EM FX Technical Picture

MindMkts Blog ICON-FX TechPicThere’s really no specific news behind this week’s EM washout.  Higher US rates are one major factor, perhaps ongoing trade tensions are another.  Yet this week’s price action is simply a continuation of the trend that’s been seen all quarter. 

Indeed, every EM currency is down in Q2 except for PHP.  The worst performers are the high beta group RUB, ZAR, BRL, MXN, and TRY.  Many currencies have seen their Q1 gains wiped out in Q2, and then some.

MSCI EM FX rallied from mid-November until the end of March.  Since then, it has retraced nearly half that rise and is trading at its lowest level since January 10.  With US rates likely to march higher, EM FX is likely to remain under pressure into H2.  We simply don’t get the sense that anyone wants to step in front of this freight train now.

Given this outlook, we look at some retracement objectives for individual EM currencies.  In some cases, currencies have already retraced their entire rally while others are lagging.

Latin America

Brazil:  USD/BRL has retraced the entire December-January drop and is trading at its highest level since June 2016.  It is on track to test the April 2016 high near 3.7185.  The next major retracement objectives of the entire 2016-2017 drop come in near 3.6065 (50%) and 3.7400 (62%).  Break of 3.74 would target the January 2016 high near 4.1720.  The 200-day MA comes in near 3.2370.

Chile:  USD/CLP has retraced nearly half of the December-February drop.  The next major retracement objectives from that drop come in near 622 (50%) and 631 (62%).  Break of 631 would target the December high near 658.  The 200-day MA comes in near 621.

Colombia:  USD/COP has retraced a third of the November-April drop.  The major retracement objectives from that drop come in near 2836 (38%), 2883 (50%), and 2929 (62%).  Break of 2929 would target the November high near 3080.  The 200-day MA comes in near 2914.

Mexico:  USD/MXN has retraced two thirds of the December-April drop.  The next major retracement objective comes in near 19.1570 (62%).  Clean break of that level would target the December high near 19.91.  The 200-day MA comes in near 18.56.

Peru:  USD/PEN has retraced nearly two thirds of the December-January drop.  The next major retracement level comes in near 3.2660 (62%).  Break of that level would target the December high near 3.3075.  The 200-day MA comes in near 3.2415. 

EMEA

Czech Republic:  EUR/CZK has retraced over half the December-February drop.  The next major retracement level comes in near 25.64 (62%).  Break of that level would target a test of the December high near 25.9630.  The 200-day MA comes in near 25.65.

Hungary:  EUR/HUF has retraced the entire December-January drop and is trading at its highest level since July 2016.  The pair is on track to test the June 2016 high near 322.  The 200-day MA comes in near 310.

Poland:  EUR/PLN has retraced the entire December-January and is trading at its highest level since October.  The pair is on track to test the September high near 4.3325 and then the March 2017 high near 4.3535.  Break above 4.3625 would target the December 2016 high near 4.5065.  The 200-day MA comes in near 4.22.

Israel:  USD/ILS has retraced the entire November-January drop and is trading at its highest level since August.  The pair is on track to test the August high near 3.6370 and then the April 2017 high near 3.6855.  Break of 3.6925 would target the November 2016 high near 3.8860.  The 200-day MA comes in near 3.51.

Russia:  USD/RUB has retraced three quarters of the April drop.  The pair is on track to test the April 11 high near 65.045.  Break of that level would target the November 2016 high near 66.87 and the August 2016 high near 67.45.  The major retracement objectives from the entire 2016-2018 drop come in near 67.17 (38%), 70.76 (50%), and 74.34 (62%).  The 200-day MA comes in near 58.30.

South Africa:  USD/ZAR has retraced over a third of the November-February drop.  The major retracement objectives from that drop come in near 12.68 (38%), 13.04 (50%), and 13.40 (62%).  The 200-day MA comes in near 12.8150.

Turkey:  USD/TRY has retraced nearly the entire April drop.  The pair is on track to test the all-time high near 4.1935 from April 11.  The top of an upward sloping channel on the weekly chart going back to 2012 comes in near 4.55 currently.  The 200-day MA comes in near 3.7655.  

Asia

China:  USD/CNY has retraced over a quarter of the November-March drop.  The major retracement objectives from that drop come in near 6.40 (38%), 6.4475 (50%), and 6.4950 (62%).  The 200-day MA comes in near 6.5215.

Hong Kong:  The USD/HKD peg at 7.80 will remain in place for the foreseeable future, as will the 7.75-7.85 trading band.  In April, the pair traded at its highest level to test the trading band for the first time since it was installed back in 2005.  It remains near 7.85 and the HKMA will continue intervening as needed to protect the band.

India:  USD/INR has retraced the entire November-January drop and is trading at its highest level since February 2017.  The pair is on track to test the January 2017 high near 68.3875.  The 200-day MA comes in near 64.58.

Indonesia:  USD/IDR has retraced the entire December-January drop and is trading at its highest level since January 2016.  The pair is on track to test the January 2016 high near 14000 and the December 2015 high near 14125.  Break of 14086 would target the September 2015 high near 14828.  The 200-day MA comes in near 13530.

Korea:  USD/KRW has retraced a third of the November-April drop.  The major retracement objectives from that drop come in near 1080 (38%), 1088 (50%), and 1096 (62%).  Break of 1096 would target the November high near 1122.  The 200-day MA comes in near 1097.

Malaysia:  USD/MYR has retraced a quarter of the November-April drop.  Retracement objectives from that move come in near 4.00 (38%), 4.05 (50%), and 4.10 (62%).  The 200-day MA comes in near 4.09.

Philippines:  USD/PHP has retraced the entire October-January drop and traded at its highest level since 2006 before stalling.  The pair is on track to test the June 2006 high near 53.65 and then the July 2005 high near 56.45.  The 200-day MA comes in near 51.235.

Singapore:  USD/SGD has retraced nearly two thirds of the November-January drop.  The next major retracement objective from that drop comes in near 1.3410 (62%).  Break of that level would target the November high near 1.3660.  The 200-day MA comes in near 1.34.

Taiwan:  USD/TWD has retraced two thirds of the November-February drop.  The next major retracement objective from that drop comes in near 29.74 (62%).  Break of that level would target the November high near 30.22.  The 200-day MA comes in near 29.78.

Thailand:  USD/THB has retraced over a third of the November-March drop.  Retracement objectives from that drop come in near 31.89 (38%), 32.14 (50%), and 32.39 (62%).  Break of that level would target the November high near 33.20.  The 200-day MA comes in near 32.37.