Is The Dollar's Decline Set To Correct?

Mexican Peso

The dollar rose against the Mexican peso for the second consecutive week for the first time since mid-July. Rising US Treasury yields, the pandemic, run-of-the-mill profit-taking on year-end moves all could have weighed on emerging markets currencies in general and the Mexican peso in particular. It was the third consecutive week that the JP Morgan Emerging Market Currency Index fell, the longest losing streak since the end of H1 20. The MACD has been trending higher since early December, and Slow Stochastic is turning up. A move above MXN20.15 could spur a recovery toward MXN20.50.  

Chinese Yuan

The dollar fell for the second consecutive week against the Chinese yuan and traded at levels not seen since the middle of 2018. It spiked down to almost CNY6.43 and quickly recovered. A combination of daily reference rate settings and talk that large mainland banks were dollar buyers (for the PBOC?) was seen as a sign that the dollar's downside risks were smaller.  During this consolidative or corrective phase, we anticipate, the dollar can rise toward CNY6.50-CNY6.52. The 20-day moving average is found at the upper end of that range, and the dollar has not closed above it since late last September, and it has been violated on an intraday basis only a handful of times since.  


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Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

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