- The US dollar has rallied slightly against the Chilean Peso over the last couple of days, and on Tuesday finds itself challenging the 50-Day EMA.
- We had passed above the 200-Day EMA during the last couple of sessions, so it’s perhaps a situation where the momentum is building up at this point, but it’s also worth noting that this is a market that is highly influenced by commodities, as well as the overall attitude of the economy of Latin America.
It is worth noting that the Chilean Peso has an 11.25% interest rate attached to it, so it does pay you to short this pair. I think that’s part of what’s been going on, and you can also make a bit of an argument for a massive double top near the 990 level. All things being equal, this is a market that is also tied to certain commodities such as copper, and therefore a lot of foreign currency traders will use this as a proxy for the copper markets.
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The question now is whether or not we can pick up enough momentum to the upside. The fact that Wednesday has an FOMC meeting and press conference could be the catalyst in one direction or the other, especially if the Federal Reserve comes out and sounds more dovish than previous actions. If that ends up being the case, the market could plunge down to the 900 CLP level, perhaps even down to the recent swing low near the 885 CLP level. Regardless, this is a market that I think continues to see a lot of volatility but at the end of the day, we had broken down rather significantly and if we fall from here, we could end up forming a bit of a bearish flag.
Keep in mind that you are trading an emerging market currency, so the moves can be sudden and violent. Furthermore, if you have access to the Chilean peso, it doesn’t necessarily trade around the clock, and in fact tends to trade for 6 hours or so from what I have seen through most brokers. However, one of the things that are truly attractive about the USD/CLP pair is that it does tend to trend for very long periods of time.
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