- The US dollar has rallied rather significantly during the trading session on Monday against the Thai baht.
- That being said, this is a market that I think is going to continue to pay attention to the 34 level overall.
- When you look at the longer term charts, you can see that we are almost certainly at a major support level.
- This area could be very important, so keep this in mind.
Therefore, a bounce from here makes quite a bit of sense, especially considering how aggressive this sell-off has been. You could see this market going to the 35.15 level and really has not changed much. It would just be a simple matter of bouncing from a huge and oversold condition. Keep in mind the US dollar of course is a safety currency.
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Currencies like the Thai baht won't be sought after, and we will see a major change in attitude. This being the case, I think you have a situation where at the very least we do have that recovery bounce, but really there are a few things that you need to think about overall.
Interest Rates Don’t Make Much of a Difference
You also have to keep in mind that the interest rate differential between these two actually favors the US as Thailand has two and a half percent. So, if we get the carry trade coming back in the Japanese yen, like we've seen over the last couple of days, it could happen here to a lesser extent. I don't necessarily think that we would melt straight up in the air like we could against the yen, but we could conceivably over the longer term go all the way up to the 37 level and still just be at the top of a consolidation area. On the other hand, if we drop down below 33.50, then I think the US dollar is in a lot of trouble, not only against the Thai baht, but other currencies as well.
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