Emerging Markets Analysis: USD/ZAR, USD/MXN & USD/RUB
The emerging market currencies have been firm on the USD in recent months as speculators focus on a strong global economic recovery from COVID but we now think the good news is now priced in. The USD has started to firm up and we expect it to continue to the upside our view of the fundamentals, sentiment and technicals below.
Emerging market currencies have seen big inflows as the market focuses on a strong global economic recovery which has seen commodity prices soar higher. We have noted in previous articles a “perfect recovery” in the global economy from the impact of COVID is discounted and speculators are heavily long the emerging market currencies and commodities. Central bank stimulus globally has also helped emerging markets as well but that is now peaking and a reduction in stimulus will is bearish for emerging market currencies chart below from Morgan Stanley.
Emerging Markets – What More Good News Is Coming?
It’s as good as it gets for the emerging markets in our view and we expect the USD to bounce back strongly we have seen some strength in the USD but expect more as the large number of speculators who are short the USD exit on stop. Key levels of support and resistance in our view on the charts below.
USD/ZAR
On the chart below last week we saw a big reversal candle that pushed off the 14.50 level and above the 20 day moving average which we now expect to provide support for pullbacks an upside breakout is expected to follow through strongly to the upside.
USD/MXN
The USD is moved up from daily chart lows and we view as a buy on a breakout to the upside or on dips to support levels indicated.
USD/RUB
The USD has major support at 75.00 and we view it as a buy on dips back to the level or on a breakout to the upside. Volatility is dropping which can be seen on the contraction of the outer Bollinger Bands – this volatility drop warns of a big move and we think it will be to the upside.
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