A basket of major currencies in Asia including the Philippine peso suffered a blow against the US dollar after the recent comments of Federal Reserve chairman Ben Bernanke. Bernanke commented on considering cutting back stimulus programs if the US economy continues to improve. This was received positively by investors since an interest rate hike that could likely happen induced to buying the greenback.
Above is the daily chart of the USD/PHP currency pair where we can see the Philippine peso exchanging at PHP40.40-41.50 to a dollar for seven months until it surged to a high of 41.83 last May 23. As for my technical analysis, during that 7-month period, the forex pair consolidated to a cup and handle formation and broke out when it breached the 41.42 neckline after Ben Bernanke’s speech. The pair may further rise to 42.30 based on my target price which I got by gauging the size of the chart pattern and adding it to the breakout point. On the way up, however, the 42.06 resistance should be a bit of a hurdle for the US dollar’s rise. If the dollar sustains its rally against the Philippine peso, heavy selling pressure could be expected at the 42.30 marker which is currently the 8-year downtrend/resistance line. Although, if this breaks, the Philippine peso could further weaken and trade around 43.50-44.00 to a US dollar.
The USD/PHP rally was triggered by the mixed market sentiments that arose after Ben Bernanke’s speech as well as the profit taking in the Philippine stock market after an amazing run which broke all-time highs. A significant chunk of these funds taking profits are from foreign investors who we can’t blame if they just want to take a break from the market for the coming June to August summer. I may be biased but in my opinion, I’m seing this rally only for a short run. Remember, the fund inflows that the Philippine stock market will be getting after the recent credit rating upgrades haven’t been taking into account yet. Just imagine when it does. 38.00? We’ll see… Happy weekend! 🙂