Home Forex August Rising Markets Outlook | HF Evaluation

August Rising Markets Outlook | HF Evaluation

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August Rising Markets Outlook | HF Evaluation

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Mexico


USDMXN fell again to only above $17, after failing to surpass the July peak value of $17.3934 final week on 2 makes an attempt. Every day candles present value above the important thing stage in a pin-bar candle format forward of the Financial institution of Mexico and US July CPI experiences, in addition to Banxico’s price resolution due on the eleventh of August. Mexico’s annual inflation price is anticipated to fall for the sixth month, reaching a low of 4.7% since March 2021. The core price may even fall to its lowest stage since February 2022. As such, the Financial institution of Mexico is anticipated to maintain its benchmark price at a report 11.25% for the third time at this week’s assembly.

Regardless of the current weak point, the Mexican peso remains to be among the best performing currencies this yr, appreciating by 12.5% as a consequence of excessive rates of interest, political stability and the continuing nearshoring development. Greater than 60 new investments have been introduced and it’s estimated that the demand for nearshoring in Mexico represents 50% of the whole demand in Latin America. Finance Minister Rogelio Ramirez de la O stated 20 corporations have introduced nearshoring investments of round $13 billion, of which 54% are associated to the car trade. Highlights are Tesla and BMW’s plans to develop operations and produce electrical vehicles within the nation.

Within the earlier week, the Peso confronted its most difficult week pushed by components reminiscent of substantial gross sales of US Treasuries, issues concerning the US shedding its AAA ranking, and the beginning of a financial easing cycle by main central banks. The USDMXN pair hit an 8-year low in July ‘23 at 16.6228 (200-month EMA), and since then the pair has rallied by +4.8%, earlier than dropping again forward of Banxico’s inflation report and price resolution this week.

On the each day interval, a divergence bias has been seen on each RSI and MACD and it seems to be comparatively sturdy after surpassing the 17.0488 minor resistance. Nevertheless, the worth is presently holding on the 52-day EMA. A value motion above 17.3934 could possibly be the primary signal of a short-term development change and make sure the worth of 16.6228 because the yearly low to make a sequence of corrections to the upside for the 100-day EMA and 200-day EMA. Overall the downtrend nonetheless dominates, so it’s going to take time and a powerful catalyst to alter the market notion.

On the draw back, a transfer again under the $17 psychological mark would create a combined outlook; so consolidation is probably going inevitable and a retest of the current low may additionally apply once more.

Russia


For the reason that outbreak of the Russian-Ukrainian battle, the ruble’s volatility in opposition to the US Greenback has intensified, at one level falling under 140 in early March final yr, hitting a report low. Since then, with the Russian authorities taking varied measures to take care of financial sanctions, the ruble change price progressively recovered and reached a peak of 50 in June final yr, the best stage in  almost seven years.

Russia's trade balance. Source: Trading Economics
Russia’s commerce stability. Supply: Buying and selling Economics

Since then, nonetheless, the ruble has continued to depreciate in opposition to the US Greenback. As of yesterday’s shut, the ruble was down virtually 90 per cent in opposition to the Greenback from its almost seven-year excessive stage, at round 95/96. The sharp depreciation of the ruble has been as a consequence of a minimum of import progress (up over 40% year-on-year), weak exports (the most recent financial forecast report from the Russian Central Financial institution means that merchandise export revenues may report $414 billion this yr, down virtually 30% year-on-year), declining oil and gasoline revenues, elevated demand for overseas change funds to non-residents, extraordinarily low liquidity, the “Wagner” incident, and so forth. On prime of that, from 7 August to six September, the Russian Finance Ministry will shift from promoting to purchasing overseas forex throughout the framework of funds guidelines, a transfer that may most likely put stress on the ruble within the brief time period.

Russia's oil and gas industry as a share of domestic GDP. Source: Statista
Russia’s oil and gasoline trade as a share of home GDP. Supply: Statista

Most analysts are pessimistic concerning the ruble. Final month, the Russian Central Financial institution raised rates of interest for the primary time since September final yr, elevating its benchmark price by 100 foundation factors to 8.5%. Russian inflation rose 3.2% year-on-year in June, in contrast with 2.5% beforehand. That is the second consecutive month that the expansion price has warmed up, whereas the central financial institution expects inflation to additionally attain a variety of 4.5% to 6.5% by the tip of this yr. Larger costs and rates of interest may have an extra affect on consumption and finally stress financial progress.

Technical Evaluation:


To date this yr, the USDRUB has ended each month besides January on a bullish month-to-month foundation. Shifting into August, the bullish momentum appears to be displaying no indicators of fading and is now testing the 95/96 key stage (50.0% of the FR stretching from the height in March final yr to the low in June of the identical yr). A break above this key level alerts a continuation of the uptrend and even has the potential to develop right into a medium to long run bullish development. The MACD stays in a optimistic configuration.

The each day chart exhibits that the USDRUB has been buying and selling above the 100-day SMA since final October and has just lately damaged the shackles of the uptrend channel. Due to this fact, if the bulls handle to interrupt by the current resistance, the following factors to observe would be the psychological stage of 100 after which 106.50 (FR 61.8%). Any retracement will sign a false breakout of the channel and the forex pair will return to buying and selling throughout the channel. The underside of the channel will likely be near-term assist, adopted by 85 (FR 38.2%) and the 100-day SMA.

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Ady Phangestu & Larince Zhang

Market Analysts

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