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Thailand Baht: USD/THB (THB) Bank of Thailand cuts policy rate to record low

Thailand Baht: USD/THB (THB) Bank of Thailand cuts policy rate to record low

The Bank of Thailand policy committee cut the benchmark interest rate by 25bps to a record low of 0.5%, backed by a 4-3 vote. The central bank maintained a cautious tone on the growth outlook, expecting a slower turnaround from the external sector. The Thai Baht outperformance in may nevertheless so much is additionally a worry at the margin.

1Q GDP released earlier in the week had seen the economy register its first YoY negative growth in over six years at -1.8% y/y. Recession already struck a chord with revised q/q decline in 4Q19 and 1Q20 even as the impact of the virus and lockdown was starting to be felt.

FX Polls

Economic Events

The slowdown is probably going to heat up in 2Q because the state of emergency was extended till late-May, depressing domestic demand thanks to income/ employment shock and broad business activity. The pandemic’s impact has been material across the world, including Thailand’s key trade and tourism partners, dampening prospects of a fast externals-led turnaround.

The economy also slipped into disinflation, with April’s reading at -3% y/y, with an increasing probability that this may drag core readings lower. we tend to expect the central bank to bat for frontloaded rate cuts, with a minimum of another 25bps cut within the pipeline. Admittedly, the headroom for rate reductions is narrowing, that is probably going to prod the bot to think about unconventional moves, together with asset purchases. fiscal support will assume more importance, with a probability that more may be done to supplement the already declared cumulative thb 2.4trn i.e. 14.2% of GDP worth measures. Markets are likely to assess clarity on financing aspects.

Shayne Heffernan Trade Idea

“The Bank of Thailand (BoT) has cut the benchmark arrangement rate twice this year, to 0.75%. We anticipate that one more cut should be at 0.50%. In any case, given that the benchmark rate as of now stands quite low, the central bank will probably keep on using other tactics in its push to help the economy.” Shayne Heffernan PhD in Economics

Technical Analysis

Overall, the bias in prices is: Sideways.

The projected upper bound is: 32.22.

The projected lower bound is: 31.47.

The projected closing price is: 31.84.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 3 white candles and 7 black candles for a net of 4 black candles. During the past 50 bars, there have been 22 white candles and 25 black candles for a net of 3 black candles.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 14.5831. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a buy 4 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 28.90. This is where it usually bottoms. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 33 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -122.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a buy 19 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 33 period(s) ago.

Rex Takasugi – TD Profile

FOREX THB= closed up 0.030 at 31.840. Volume was 70% below average (consolidating) and Bollinger Bands were 15% narrower than normal.

Open      High      Low        Close         Volume
31.810    31.880    31.800     31.840        834
Technical Outlook
Short Term:        Oversold
Intermediate Term: Bearish
Long Term:         Bullish
Moving Averages: 10-period        50-period          200-period
Close:           32.03            32.46              31.04
Volatility:      4                7                  6
Volume:          1,617            2,756              1,492

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

FOREX THB= is currently 2.6% above its 200-period moving average and is in an downward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods.

Our volume indicators reflect volume flowing into and out of THB= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on THB= and have had this outlook for the last 21 periods. Our momentum oscillator is currently indicating that THB= is currently in an oversold condition.

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