Potential Signal:
- Looking at the chart, if we can break above the 56.85 PHP level, I am a buyer with a stop loss near the 56 PHP level.
- I also recognize that the 57 PHP level will probably be difficult to get above, so once we get above that level, I would move my stop loss to break even.
- I would be aiming for a move to the 58 PHP level.
- I would also need to see the United States dollar strengthening in multiple other currency markets.
- The US dollar against the Philippine peso (USD/PHP currency pair) has intention.
- This is because it looks like we are in the midst of the consolidation area, which on the surface would suggest that we could see a bit of continuation, but I also am recognizing that the 50 Day EMA is dropping toward the 200 Day EMA indicator, getting ready to kick off the so-called “death cross.” O
- ne thing that I have noticed over the years is that quite often the death cross is very late in the move, and therefore sometimes I start to look for a complete turnaround and a trend change.
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That being said, I think this is a chart that is worth watching because quite frankly, the United States dollar is a safety currency, and the Philippine peso is an emerging market currency. Because of this, it gets a good idea of risk appetite, but this market has been somewhat distorted by the fact that the economy in the Philippines has been so strong. However, if we start to see the US dollar strengthening against the peso, that could be a major sign of something ugly coming. It is because of this and through this prism that I am starting to look at this market.
A potential warning sign
If we do break to the upside, I think that’s going to be a potential warning sign for a lot of assets, but I will be particularly interested in emerging market currencies, because they typically get absolutely hammered in a “risk off move” by the markets. Remember, it seems like almost everything is one to one now, meaning that if one risky asset sells off, most others do as well. In this scenario, I’ve got a couple of levels that I am watching.
With this in mind, I do recognize that we just popped out of an oversold condition, but I also recognize that there seems to be a lot of signs of hesitation when it comes to growth out there, and perhaps the Philippine peso has overextended itself, despite the strong domestic economy.
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