.
USD/IDR (Indonesian Rupiah) has broken above a key trendline resistance from the late 2015 high, and there is now little significant resistance until 14170.
MYR/USD (Malaysian Ringgit) has also taken out a key trendline resistance from the 2015 high, and is heading towards the significant 4.48 resistance level. However, expect immediate resistance ahead of that level, at 4.42.
USD/PHP (Philippine Peso) has been in a solid uptrend for more than two years now, and momentum has increased lately. Key resistance is currently seen at 50.00, but it is unlikely to have problems taking that one out as well. The Philippines is one of the countries in Asia that are most dependent on exports to the United States, so a reduction in trade would have quite an impact on the economy.
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USD/COP (Colombian Peso) is testing key resistance around 3150. There have been reports of CenBank (Colombia's central bank) intervention close to this level last summer, but we have yet to see any signs of CenBank activity now. A break above 3150 would be quite significant, and clear the way for a 3464 test.
USD/CLP (Chilean Peso) has rallied as well, but not as much as the other EMFX pairs, and it is one of the few that are actually in a downtrend. The reason: Chile's solid economic performance, and more lately, the sharp rally in Copper prices. Copper makes up more than 50 % of Chile's exports, so the increase in prices has been helpful for the country. USD/CLP faces trendline resistance around 670.
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