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Emerging Markets - Forex Analysis - Month of August

August 18, 2017

August is usually a volatile month for emerging currencies but it is also useful in estimating possible entry points for any tactical trade in the last part of the year.

If this weakness has been evident so far against the Euro, it has been less invasive against the Dollar precisely because of the weakness of the American currency. Let's look at the main emerging exchange rates and their outlooks.


UsdMxn is experiencing a moderate rebound. The sentiment towards the Peso is still over positive also thanks to the technical support and the oversold of August. Furthermore, the seasonality of this month is not favourable to the Peso, and the oversold RSI is following the same evolution as happened other times. Vertical bars in fact are pointing to historical situations where UsdMxn on a weekly scale realized a Rsi below 30. A primary bottom was in the air. At present, however, the Peso is still underestimated in fundamental terms, so we believe that the rebound should not be so deep to make UsdMxn return above 19.50 / 20.




The risk for the South African Rand is that UsdZar comes back over the long-term bullish trend line. The technical level to monitor very carefully is between 14 and 14.50, a technical threshold that would release the bull market. Beware of oscillators because they are reporting a slow but inexorable accumulation phase, which might be dangerous in the future for the Rand. The price range of 11.90 / 12.25 has done a good job preventing UsdZar from going further. A break over the mentioned levels of resistance would put the currency in trouble together with President Zuma's political problems.



The rise of the oil up to $ 50 has prevented the Ruble from an important fall; in fact, the weakness has moved UsdRub from 55 to 60 so far. The level is technically important as we can see from the chart, since here we can find levels of resistance linked to the low of 2016. The market is concerned with the geopolitical tensions between the United States and Russia and it is highly likely that if oil would fail its support for UsdRub would open the door to area 65.



A net bearish break for UsdCny with the moving average that was supporting the bull market that crashed due to bears from 2015. It seems that there is a flight to quality in the geopolitical tensions towards the Chinese currency instead of the American one. The support level of 6.60 where we can find the top of the beginning of  2016 and the low of August 2016 is quite close. The oversold is increasing also considering that we are facing the most important sell off in just one month (-2.5 %). UsdCny: a technical rebound is at least possible, but we feel that a return to area 6.80 will be useful to come back short.


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