ARGENTINA: Goldman Sachs Sees Strict Management Of Peso Depreciation Until Oct
- Goldman Sachs says that last week’s announced change in the crawling FX peg strengthens their view that the Milei administration will be committed to maintaining a strict management of the peso's depreciation until the October midterm elections, to avoid compromising the progress on disinflation.
- They see USDARS at 1,080 in 3-months and 1,110 in 6-months (vs. 1,050 and 1,120 previously), but factor in a ~20% weakening after October to bring USDARS to ~1,350 (vs. 1,250 previously) in 12 months. GS see risks to their 3- and 6- month forecasts as skewed towards a weaker peso.
- Given the likelihood of a new IMF programme that would bolster BCRA FX reserves and given that the government has already met a significant share of its external funding needs this year, there is limited urgency to make the currency more competitive to accumulate reserves ahead of the elections (excluding new IMF programme requirements).
- Beyond the elections, while the slower pace of FX depreciation would help to ease inflationary pressures further, it would also deepen the peso’s overvaluation. GS says their model suggests the peso’s overvaluation could widen to more than 20% by October.
- GS believes that the local FX carry trade would be more compelling once a devaluation has occurred and corrected the overvaluation and authorities succeed in stabilising the currency subsequently.
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TRUDEAU SAYS `WE HAVE A LOT OF WORK TO DO'
- TRUDEAU SAYS `WE HAVE A LOT OF WORK TO DO'
- TRUDEAU WANTS GOVT TO PREPARE FOR NEW US ADMINISTRATION
- TRUDEAU DOESN'T ADDRESS QUESTIONS ABOUT HIS LEADERSHIP
USDCAD TECHS: A Pullback Would Be Considered Corrective
- RES 4: 1.4539 3.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 3: 1.4537 2.0% 10-dma envelope
- RES 2: 1.4508 3.236 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4467 High Dec 19
- PRICE: 1.4356 @ 16:56 GMT Dec 20
- SUP 1: 1.4301 Low Dec 18
- SUP 2: 1.4174/4014 20- and 50-day EMA values
- SUP 3: 1.3928 Low Nov 25 and a key support
- SUP 4: 1.3822 Low Nov 6
USDCAD bulls remain in the driver’s seat. While price faded into the Thursday close, the recent breach of 1.4178, the Nov 26 high, confirmed a resumption of the uptrend and this maintains the price sequence of higher highs and higher lows. The latest rally opens 1.4508 next, a Fibonacci projection level. Initial firm support to watch lies at 1.4174, the 20-day EMA. A pullback would be considered corrective.
AUDUSD TECHS: Bearish Trend Structure
- RES 4: 0.6550 High Nov 25
- RES 3: 0.6501 50-day EMA
- RES 2: 0.6429 High Dec 12
- RES 1: 0.6337/6396 Low Dec 11 / 20-day EMA
- PRICE: 0.6263 @ 16:55 GMT Dec 20
- SUP 1: 0.6199 Low Dec 19
- SUP 3: 0.6158 1.236 proj of the Sep 30 - Nov 6 - 7 price swing
- SUP 3: 0.6100 Round number support
- SUP 4: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
The trend needle in AUDUSD continues to point south and this week’s fresh cycle lows and Wednesday’s sell-off, reinforce a bear theme. The move down maintains the price sequence of lower lows and lower highs. Note that moving average studies are in a bear-mode position too, highlighting a dominant downtrend. The break lower opens 0.6158 next, a Fibonacci projection. Initial firm resistance to watch is 0.6396, the 20-day EMA.
