PHP: USD/PHP Testing Under 50-day EMA, Positive Seasonality May Be Kicking In
USD/PHP is testing under its 50-day EMA support in the first part of Tuesday dealings, the pair last just under 58.40 (see the chart below). Note further south is the 100-day EMA near 58.00. PHP is a relative outperformer in EM Asia FX over the past month (up 0.84%) with only THB and MYR outperforming, and the bulk of PHP's gains have come in the past 5 trading days (second best performer in the region after THB over this period). Rising Fed easing expectations has been a positive for PHP, like elsewhere in the region, whilst positive seasonality ahead of year end may also be coming into play.
- In the past 10yrs, USD/PHP has fallen on average 0.30%, and only risen in 3 out of those 10yr years in the month of Dec. Remittance inflows tend to rise ahead of year end (Christmas period). The level of remittances this year is running close to previous years.
- PHP also tends to be less impacted by global equity market shifts, with a close to flat correlation. This may be seen as a point of differentiation with the likes of KRW and TWD.
- Local equities are off recent highs, struggling above 6000 for PCOMP, but well up from mid Nov multi year lows. The market may be more comfortable around the growth backdrop or least a good chunk of the bad news is now priced into FX and equity markets.
- On the data front, bank lending is out on Thursday then Nov CPI prints on Friday.
Fig 1: USD/PHP Versus Key EMAs
Source: Bloomberg Finance L.P./MNI
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AUSSIE 10-YEAR TECHS: (Z5) Returns Lower
- RES 3: 95.982 - 76.4% retracement Sep’24 - Nov’24 downleg
- RES 2: 95.960 - High Apr 7 (cont.)
- RES 1: 95.900 - High Oct 17
- PRICE: 95.670 @ 16:16 GMT Oct 31
- SUP 1: 95.510 - Low Sep 3
- SUP 2: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 3: 95.275 - Low Nov 14 (cont) and a key support
Aussie 10-yr futures slipped lower Wednesday on the back of hotter-than-expected Australian inflation. This returned prices lower despite nascent signs of a technical recovery as recently as last week. The sustainability of the pullback will be dependent on prices holding above key short-term support at 95.510, the Sep 3 low. Near-term resistance remains 95.780, the Sep 12 high. A clear break of this level signals scope for a continuation higher and opens 95.960, the 76.4% retracement level for the Sep’24 - Nov’24 downleg.
AUSSIE 3-YEAR TECHS: (Z5) Struck by Strong CPI
- RES 3: 97.796 - 1.618 proj of the Sep 3 - 12 - 15 price swing
- RES 2: 96.780 - High Jun 26 (cont)
- RES 1: 96.700 - High Sep 12
- PRICE: 96.375 @ 16:13 GMT Oct 31
- SUP 1: 96.280 - Low May 15 (cont.)
- SUP 2: 95.900 - Low Jan 14 (cont.)
- SUP 3: 95.760 - Low 14 Nov ‘24
Having bounced well on the back of the mild US CPI print, Aussie 3-yr futures reversed course Wednesday on strong domestic inflation data containing RBA cut pricing through 2026. This keeps prices well below prior resistance at 96.615, the Sep 12 high, and refocuses attention on 96.280 as the next major support.
FED: Gov Waller: Still Advocating For A December Rate Cut
Gov Waller, one of the FOMC's more prominent doves, makes clear in an appearance on Fox Business that he supports a follow-up rate cut in December. He makes reference to Chair Powell's press conference comment that the Fed could skip a cut at the December meeting due in part to a lack of official government data during the federal shutdown (Powell: “what do you do if you are driving in the fog? You slow down").
- Waller says today: "Right now, we know that the labor market has been weak... We know inflation is going to come back down. Inflation expectations are anchored, and in that world, the standard of central bank wisdom is to look through it and proceed with worrying about the labor market. So in my view, we should just look at what the data is telling us and proceed on policy that way.... So this is why I'm still advocating that we cut policy rates in December, because that's what all the data is telling me to do. The fog might tell you to slow down. It doesn't tell you to pull over to the side of the road. You still have to go. You may want to be careful, but it doesn't mean to stop, and ... the right thing to do with policy is to continue cutting."
- This is of particular interest since he appeared to suggest he would have a more cautious outlook on further easing after cutting in October.
