Potential Signal:
- I would be watching this pair very closely at the 4.4 level. If the market were to break above there, I’d be willing to take a long position in favor of the US dollar, with a stop loss at the 4.3 level.
- I would be aiming for a move all the way back to the 4.65 level, but I would also need to be paying attention to other markets around the world, because if we saw risk appetite crumbling, that would only give me more of a reason to get long of this pair.
- The USD/MYR pair looks very interesting, as we did pull back a bit in the overall downtrend over the last couple of days, only to see it fall yet again.
- The 4.35 level seems to be an area of interest at this point in time, and we have seen some reactions to this area.
- At this point in time though, the question now becomes whether or not the US dollar can recover, because quite frankly it is extremely oversold.
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Technical Analysis
When I look at this pair, the technical analysis is of course very negative, but it’s also worth noting that we are extraordinarily oversold. True, Malaysia has seen significant growth over the last year or so, but the reality is that if the global economy is slowing down, Malaysia is not going to escape this negative pressure, and in fact, I would postulate that is very likely that the US dollar would strengthen quite drastically in that environment. While Malaysia is not necessarily the first place people go looking to when they are trading currencies from a “risk on/risk off perspective”, it does have that overall attitude.
Because of this, I’ll be watching the global markets very closely, and at this point in time it is worth noting that the Malaysian ringgit has managed to stay out of the crosshairs of forex traders when things get a bit messy. It’s almost the same story as we see in the Philippine peso, where it looks like traders are looking at these countries as outliers. However, we all know that when panic set said, everything seems to have a 1 to 1 correlation going forward. In other words, if we get some type of panic selling, the US dollar will strengthen against everything, regardless of what it is, perhaps with the exception of the gold market. In the meantime, though, it does look like we have a lot of volatility and choppiness ahead of us but it’s also worth noting that we are near a major support level.
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